Buying your first home is exciting, and it can also be intimidating. After all, this is uncharted territory for you, and there’s a lot to take in. Becoming as informed as possible before you take those initial steps on the path to homeownership can help. Here are six things to remember as you begin your journey from first-time homebuyer to confident homeowner.
Now is the Time to Buy
As rent continues to increase across many metropolitan areas, many individuals are committing to homeownership. Rent hikes aren’t the only reason for this. According to Freddie Mac, the annual average interest rate on a 30-year fixed rate mortgage in 2000 was 8.05%. In 1990, it was 10.13%. So far in 2015, the annual interest rate is 3.8%.
If you’re a first-time homebuyer, seize this tremendous opportunity to save thousands in interest payments over the life of your loan, because as we’ve said before, it's a matter of time until they increase.
The Importance of Your Credit Score
The three digits that make up your credit score can be your ticket to purchasing your own home at a low interest rate. It can also be a reason your interest rate is high, or worse, why you’ve been denied a loan. The point is, your credit score is a critical piece to the home loan process. Obtain your score and review it before you begin house hunting.
A Reputable Real Estate Agent
Finding and getting comfortable with a trustworthy real estate agent is important for all types of homebuyers, and especially first timers. Since this is your first experience with an agent, it can be difficult to gauge the difference between a skilled one and one who’s lacking in expertise. If you and your agent of choice work in great harmony, it can make the house hunting process not only seamless, but also enjoyable.
Home Inspections are a Must
You may think it’s worth skipping the home inspection to use your money elsewhere. Make no mistake: a home inspection is crucial no matter the situation. The few hundred dollars you spend on a professional inspector can save you thousands in future home repairs. Inspectors examine the home’s heating, cooling, plumbing and electrical systems, as well as the home’s structural condition, and all exterior features. So, yes, a home inspection is a must, even if the home appears to be in perfect looking and working condition.
Down Payments Don’t Need to Be Big
The idea of forking over a big chunk of money for a home can be daunting. But the reality is, you may need less than you think. For instance, a 5% down payment can be applied to our fixed rate and adjustable rate loans, while our FHA loan and VA loan have required down payments of a mere 3.5% and 0% percent, respectively. Whether you’d like to put down a small amount and pay for private mortgage insurance, or put down the traditional 20% percent, there are ways to quickly save for a down payment.
Hunt For a Loan, Then a House
Knowing how much you can afford before you begin shopping for a home will put you in complete control of your financial situation. By getting preapproved or prequalified by a lender, you’ll get an estimate of the home loan amount for which you qualify (prequalification), or receive a conditional commitment letter that states you’ll be approved for a specific loan amount, and perhaps get a look into your interest rate (preapproval).
So when the next step occurs and you start house hunting, you’ll be shopping with confidence and knowledge when it comes time to make an offer.
Thinking of making the leap to homeownership? A ditech Home Loan Specialist can help you determine the right mortgage to put you on the path to homeownership. Find a Home Loan Specialist now.