For youngsters in the USA investing in real estate is becoming a challenge. With the increased inflation rate and the skyrocketing mortgage, buying a house is becoming a pipe dream. This is when first time home buyers desperately need tips for …(especially the one that will work).
However, if you have knowledge about real estate and organize your finances well then, the goal will be attainable.
Therefore, we are bringing some extra help to you. Upon asking a few first time home buyers, we were able to compile a beginner’s handbook. Starting from the steps you need to cover to get the keys to your first home, to the expert tips for first time home buyers to protect them from the inevitable mistakes.
Becoming a homeowner in your very first home is like that one milestone we have been waiting for. It is time to prepare financially, and mentally.
Mistakes To Avoid
Before we get into the tips for first time home buyers, it is imperative to understand the mistakes of first time home buyers.
Once you know what you shouldn’t do, what you should do becomes clearer.
1. Having Only One Real-Estate Agent
In today’s day and age, a real estate agent is not only easy to find, but also assess. You have digital real-estate channels which list agents, alongside their experience level, and customer feedback.
If you are having trust issues about the real-estate website exaggerating feedback, you can investigate other listings like Yelp.
However, the mistake would be to stick to one real-estate agent. No matter how good they are, you should at least investigate the properties shown by others.
If you do not have enough properties to compare, your options will be too limited.
2. Waiting For That One “Unicorn Property”
Neither of us wants to limit our searches to a few options. That doesn’t mean we will keep looking for that one “unicorn property” that makes us “feel at home.”
Moreover, the reality is none of these properties are your home yet. Therefore, you are fishing for a “feeling” that doesn’t exist.
When it comes to property searching, you must ensure other logistics. For example, the ease of location, the age of the house, the amenities being provided, and how big the area is for the price you are paying.
3. Taking Too Many Decisions on Emotions
It is not your fault that your emotions are running wild. It is your first home Afterall!
However, one of the first tips for first home buyers is to not let their emotions take control of their decisions.
It can lead to heavily crossing your budget without even realizing it. Or you might be a victim of overpaying for a property whose price is way less.
Remember, lenders, sellers, and realtors might even feed onto that emotion and try to extract more money from you. Therefore, remember to always either be extremely logical or find someone who can be the logical backbone the moment you get too emotional.
4. Forgetting About Mortgage Preapproval
Excitement can be dangerous for first time buyers. Before even looking for a loan lender or approval of your mortgage, many start browsing for their dream house.
Although that form of enthusiasm is always welcomed when you are doing something new, you should also have a reality check! As one of the biggest tips for first time home buyers, settling the money is crucial.
Here is some data to give you an idea of the current mortgage scene (Disclaimer: This is not to scare you, but rather to prepare you better for the real estate scene).
According to the Consumer Financial Protection Bureau (CFPB) report in September 2023. In 2022, lending declined, with an increase in rates, fees, and other costs.
50% of Asian, Hispanic, and African American mortgage applications were declined due to low income. While White borrowers have 40% of their applications declined due to low income. 1
The number of first time buyers is more than the company’s lending money. No seller will consider you a confident buyer without loan approval (unless you are paying for the whole amount, which is rare).
Therefore, the first step to buying a house is to always fix the finances first! You can also investigate online loan applications to quickly process the finances.
Top Real-Estate Loan Lenders
| Lenders | Credit Score Required | Min. Downpayment |
|---|---|---|
| Guild Mortgage | 540 | 3.5% |
| Network Capital | 56O | 3.5% |
| Flagstar | 580 | 3.5% |
| Fairway | 580 | 3.5% |
| Guaranteed Rate | 580 | 3.5% |
| Wells Fargo | 600 | 0% |
| Carrington | 500 | 3.5% |
| New American Funding | 500 | 3.5% |
5. Speeding The Process
We understand you are excited to get possession of your new house. Yes, you cannot wait to choose a paint color, and decide what to do with the extra bedroom.
However, you will get to do these anyway. So, why not take the time to ensure the safe & secure signing of the contract?
Haste can make you miss out on important details. Some of these details could also be legal, and missing out will lead to legal troubles.
Thus, a step-by-step curated approach is always the right kind when it comes to buying your very first property.
So, without any further ado, let’s get into the ultimate step by step guide to getting your very first property.
Step By Step Guide to Your First Property – Tips for First Time Home Buyers
These are the steps you should keep in mind when buying your very first property.
Step 1: Create A Budget
If you have a few realtors showing your properties, they are likely to show you ones that will surpass your budget.
Remember, it is their job to make any property look extremely appealing to get more sales.
