In today’s competitive market, home prices are on the rise as inflation starts to creep up and more and more people are looking to switch from renting to buying. As a first-time buyer, you might not know what goes into buying your first home. In this article, we’ll provide our top tips for first-time buyers, such as how to save, find the best mortgage rates, and pick the right realtor.
1. Start Saving Early
As stated, buying a first home is an expensive purchase and can cost hundreds of thousands of dollars depending on the size of the home and its location. The first step in buying your first home is saving early. Because purchasing a home is expensive, most first-time buyers won’t pay for their home in full on the closing date. Instead, they’ll take out a mortgage that they’ll pay off over 15 or 30 years. However, there are still costs associated with purchasing a home that you will need to cover, including:
Down payment: The down payment is a sum of money that’s due upfront in a real estate transaction. Your down payment often depends on the type of loan you take out. It can be low, at around 3% or much higher at around 20%. Regardless of the percentage due upfront, a down payment can be expensive. For example, a 10% down payment on a $100,000 house is $10,000.
Closing costs: When you close on a house, you will also be responsible for closing costs. Closing costs include expenses like home appraisals, inspection fees, taxes, attorney fees, and loan application fees. To calculate potential closing costs, you can reach out to a closing company for an estimate.
Moving expenses: After buying a home, you’ll have several moving expenses to take care of, such as renting a moving truck, hiring a moving company, making any necessary home repairs, and buying new furniture.
As you can tell, there are several expenses that can add up when buying your first home. To pay for these costs, start saving as early as you can. By setting aside money each month in a high-yield savings account dedicated to your first home, you can slowly grow your money until you’re ready to make your purchase.
2. Know How Much House You Can Afford
Another first-time buying tip is knowing how much house you can afford. While choosing the largest house on the block may be tempting, it’s important to live within your means by purchasing a house within your budget. To determine your house budget, review your finances, such as your income, down payment, savings, credit score, and debt. From there, you can estimate your monthly expenses to determine reasonable mortgage payments for your financial situation.
3. Consider Getting Preapproved
An important tip for first-time homebuyers is to get a preapproval letter from your mortgage lender. It is easy to get excited about the prospect of owning your first home, causing you to look at properties you might not be able to afford. That is why it’s a good idea to work with your lender to get preapproved. They will let you know how much money you can take out with a loan. Once you have this number, you can narrow your search to find homes in your price range. Visit our financing page for more information on preapprovals and the home loan financing process.
4. Shop Around for Mortgage Interest Rates
In most cases, you can choose a 15-year or 30-year mortgage, depending on your preference. However, your mortgage lender will charge interest on your loan each month, which can add up over those 15 or 30 years. To keep costs low, take time to shop around for mortgage interest rates to find a lender who will give you favorable terms.
5. Pick a Realtor You Trust
Your realtor will work with you throughout the homebuying process, which means you want to pick a realtor you can count on. As you prepare to become a first-time buyer, take time to interview several realtors. During the interview process, state your goals, outline your “wants” and “needs,” and ask them about their process for finding homes for clients. It’s also important to read reviews and talk to others who may have worked with that realtor to determine whether they’d be a good fit.
6. Understand First-Time Buyer Program Options
If you’re buying your first home, it’s important to note that there are first-time buyer programs. The Department of Housing and Urban Development (HUD) provides information on various first-time buyer programs that can provide down payment assistance, low-interest mortgage rates, and assistance on closing costs. HUD can point you in the right direction for home buying programs in your state, as well as information on their first-time buyer programs, such as FHA loan programs, public housing information, and more.
7. Stay Informed
Lastly, an important tip for first-time homebuyers is staying informed. The housing market can be volatile, which means market conditions can fluctuate. Some tips for staying informed include:
Analyzing market trends by seeing how much homes are selling for in your desired area and how long they stay on the market.
Choosing an informed realtor who can provide updates to guidelines and housing cost trends.
Understanding the importance of timing and when it’s a good time to place an offer or wait.
These are some of the ways you can stay informed as a first-time buyer. To stay up-to-date, review real estate media on news channels, reliable blogs, and turn to your realtor for any questions.
View Our Inventory of Homes for Sale
Ready to buy your first home? At ServiceLink Auction, you can view our inventory of homes for sale, including bank-owned homes and foreclosure homes. With resources on how to bid at an auction and buyer exclusives, we can help you become a first-time buyer in 2024.