If you happen to know a first-time home buyer, it’s time to consider sharing some of the crucial information you learned throughout the buying process with your friends. They’re going into this process unsure of what to expect, unsure how long it might take, and unaware of the many things that aren’t obvious until they occur. To help make it easier on the first-time buyers you know, why not share some of the most important information with them you know. It’s going to make the process that much simpler, and it’s going to make the buying process a lot easier on them.
Do Nothing Until You Check Your Credit
You might know you have amazing credit. You’ve been using your credit cards and paying them off in full for years. You have a car note, you’ve never made a late payment, you keep your credit utilization at or below 30%, and you never miss payments. You have an ideal credit history, but that doesn’t mean anything when it comes to the information the three major credit bureaus share with lenders. You might know these for fact, but if any of the creditors you work with make a mistake reporting your information to the bureau, there is a mistake on your report.
Those who work at the credit bureaus are also humans who make mistakes, and they might make mistakes on your credit report. It’s time to check your report, fix any issues you have, and then work on getting pre-approved for a mortgage. Even one small mistake could prevent you from buying the house of your dreams or getting the best possible rate.
The Pre-Approval Is Not A Guarantee You Can Afford A Home
Let’s be very clear here; when the bank says you can buy a home up to $500,000, it doesn’t mean you can afford a half-million dollar home. You must first take into consideration the additional costs of home-ownership. This means the cost of paying for home maintenance, savings, living the same quality of life you already have, the cost of utilities in a large home, homeowner association fees, and more. You’ll want to add a new home warranty to your budget to make paying for major repairs much more affordable, and this is also a factor to consider in the budget.
Remember the bank doesn’t know what you can actually afford. They simply know what you look like you can afford. Do the math, figure out what kind of payment you’re comfortable making, and then choose a price point. By all means, get the pre-approval, but don’t take it as a law governing what you can afford.
Put Money Down
With so many programs available to help first-time home-buyers with down payment assistance, it’s amazing how many buyers choose not to make a down payment. Yes, it’s expensive to put down at least 20% of the value of a home, but it’s worth every penny. When you choose to forgo a down payment in favor of a 100% bank loan offered to some buyers, you also require your budget to go up. Now you’re paying Private Mortgage Insurance, which is hundreds of dollars a month added onto your mortgage payment. This is a payment you make until your mortgage is paid down to 80% of the value of your home. Don’t skip the down payment.
With so many factors associated with the home buying process, it can take some time to get everything in order. You can do yourself a big favor by learning what goes into buying a house prior to making this first step. It’s better to know what to expect, what might happen, and what makes the process easier. You have the power to make this a seamless and exciting adventure, and all homeowners will tell you it’s a wise idea to do just that. Get to know the process, your finances, and make the right decision the first time.