It is your job to keep reminding them of the budget. It might seem all right to surpass your budget now. However, when it comes to long term financial planning, going over and beyond your budget can have repercussions.
So, the first step is to fix a budget and stick to it!
Step 2: Start Saving for a Downpayment
There is no home loan on Earth being dispensed at zero downpayment. Plus, the downpayment rating depending on the lender you choose could vary.
Therefore, it always takes a few months to save as much as you can for your downpayment.
While you are saving for your downpayment, try not to make any extravagant reckless purchase on your credit card.
Lenders often scrutinize first time lenders’ credit scores in more detail than others. They might even decide not to approve your loan because of these extravagant credit charges.
Therefore, until the approval, try to be extremely careful with your finances.
Step 3: Check Into Different Loan Options
Different loan options can allow you a small percentage of downpayment as a first-time homeowner.
Do not simply go to any lender. Check the following U.S. department loans that could offer lower downpayment options. This is to help young first-time home buyers at the height of the U.S. inflation rate.
V.A. Loans: This is a special kind of loan for veteran & active-duty military workers. This value proposition will also extend to their spouses. They are not required to make any downpayments; they just pay the funding fee. This makes the borrower fee a lot more affordable for these offers. 2
FHA Loans: With a good 580 credit score, you can get a 3% down payment with the help of an FHA loan. This is a great option for people who do not have much saved for downpayment. However, you should remember that lenders will claim mortgage insurance either yearly or upfront upon signing your role. 3
USDA Loans: There are USDA-eligible areas assigned by the U.S. government (most of them are rural areas). This loan is to help low-income individuals get a house. Some of these loans (depending on the area) don’t even require a downpayment. 4
Also Read: Avoiding Common Mortgage Mistakes: Tips For First-Time Homebuyers.
Step 4: Finding A Real Estate Agent
Once you are quite settled with your loan approval and mortgage rate, it is time to pick the right real estate agent to help you understand your properties.
Once you establish your budget for your home, you must keep some away from your estate agent.
You will have more than one, if you want to get a diverse property browsing experience. Therefore, settle the budget accordingly.
Look for referrals, portfolios, and first-hand experience from clients they have worked with before selecting a real estate agent.
However, affordability is a big deal. You must ensure their fees do not cross the budget boundary you have set for yourself.
This also ensures safe and anxiety free browsing without having to constantly worry about real estate agent fees.
Step 5: Pick The Right Neighborhood
You cannot be looking at properties all around the city!
As a first time buyer, you are likely to have some neighborhood in mind. However, if you do not, here are a few deal-breakers you should keep in mind when picking one.
The Commute to Work
How far is the house from your place of work? Is the commute easy with available transportation, or can it be tiresome?
Low-Crime Rate
Unfortunately, crime can fester anywhere. However, when it comes to neighborhood, you should stay away from the ones with high crime rates. No matter how affordable the houses are.
Easier Communication
Where is the nearby airport or railway? Is it easier to reach, or are the modes of transportation scarce?
Educational System
If you plan to extend your family, look at the school’s proximity. For both primary & secondary schools.
Quite & Peaceful
Your neighborhood shouldn’t feel like a frat house party every day. Try to stay away from neighborhoods popularly known as college communities.
Last-Minute Tips for First-Time Home Buyers
Here are some last-minute tips for first time home buyers.
- Check your credit history one last time before you go for your mortgage approval.
- Try to ensure you get a minimum of 1400 sq. ft for your first house. You can always go up when you choose to shift to a new property.
- The house should have at least two bathrooms, even if the house is for two. This is because you will have guests, and it could be chaotic.
- Do not go for a big yard on your first home. If you are a novice, maintaining one could be difficult.
- If you can find a property with a good HOA (Homeowner Association). This will give you a support system for all your new homeowner problems.
Did we cover everything in terms of tips for first time home buyers?
Do let us know what you think?
Plus, if we missed out on something please do mention so to our readers in the comment section below.
Read Also:
References:
- CNBC is one of the biggest world leaders in terms of business & financial news. It is consumed by more than 355 million people worldwide. ↩︎
- VA, or US Department of Veteran Affairs, is an executive body, a department of the federal government that provides lifelong healthcare services for US veterans. Additionally, VA News & Information also provides crucial data on veteran benefits in real estate. ↩︎
- Investopedia is a finance media website that is trusted worldwide for its well-researched investment dictionaries, advice, reviews, ratings, and comparisons of financial products. ↩︎
- USDA, or the United States Department of Agriculture, is a government body responsible for developing & executing farming laws or rural, forest, and economic development. ↩︎
