Buying your first home can be a learn as you go process. But even though everyone’s home buying experience is unique, you can prepare yourself for what’s to come by learning about what helped and held others back. Before you embark on your own home buying journey, here are some of the most important Dos and Don’ts to get you started on the right track.
Do: Make Sure Your Credit Score Is in Good Shape
Before you even look at homes, it’s wise to ensure you’re financially ready to buy one. Start by checking your credit score. This is one of the major factors that affect what type loan you qualify for and the mortgage rate you pay. No matter where you stand, there are steps you can take to boost your credit score quickly:
- Make timely payments on your accounts – rent, car loan, cell phone, credit card, etc.
- If you have debt on multiple credit cards, transfer all that debt to a single credit card with the lowest interest possible.
- You can also ask for a credit limit increase or open a new card and maintain a low balance. This will improve your spending ratio and bump up your score.
To check your credit score, there are many sites available. You can get a free credit report here. If you want to learn more about credit score requirements and raising your score, check out these 5 tips to get your credit score mortgage ready.
Do: Get Preapproved for a Mortgage
The preapproval process is a formal analysis of your financial situation. To get preapproved, you’ll be asked for proof of your income and assets. You’ll also need to have your credit pulled. In the end, you’ll get a dollar amount that represents how much you can afford to spend on a home.
You have a lot to gain by getting preapproved. For one thing, you’ll know exactly how much you can spend so you don’t lose any time looking at homes outside of your budget. More importantly, you’ll have a better chance of getting an offer accepted because home sellers will know you’re a serious buyer. Your preapproval is proof that you can follow through on an offer, which is why sellers typically favor offers with a preapproval letter. You can learn more and get preapproved in minutes here.
Do: Team up with a proven real estate agent
Just as a mortgage banker guides you through the home financing process, a real estate agent will guide you through finding and buying your new home. Right from the start, an agent will work to understand your needs and identify neighborhoods where you can find the best value. Not only will you find out about homes that match your wish-list, you’ll be able to tour them much more easily with an agent coordinating the showings.
Your agent will be your advocate, from helping you evaluate homes to making an offer and negotiating the best price for you. As a first-time home buyer, having an expert at your side will make your experience far less stressful and help you avoid making any mistakes. And the best part? You don’t pay a thing. When you’re ready to get serious about your home search, check out these three tips to find the right agent for you.
Do: Consider a Home’s Resale Value
If you’re like most, the first home you buy won’t be your last. Whether you end up staying for a couple years or more than a decade, it’s nice to build some up equity so you have more money to put towards a new home after you sell. The best place to start when judging potential resale value is a home’s location. How are the nearby schools? Is there a downtown area within walking distance? Are there plans to develop the area? There’s a lot to consider, but you can get an idea of what to look for with these 5 location factors that influence home value.
As for a home itself, features like three bedrooms, two bathrooms, walk-in closets and garages are all signs that a home will be desirable to buyers when you sell. There’s no sure-fire way to know a home will turn into a gold mine. Just keep resale value in mind and get your real estate agent’s input as you weigh the pros and cons.
Don’t: Let Your Emotions Get the Best of You
There’s no getting around it – buying a home is deeply personal. Just the thought of owning your first place can be thrilling, so it’s easy to get swept up in emotions as you imagine yourself living in each home you walk through. This can either lead to falling in love with a home too quickly or dismissing every home you look at because there could be something better out there.
It’s important for a home to feel right – no question. Just make sure to consider the financial, practical and emotional elements that are involved before you come to a decision. A home you love at first sight might be overpriced. A home you dismiss out of the gate might be fixable. Which leads us to…
Don’t: Fixate on the Little Things
It can be tough to see all that a home has to offer when you’re staring at leopard print wallpaper in the master bedroom. But as unsightly as one, two or even ten features may be, don’t let them deter you. You can always paint walls, install new flooring or hire a landscaper to refresh the front lawn and backyard without breaking the bank. Plus, a home with a few flaws might be sitting on the market for longer than the seller anticipated. Check with your real estate agent to see if you might have some extra negotiating power.
Don’t: Lose Sight of Closing Costs
Closing costs are like the fine print of buying a home. Many first-time buyers zero in on the price tag only to be blindsided by the costs bubbling under the surface. These include – but are not limited to – home appraisal fees, underwriting fees, survey fees, title insurance fees and home insurances fees. Learn more about what you’re paying for with each of these fees here.
Altogether, closing costs typically add up to 2-5 percent of the purchase price of your home. At the start of your home search when you figure out the maximum down payment you can afford, just remember that you might be on the hook for a few thousand more upfront after you get an offer accepted.
Don’t: Make Big Purchases Before You Close
Your offer was accepted and you’re at the doorstep of becoming a homeowner. Celebrating is definitely a “Do”, but celebrating by buying a brand-new living room set with your credit card is a definite “Don’t.” Your mortgage lender will recheck your debt load before you officially close. If your debt-to-income ratio goes up, it makes you more of a risk to make your mortgage payments. A mortgage can be denied at any time before closing, and you don’t want to see yours fall through when you’re so close to the finish line. Learn more about the dangers of making large purchases here.
It’s Okay Not Knowing Everything
Very few of us who purchase homes are housing market experts or read up on mortgage interest rates until it’s time to take the plunge. No matter how uncertain you may feel at any point on your journey, just remember that millions of others were in the same boat you are and made it to the other side. Just keep an open mind, ask questions, and make sure you work with trusted professionals who can help you make the right decisions.