FirstCapital Bank of Texas
Nov 14, 2018
4 Dos — and 4 Don’ts — of First-Time Home Buying
There are few moments more important—and more exciting—than when you’re ready to buy your first home. Whether you’ve continued to live in your family home while saving money or have put in your time living in an apartment, it’s finally time to have a place all your own. The process of buying a house can be daunting for even the most educated and prepared homebuyer, so here are some dos and don’ts to get you started:
- Do: Check Your Credit Score
Your credit score is one of the most crucial aspects of securing financing for your first home. You may have a well-paying job and a large down payment, but a low credit score could stand between you and your dream home. That’s why it’s important to know your score before you begin the process and to take the necessary steps to improve it or report errors. Buying a home with a significant other? Their credit is just as important if both of your incomes will be factored into your mortgage approval.
- Don’t: Underestimate Costs
Some people only consider their mortgage amount when preparing a home buying budget and are in for a shock when the bills start rolling in. You need to factor in property insurance, taxes, utilities, maintenance, and potential homeowners’ association fees to create an accurate budget. Remember, it’s better to overestimate than to find yourself unable to meet your financial responsibilities.
- Do: Take Advantage of Mortgage and Assistance Options
Fortunately for you, there are a variety of mortgage options and first-time homebuyer programs available. FHA loans are popular with first-time buyers with credit scores as low as 580 and a down payment of just 3.5 percent, but do require mortgage insurance for the life of the loan. Additionally, many states offer first-time homebuyer programs that assist with closing costs and offer tax credits and discounted interest rates.
- Don’t: Save the Bare Minimum Down Payment
While you may be tempted to put in only the minimum down payment your loan requires, resist that urge if you’re able to put down more. You are still financially responsible for 100 percent of the home’s price over the same period of time, which will accrue interest. So, while it may feel like you’re saving money by putting down 5 percent instead of 20, you’ll be paying interest on 95 percent of your loan, rather than 80 percent.
- Do: Research Multiple Lenders
Not all rates are considered equal and choosing the first rate you see can cost you big. In fact, the Consumer Financial Protection Bureau estimates that you can save more than $3,500 over the first five years of your loan by comparing rates from at least three lenders. Before you commit, learn more about your lender’s customer service and reputation, closing costs, and see if they offer potential discounts. All mortgage applications submitted within the same 45-day window only count as one inquiry on your credit report.
- Don’t: Find a Home Before a Loan
Beginning your home search because you have an idea of how much house you can afford is a recipe for heartbreak. Often people don’t want to miss out on the fun of open houses and Redfin or Zillow searches while they wait to get preapproved. But how would you feel if you did find the one-in-a-million dream home but lost it to another buyer because you didn’t have a preapproval letter in your pocket? Get preapproved first, and then have fun hunting.
- Do: Hire a Buyer’s Agent
The best thing about real estate agents is their commission and fees are paid by the seller, not the buyer, so it costs you nothing to work with them. Many times, a listing agent will try and work with you so they don’t have to split the commission of the sale and can help their selling client close the deal. The downside to this is objectivity—can you trust that the realtor has your best interests in mind and will disclose potential (but not illegal) issues with the home? Avoid this situation by finding a buyer’s agent with knowledge of the neighborhood and comps.
- Don’t: Try to Do It All Alone
There’s a reason real estate is such a big business: Buying a home is a lot of work! Small mistakes are easy to make throughout such a complicated process and can cost you big in the end. That’s why it’s vital to have knowledgeable, objective professionals on your side to communicate with the selling agent, offer advice, and handle the paperwork. Your home buying experience will be much better with the help of a realtor, trustworthy loan officer, and an experienced lawyer.
Buying your first home is an experience you’ll never forget. Make sure it’s a good one by following these dos and don’ts and you’ll be on the road to home sweet home!