Steps to Buying Your First Home
When it comes to the process of purchasing your first home, excitement and nerves are completely normal. However, the challenges of being a first-time homeowner can feel intimidating—daunting, even—particularly for those moving on their own for the first time. Let’s take a look at a few guidelines and tips that can help take the stress out of the decision to purchase your first home.
Your First Home Isn’t Usually Your Forever Home
When it comes to the purchase of a new home as a real estate investment, many first-time home buyers tend to want the biggest house they can get. With thoughts of starting families or getting enough space for an existing family to grow, buying a house is one of the first times people tend to really plan out their lives 30 years in advance.
But remember, 30 years of planning is a huge gamble. Any number of things may change during that time that end with needing to move once more, including job relocations, needing to be closer to an ailing family member, or looking for a better school district. This unavoidable uncertainty means that it’s not in your best interest to plan for futures that can shift and change.
Look for a house that suits your immediate needs, or needs 2-3 years down the line, and understand that houses are adaptable! That extra bedroom could be a guest room, a den, a nursery, or a home office. A shed can be a workshop, a storage area, or an artist’s studio.
Buy in Your Budget; Don’t Become “House Poor”
Many first-time home buyers also fall into the trap of figuring out the most that they could afford to spend on a new home, then spending exactly that amount, or even more! The reasoning behind this decision is simple: money spent to repay a mortgage isn’t really “spent.” Homes can be refinanced or remortgaged if money gets tight, or repaid when the house is sold.
That’s sound reasoning, but only to a point. People who end up spending most of their monthly income on a house payment leave little for other debt repayment, retirement savings, or building an emergency fund. They find themselves unprepared for an unexpected medical bill or car repair. They also find it difficult to take vacations or make home improvements. That’s an unenviable position.
Avoid this trap with a little financial consultation. Community Financial’s dedicated Mortgage Specialists can help walk you through the best budget for your financial situation. That means buying the house you need, not the most expensive house you can afford. This will help you feel more secure and happy in your new home, and allow your finances to flourish.
Understand the Process and Your Options
There are a lot of factors that go into obtaining a mortgage. First, you and the seller have to agree on a final price, which includes the money you pay for the house and a host of fees, like the inspection, appraisal, and title transfer. The realtor in charge of selling the home can walk you and the seller through the process.
Next, you’ll need to arrange financing. You’ll want to shop around for the best prices and mortgage rates. Each financier has to appraise the value of the home, and then compare their estimate to the price you agreed on with the seller. The greater the difference between these two values, the more expensive your home loan will be, but that’s not the only factor. The financing institution also has to check your credit, verify your income and assets, and confirm your employment.
You can help this process by buying a house you can afford, building your credit score by reducing the amount of credit you’re using, staying with the same employer, and saving for a significant down payment. You should aim to have at least 20% of the total amount of the sale for a down payment, as this is the threshold to avoid having to pay for private mortgage insurance (PMI). A larger down payment also reduces the risk of the loan to the lender and can help get you a less expensive mortgage. This, in turn, makes for a less expensive housing payment.
Community Financial offers a variety of options for First-Time Homebuyers, including conventional mortgages, options for rural development, and even 0% Down* programs. Call (877) 937-2328 or set up an appointment with a Mortgage Specialist for more information.
Don’t Go It Alone!
A lot of big national lending institutions advertise appealing mortgage specials on billboards, TV, and the radio. The rates may seem reasonable and even enticing. In reality, though, those rates go only to a small percentage of borrowers – borrowers who have exceptional credit, significant income, and a considerable net worth. As a first-time home-buyer, you probably will not qualify for the rates those large, faceless corporate lenders are using as bait to pique your curiosity.
Given the difficulty of shopping around, make your first stop the institution that has the best chance of giving you the best rates from the start. Your credit union is there to help your community, and that includes helping new home-buyers secure loans for the first time. Community Financial’s Mortgage Specialists are here to provide you with all of the tools for a successful home purchase, including pre-approvals that allow you to shop for a home with extra knowledge and security under your belt.
Your Turn: Have you gone through the process of buying your first home? Share your advice for a successful home purchase with us in the comments!
*0% Down is available for those with a Good credit rating (720+), subject to credit application and approval. Reduced PMI, no income limits, and available for 15, 20, and 30-year Fixed Rate Terms and ARMs. Available for owner-occupied properties only. See cfcu.org/firsthome or consult a Mortgage Specialist for more information.
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