Looking for a new home to buy?
Buying a home can be nerve wracking, particularly if you’re a home buyer for the first time. These keys can assist you in handling the process, saving money and preventing common mistakes.
# 1 Key: Start saving early for an advance payment
Putting 20% down payment is usually required, but many lenders now offers a lesser percentage like homebuyer programs for the first time that allows as little as 3% down. Yet putting down less than 20% can mean higher premiums and mortgage insurance rates, that even what seems small down payment can still be a large amount. For example, $10,000 is a 5 percent down payment on a $200,000 home.
Play around to help you settle on a target number with a down payment calculator. Setting aside tax refunds and job incentives, having a fixed Automatic Savings plan, and using an app to track your progress are just some tips for saving for a down payment.
# 2 Key: Know your options for down payment and mortgage
There are many loan options out there, each with its own mix of advantages and disadvantages. Check out the kinds of loans you can avail if you’re struggling to get a down payment.
Higher down payment means a lower monthly mortgage payment. Choose a 30-year fixed mortgage if you want the smallest possible mortgage payment. But if you can make higher monthly payments, opting for a 20-year or 15-year fixed loan can give you a lower interest rate. Use the mortgage calculator to determine if a fixed mortgage of 15 years or perhaps 30 years is better for you. As an option, you can ask for an adjustable mortgage rate, which is more risky but guarantees a low-interest rate for your mortgage’s first few years.
# 3 Key: State research and local support services
Besides federal programs, many states offer first-time homebuyers with benefits such as down payment assistance, closing cost assistance, tax credits and discounted interest rates as well as assistance programs. You may also have Home Buyer Programs for the first-timers in your county or municipality. Start to research.
# 4 Key: Identify how much you can spend at home
You need to know what is actually within your price range before you start looking for your dream home. To determine how much you can safely afford to spend, use a home affordability calculator.
# 5 Key: Check your balance and stop any new activities
Your credit will be one of the key factors in whether you are accepted when applying for a mortgage loan, and it will help to determine your interest rate and probably the terms of the loan.
So check your credit before you start the process of homebuying. Discuss any mistakes that might bring your credit score down and check for opportunities to improve your record, such as making a dent in any outstanding debts.
To avoid dropping your score after applying for a mortgage, avoid opening new credit accounts, such as a credit card or auto loan until your home loan is closed.
# 6 Key: Comparison of rates
Most homebuyers receive only one lender’s price quote, but this often leaves money on the table. According to the Consumer Financial Protection Bureau, comparing mortgage rates from at least three lenders can save you in $3,500 over the first five years of your loan. Compare rates and charges with at least three quotes.
When you compare quotes, ask if any of the lenders will encourage you to buy discount points, which means you can pay interest in advance in order to secure a lower interest rate on your loan. How long you expect to stay at home and whether you have money on hand to purchase the points are two main factors in determining whether it make sense to buy points.
# 7 Key: Hire the right agent
You’re going to work closely with your real estate agent, so having someone you can get along well is important. Highly qualified, inspired, and informed about the region are the qualities for the right buyer’s agent.
# 8 Key: Not getting adequate insurance for homeowners
The lender would allow you to purchase homeowners insurance before you close the new home. To find the best deal, search around and compare insurance rates. Look carefully at what’s included by the policies; when you make a claim, going for a lower-cost plan usually means less coverage and more out-of-pocket costs. Flood damage is also not protected by homeowners’ insurance, so you may need to obtain separate flood insurance if your new home is in a flood-prone area.
