Five Tips for First Time Homebuyers
2021 has been a historic year in many ways: some of them good, some of them bad, and some of them ugly…really, really, really ugly.
While the ongoing pandemic has been devastating for many industries, realtors have seen a significant uptick in real estate purchases: particularly among first-time home buyers. In fact, according to CoreLogic—a company that analyzes business statistics—first-time homebuyer applications jumped substantially in June 2021 when compared to June 2020.
With so many first-time homebuyers shopping around for a new home, we know that many of you out there probably have a lot of questions about successfully navigating the homebuying process.
To lend a little helping hand, we’ve compiled a list of five tips that every first-time homebuyer should know.
Tip #1—Pay Your Debts
Owning a home is an expensive venture. Unless you are a multi-millionaire with a mountain of liquid cash that you’re ready to spend, you are probably going to have to get a mortgage loan, which you are then going to have to turn around and start paying off. Between the monthly mortgage payment, and the day to day costs that crop up with owning a home—renovations, maintenance, furnishings, etc.—the costs of owning your own home can quickly begin to add up. That’s why, as a new homeowner, the last thing you need is to have credit card debt or student loan payments hanging over your head.
So, before you start making a budget or talking to realtors®, you need to pay off your debts!
Starting off debt-free will help make your home buying process easier in a lot of ways! First, it will significantly improve your credit score, which will, in turn, help you get a better interest rate on your mortgage. It will allow for greater flexibility in your overall budget when the time comes to start looking for a home. And, in general, it will make the whole home buying process a lot less stressful moving forward.
Tip #2—Do Your Homework
Once you have paid down your debts, it is time to start doing your research. Start by figuring out where you would ideally like to live and what kind of accommodations you are going to need, both now and in the future.
Once you have determined your needs and where you would ideally like to live, you will be able to start researching comps, and from there, figuring out how much money you will need to purchase your first home. Once you have that figure in mind, you can start taking tangible steps towards buying your first home: creating a budget, saving money for down payments and closing fees, shopping around for different mortgage rates, and doing your research.
Tip #3—Take the Time to Get a Mortgage Preapproval Letter
We’re going to let you in on a little secret about home sellers: they want, to sell, their homes. Home sellers aren’t interested in working with window shoppers. They want to work with serious buyers, people they can count on to close on their home.
One of the easiest ways to show homeowners that you are a serious buyer is to get a mortgage preapproval letter. The preapproval letter is a lender’s offer to loan prospective homebuyers a certain amount of money under specific terms. Having this preapproval letter shows sellers and real estate agents that you’ve already taken the necessary steps to secure the capital that you’ll need to buy your first home.
This will give you a significant advantage over other prospective buyers who have not taken this step yet.
Tip #4—Get to Know Your Prospective Home
Now comes the fun part—it is time to start shopping for your new home!
During this exciting—albeit stressful—period, you need to make the most of your time. When you attend an open house or tour a home with your Realtor®, you need to open your senses to that property: listen for noise, pay attention to any strange odors or stains, and look at the overall condition of the house—both inside and out. Ask about the type and age of the electrical and plumbing systems. Ask about the age of the roof, and if there has ever been any significant damage.
Then, once you’ve found a home that shows promise, bring in a professional home inspector to give the place a thorough once over to make doubly sure you didn’t miss anything. By the time you enter negotiations, you should know your prospective home just as well as the seller.
Tip #5—Stick to Your Budget
Once you enter the final stages of the home buying process, you may feel tempted to offer a little more than you feel comfortable with—especially if there are multiple offers on that home.
While you always want to make a competitive, you need to keep your budget in mind. Work with your Realtor® to make a detailed written offer that stays within your budget. If the seller tries to push you past a comfortable price point, then don’t be afraid to walk away.
Sticking to your budget is the only way to keep the American Dream from turning into the American Nightmare.
