What Every First Time Home Buyer Should Know
Buying your first home can be both exciting and terrifying at the same time. The surest way to lean more towards the positive side of that spectrum is to educate yourself so you can have a better idea of what to expect. You’ll also feel better about your decisions.
1. Define Your Dream Home
Make a list of the things you want in your home. Then, be prepared to compromise if you must. Sometimes you just can’t afford as much home as you desire. So make a list for your wish list, but note the must-haves as well as the attributes you’re willing to forgo.
2. Consider the Neighborhood
If your dream home is in a neighborhood you don’t care for, move on. Even a fixer-upper in an iffy neighborhood isn’t a good idea, because your improvements will cost you money you may not recoup in a re-sell.
3. Get Your Qualifying Documents Together
Be prepared to provide what a loan provider will need to approve your loan.
- Credit score – Credit score requirements vary, but generally you need to have a score of 600 for a conventional loan or at least 580 if you want to use the lower down payment option of an FHA loan.
- Income – You need to show the lender you earn enough money to pay your mortgage and have had steady income for the last two or three years. They will need to see the last couple of years’ tax records and proof of income, bank statements and other financial documents
- Debt-to-income ratio – The lender will compare the amount of money you earn to what you are paying towards current debts. These will show up in your credit report and other financial documents requested.
4. Determine the Down Payment You’ll Need to Make
The good news is, your down payment will probably be less than you may think. While. A conventional loan can require a down payment of as little as 3% to 5%. If you use a VA, FHA or other government-backed program, you may not be required to make a down payment at all.
If you do need to put money down, as a first-time buyer you are allowed to get funds from someone else, such as a family member or friend, as long is it’s a gift you don’t need to pay back.
5. Be Patient
Have fun getting out and walking through homes and imagining the possibilities, but be patient. Others may bid on the same home, so you could very well end up having to make offers on several houses before one of your bids is accepted. Plus, the process of actually getting a mortgage, having the home inspected and closing requirements can take 30 to 60 days.
Homeowners insurance is something you will need when buying your first home. To learn the ins and outs of this kind of coverage, see the Homeowners Insurance information provided by Einsurance.