First Time Home Buyer Tips

Buying your first home can be an exciting time.  It can also be confusing, frustrating, and even intimidating.  You most likely have lots of questions, and you may not know where to begin.  Here are a few tips to help make your first home buying experience a less overwhelming and more successful one.

Learn the Basics
You may not know what you don't know.  Therefore, one of your first steps is to get educated on the basics of buying a home.  As you do, remember that details within the real estate process vary by area.  So you'll also want to know what local real estate customs impact your transaction.  Learn about those customs from discussions with a real estate agent or by attending available complimentary home buying workshops.  Find general information online, as well as in books written specifically for first time buyers.
 
Know Your Credit Rating
If you plan to get a loan to finance the purchase of your home, your credit rating will impact your eligibility for a loan as well as the terms you get, such as your interest rate.  So, know your credit score -- the three-digit number that sums up credit report data -- and also confirm that the information contained on your credit report is accurate.  If it is not, correct the situation before you apply for a home loan.  And if your credit rating is less than spotless, you may want to take time to clean up your credit.

Know Your Buying Power
Save yourself time, energy, and disappointment by taking the time up front to find out how much home you can afford.  You can do that by either getting pre-qualified or pre-approved.  Pre-qualification gives you a ballpark price range that lets you know how much house you can potentially buy.   Pre-approval is a written commitment for a loan up to a specified amount subject to certain terms and conditions.  Both processes enable you to focus your home search.

Be Financially Prepared
Have a down payment ready to apply toward the purchase price of the home.  You will typically find that the larger your down payment, the more favorable your loan terms. And if you make a down payment that is at least 20 percent of the purchase price, you can usually avoid private mortgage insurance (PMI) -- a policy that protects your lender against financial loss if you default on your loan.  If your down payment falls short of that 20 percent, expect to pay a premium for PMI in addition to possibly paying other closing costs.  These can include fees for the appraisal and credit report; prepaid interest; points (one-time, up-front amount to have the lender offer you a lower interest rate); title insurance premium, etc.
 
Make a Search Plan
Many emotions come into play when you are looking for a home.  Keep emotions and ensuing anxiety at bay by making a plan of action for your home search.   Develop a list of what you are looking for in a neighborhood and a home.  Set priorities and distinguish what you must have from what you would like to have.  Decide how you are going to research neighborhoods and homes; whether you are going solo or will enlist the help of a real estate agent; and what your timeline is for locating and closing on a home.

Relax and Take Your Time
Shopping for a home in a frenzied state of mind can have definite drawbacks.  Make sure you look to your satisfaction, get all of your questions answered, and feel comfortable with your home choice.  You should be prepared to compromise on some things because there is quite simply no perfect home.   And be emotionally prepared if someone else snaps up the "home of your dreams."  Move on with confidence to find another perfectly comfortable home that meets your needs.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.