If you’ve followed the eCredable plan to establish strong financial habits, use credit responsibly and show your potential using alternative credit, you might be ready to take the next step in your financial life: buying a house.
First-time homebuyers need to ask themselves several questions:
Is my credit good enough to buy a home?
Do I have enough money saved for a down payment?
What neighborhood do I want to live in?
What type of home do I want?
What is my budget?
These questions are just a starting point; you may have dozens more. As a first-time homebuyer, the most important thing is to understand the current real estate market and to know if you’re prepared to enter it.
Make sure your finances are in order
If you are a first-time homebuyer, you should make sure your credit score is more than 720. The higher your credit score, the lower the mortgage interest rate you’ll be able to get.
You should also have saved up at least 20 percent of the value of the home. If you put down less than 20 percent on a home, you will probably have to pay private mortgage insurance (PMI) or a similar payment to get your loan. In some cases, you may have a lump-sum payment owed when you buy the home along with a monthly payment for several years after or for the life of the loan.
Find out where you want to live
If your credit and savings are good enough to buy a home, you next have to focus on buying in a community that will suit your needs now and in the future. You may want to have a wish list and a list of must-haves. If you have an understanding of what you must have versus what you would like, you will be better prepared to make smarter decisions when buying your first home.
Set a reasonable budget
A common first-time homebuyer mistake is forgetting to budget for increased expenses. Remember—the larger the home, the higher the monthly expenses. With a larger home, you’ll have higher heating and cooling bills, higher property taxes and higher repair and maintenance fees. Try to match the size of the home you purchase with the amount of money you will be able to invest in its upkeep.
Caveat emptor—let the buyer beware
As the saying goes, in real estate, “let the buyer beware.” Once you’re ready to start looking for your first home, make sure you get a good inspector to take a look at the home you are buying, a good attorney to review your documentation and a good real estate agent to help you navigate the transaction. Following these simple steps should help you to have a pleasant home-buying experience.