Home buying is an exciting journey, but it is daunting at the same time. The What, Why, and How of things can be overwhelming and may even lead to a bad experience. Being well-informed will help you avoid getting caught in scams or home buying programs that could lead you to make the wrong choice.
This first time home buyer information will give all the deets you need to get started with shopping for your new home the right way.
Set a Good Foundation for Your Home Buying Plans
Homebuying is a major life decision, don’t think it only involves the technical side of things. Your decision on where and what to buy should be anchored on the kind of life you want to build moving forward. Make sure your life plan and home buying plans fit well together.
Give these factors the same amount of attention when deciding what kind of house to buy: your lifestyle, forthcoming life events, and financial capability. It will also be wise to set up a contingency plan in case your plans don’t pan out as you expected.
Check Your Financial Status
Are you financially equipped to buy a home? Let’s find out.
The Federal Housing Administration uses 43% as the standard debt-to-income (DTI) ratio for approving mortgages. This means all your debt payments, including home-related expenses must not exceed 43% of your gross monthly income. This figure is also important to lenders because it shows how well you can manage your debts.
Credit Score to Qualify for Mortgage Loan
First-time homebuyers need a credit score of 650 to qualify for a mortgage loan. Although credit score requirements vary depending on the type of loan program, it’s important not to go below this score. And if you really want to qualify for the best deals on interest rates, try to aim for a score of 760 or higher.
Have a Cosigner to Help Back Up Your Credit
If your income or credit score is not high enough to qualify for a mortgage loan, consider getting a cosigner to include their income and score in the affordability calculation. But be wary, your cosigner will also share the financial responsibility of that mortgage. If you fail to meet your obligations, it will create a negative impact on your cosigner’s creditworthiness.
You need to prepare for these upfront costs so you won’t derail your closing or move-in plans: down payment (at least 20%), closing costs, moving costs, maintenance and repairs (unless the house is brand new), initial set of furniture and appliances, and home association fees. Be earnest to save money for home purchase to prepare you for these costs.
Find a Buyer Agent You Can Trust
A buyer agent works for your best interest and can actually help speed up your home buying process through their professional guidance and assistance. In most cases, they will negotiate on your behalf. Select an agent from the list of Accredited Buyer’s Representative by the National Association of Realtors.
Poplar Homes assists buyers of primary residence or rental properties, whether they are homeowners or renters.
Find The Right Property
Optimize your search by using online listing sites where you can check multiple listings in a short span of time. Take it up a notch and make use of tech-based listing sites that have tools, such as 3D virtual tours, that help narrow down your search. Study the neighborhood and homeowner laws in your preferred area.
This stage of your homebuying journey is crucial as this will set your financial obligations for years to come. Choose the right lender whose program fits your needs.
Related Read: Guide to First Time Homebuyer Programs
You may opt to pre-qualify alongside your home search to get a good idea of what you can afford. Pre-qualifying won’t hurt your credit score as it is only considered a “soft pull.” You only need to provide a lender with basic information about your income and debt. This is also a quick process and it’s free. However, it doesn’t guarantee that you’ll get approved for a loan, especially when the estimated credit score you provided changed by the time you get a pre-approval.
Your lender will make a “hard pull” on your credit report to determine your actual creditworthiness. Everytime a hard pull is made, it causes your credit score to temporarily lose a few points. If you’re working with multiple lenders as your way of selection process, make sure you do your pre-approvals within a 14-day span or 45-day span depending on how your credit scores are calculated, according to FICO. This way, your multiple hard inquiries will only be counted as a single inquiry and will not create a significant impact on your credit score.
Make an Offer and Pay Earnest Money
Your agent will help you make an offer to the seller or the seller’s agent based on the actual condition of the property. When you’ve reached an agreement, you’ll pay a security deposit of 1% to 3% of the purchase price.
Obtain a Thorough Inspection
Make a thorough inspection of the property while your earnest money is in escrow. Use a professional service to determine its overall condition because they have the ability to scrutinize defects not commonly obvious. If a major defect shows up in the inspection that the seller failed to disclose, you will have the option to re-negotiate your offer or just decide to call it quits and take your money back.
Close The Deal and Move In
If the inspection didn’t reveal any major issues then move to close the deal. Your agent will guide and assist you through the rest of the paperworks to make sure that nothing falls through this final stage. You can now begin to plan for your move-in process set on a time that is agreeable to you and the seller.
All first time homeowners agree that the difficulties that come with homebuying are worth it in the end. The pride of accomplishing a major financial milestone outweighs any challenges along the journey. Doing your part in learning what you need to know and how to do them will make your homebuying experience a wonderful journey.
If you’re considering buying a property, Poplar Homes can help you buy a home faster, for less.
Subscribe to Poplar Homes Insights for more information on homebuying tips and programs.