Buying A Home For The First Time: Do’s And Don’ts
Jeff SeehorschFebruary 27, 2019
Buying a home for the first time tends to be a learn-as-you-go process. But it doesn’t have to be. Even though everyone’s experience purchasing their first home is unique, you can prepare yourself for what’s to come by learning what helped others and what held them back. Before you embark on your own home buying journey, take a look at some of the most important do’s and don’ts to help you get on the right track.
Top 4 Do’s When Buying A Home For The First Time:
The top 4 do’s for buying a home for the first time revolve around preparation. Your first home will likely be your largest investment, which is why it’s crucial to ensure that your financials are in order, you have a professional ready to represent your best interests and your purchase is one that is likely to appreciate over time.
Check Your Credit Score
Before you even start to look at homes, it’s wise to ensure you’re financially prepared to buy one. To begin, check your credit score. Your FICO® Score is one of the major factors that affect the type of loan you qualify for and the interest rate you secure.
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 of it to a single credit card with the lowest possible interest.
- You can also ask for a credit limit increase or open a new card and maintain a low balance, which will improve your spending ration and bump up your score.
If you’re not sure how strong your credit is, you can check your score for free by creating an account on Rocket HQ℠. If you want to learn more about FICO® Score requirements and raising your score, you can also check out our tips for getting your credit score mortgage-ready.
Get Preapproved For A Home Loan
The preapproval process is a formal analysis of your financial situation. To get preapproved for a home loan, 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. Moreover, you’ll be given an approval letter, providing you with proof that you have the funds necessary to purchase the home you ultimately make an offer on.
Many first-time buyers get so excited by the prospect of finding a home that they don’t think to check how much house they can afford before starting their search. You must get preapproved for a home loan at the outset of the home buying journey, so you don’t lose any time looking at homes outside of your budget. More importantly, getting preapproved early on will give you a better chance of getting an offer accepted because sellers will know you’re a serious buyer.
Find A Real Estate Agent
Although some buyers decide to try to go through the process alone, you should absolutely find a 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, but you’ll also 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. Agents’ commissions are paid out of the purchasing price of the home, so their fees are actually paid by sellers.
Consider 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 up some equity, so you have more money to put toward 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.
Top 4 Don’ts When Buying A Home For The First Time:
Buying your first home can be an exciting experience, but it’s vital that you maintain a practical mindset throughout the process and refrain from acting impulsively. For this reason, the top 4 don’ts require you to remain level-headed, keeping both your desires and finances in check.
Let Your Emotions Drive Decisions
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. But, beware: you should never let your emotions drive decisions about your purchase.
It’s important for a home to “feel” right – no question. Just make sure to consider the financial and practical (as well as the 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.
It can be tough to see all 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 10 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 can be an opportunity. If the property has been sitting on the market longer than anticipated, the seller may be willing to come down on the price. Instead of deciding to nitpick, check with your real estate agent to see if those little imperfections could furnish you with extra negotiating power.
Forget To Estimate 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. The expenses involved in home buying include – but are not limited to – home appraisal fees, underwriting fees, survey fees, title insurance fees and home insurance fees. It’s crucial that you don’t forget to estimate closing costs when determining your budget because they can add up.
Altogether, closing costs typically amount to 2% – 5% of the purchase price of your home. When figuring out the maximum down payment you can afford, be sure to account for closing costs as well. You might be on the hook for a few thousand more upfront after you get an offer accepted.
Make Big Credit Card Purchases Before Closing
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 indicates you’re more of a risk to make your mortgage payments.
Making big credit card purchases before closing is often dangerous because it leaves you financially vulnerable. 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. So, play it safe and refrain. You’d be better off saving the extra funds in case of emergencies.
Are You Ready To Buy Your First Home?
Determining whether you’re ready to buy your first home can be intimidating. Very few buyers, especially first-time buyers, are housing market experts or have 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 and made it to the other side. The trick is to keep an open mind, ask questions and make sure you work with trusted professionals who can help you make the right decisions.
If you’re ready to get started on this major milestone, we’re happy to walk you through the process. Create an account online with Rocket Mortgage® or speak to a home loan expert by calling (855) 480-8624.