10 Things Every First-Time Homebuyer Should Do

For a first-time homebuyer, it can be overwhelming, exciting, and even terrifying to decide to buy a home. There’s so much promise in what it can offer; for many, it is one of the best long-term financial decisions a person can make. Before you make that decision, there are a few simple things you can do now to ensure you get the best deal and opportunity for your future.

#1: Check Your Credit Score

Many first-time homebuyers qualify for an FHA loan, which could help make getting approval for a loan a bit easier. As noted by Experian, to qualify for these loans, applicants must have a credit score that’s at least 500, but higher than this could lower interest rates. Some credit card companies and free services offer access to your FICO score, the most commonly used for loan approval. Find out what your score is.

#2: Make Sure Your Credit Report Is Accurate

What’s on your credit report could impact your ability to obtain a loan. All consumers can receive a copy of each of their three credit reports free from AnnualCreditReport.com, a website managed by the three credit bureaus: TransUnion, Equifax, and Experian. Look for outdated accounts, inaccurate information, and any judgments or collections activity that could stop a first-time homebuyer from qualifying for a home.

#3: Get Pre-Approved for a Loan Before Shopping

Before looking at homes for sale, meet with a mortgage broker to obtain pre-approval for a loan. Doing this now ensures you know what type and size loan you qualify for, which will likely impact the home you buy. Your lender will give you insight into what your monthly payment could be and what interest rate you qualify for. This often includes locking in a low rate while you start the home search process.

#4: Discuss All Loan Options With Mortgage Brokers

Before deciding which loan to go with, ask questions about all available homes. If you are a veteran of the U.S. Armed Forces, inquire about the availability of VA loans. For many first-time homebuyers, FHA loans are an option, but some may have very good credit and qualify for conventional loans. Next, talk to the mortgage broker about various loan terms, including 15-year and 30-year loans and fixed and adjustable rates.

#5: Create a Budget for the Future

It’s often important to clearly understand what’s to come regarding monthly finances. Now that you know your monthly payment, work out a budget for yourself. Consider that utilities may be higher in a home than they are if you’re renting.

#6: Build Up Your Down Payment

First-time homebuyers are likely to save a significant amount of money when they have a down payment larger than the requirements. FHA loans typically require a 3.5% down payment, for example, but having 5% or more helps to reduce the cost of the home in the long term. Work to build up the down payment you’ll make over the coming months as you search for a home for sale. The U.S. Department of Housing and Urban Development offers a list of resources to help fund a new home, including grants and down payment assistance that could help.

#7: Start Your Search with Confidence

Now that you know the financials and you have a mortgage broker by your side, you can start looking for the home that’s perfect for you and your family. It is often critical for a first-time homebuyer to work with a real estate agent who can guide prospective buyers through the process. As the buyer, you don’t pay your agent anything out-of-pocket for their service, but they can provide exceptional insight, negotiation power, and guidance.

#8: Make an Offer on Your Home with Help

Working with a local real estate agent, find the home you desire and negotiate an offer. A core part of this will be to understand the local real estate market and the home details. Your agent will do a market analysis to help you create a competitive offer but also one that’s affordable to you.

#9: Complete a Full Home Inspection

From pests to structural concerns, you need to know everything about the potential home you’re buying before you move forward. A home inspection enables that and is often a contingent part of any offered contract. After they accept your offer, you’ll conduct a home inspection. If that inspection reveals anything unknown or troubling, you may be able to exit the offer or counter with repair or cost adjustments. This is also a valuable way to learn about the updates the home may need to major systems like larger appliances, heating and cooling, and the roof.

#10: Protect Your Financial Health Throughout This Process

While your waiting to close on your home, avoid significant changes in your financial situation. Don’t change jobs. You also shouldn’t open up new lines of credit even to buy furniture for your new home. First-time homebuyers should stay in contact with their mortgage broker throughout this process to minimize any significant changes that could impact their ability to qualify for a loan.

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