Buying a house for the first time can churn up all kinds of emotions. From exhilarating to nerve-racking, it’s an experience that you will need to be prepared for. We’ve put together some advice for first time home buyers to make your purchase run as smoothly as possible.
An important step is to go see a lender. It’s easy to miss this step when you’re wrapped up in the excitement and anticipation of your first home, but meeting with a lender, or multiple lenders, to find the best financing option for you is vital to the process. (If you don’t know where to start, we have a list of reliable lender contacts)
Having a lender allows first-time homebuyers to have good negotiating power right from the start. Your lender can go over your credit history and provide you with helpful advice on how to handle any issues that may hold you back from purchasing. If your credit is good, lenders will pre-approve you for a home you can afford. This gives you the advantage of knowing just what your price range truly is and will help manage your expectations. A lender can tell you exactly how much you’ll have to put up for down payments and closing costs which allows you to present the best possible firm offer for a home you like. This is very attractive to sellers, especially in our current market.
Once you’re pre-approved, you will know the following:
The maximum price you can afford. This will allow you to make a firm offer as well as move quickly on a house that may get other bids.
How much money you need for down payment and closing costs.
How much the seller will need to help with closing costs, if necessary. Discussing closing costs from the beginning can ensure you don’t lose the home during negotiations.
If you have any credit issues and how you can resolve them.
If you have been pre-approved for the loan. This is very attractive to sellers.
That your paperwork has been submitted and processed. Therefore, you will not have lengthy waits for the bank to evaluate your credit, etc. when you’re ready to make an offer on a house.
How long it will take for final approval of your loan.
You now know what you can afford, what you can offer, and what you need to negotiate from the seller. As a first-time homebuyer, you’ll have the facts and be ready to purchase your home.
Now comes the fun part, shopping for your dream home!
We’re here to help first-time homebuyers. Contact our team today and we’ll walk you through each step of the process. We look forward to introducing you to your first home!
Underwriters are the bank employees who calculate the risk of loaning money to each potential borrower. Some risk factors that can affect your mortgage interest rate or your acceptance rate are well known: Your credit score, debt ratio, and debt-to-income ratio. Other risk factors or concerns aren’t as well known: Sudden changes in debt ratio, changes in name or address, closing accounts, and accepting gifts to use as down payments. Learn about what lenders are looking for, what they avoid, and consult your lender before making big financial moves.
Here are the top 10 tips to prepare your finances for a home loan!
Stay current. Make on-time payments for your current credit cards, rent/mortgage, loans, and other accounts. This will help you retain or improve a good credit score, which can lower the interest rates you are offered for a home loan.
Stay steady. Spend normally. Sudden increases in purchases, new debt, or a drastic change in your spending habits can be a red flag for financial instability.
Keep debt low. Don’t apply for a car loan, new credit cards, or add new debt. Keep paying steadily on your old debt. Ideally, your balances will be 30% or less of your credit limits. Also, you want to show a predictable, conservative debt-to-income ratio to show you’re a responsible borrower.
Consult your lender. If you suddenly need to replace a vehicle, have an unexpected expense, talk to your lender about the best way to meet your increased financial needs without impacting your mortgage application. They may have suggestions, guidelines, or solutions for you. Have a payment issue? Often your lender can guide you through creating a letter of explanation for underwriters about a missed payment or a rough financial patch.
Keep your accounts. Have a credit card you opened in college? Don’t close it! While it does lower your potential debt, closing that older account can make your credit history shorter and it changes your balance sheet. Open credit that isn’t being used or is lightly used can actually raise your credit score, while closing unused accounts can adversely affect your credit score by making it seem as though you’re using a bigger percentage of your credit limits.
Student loans. Check with your lender about what consolidating accounts would do to your credit score and balance sheet. Often, lenders are looking for stability more than perfection, so don’t make big financial moves (even positive ones) without checking with your lender.
Monitor your score. Take advantage of your bank or credit card’s credit score monitoring program and keep an eye on your score. Your lender can tell you what their minimum acceptable score is and using the monitoring program will help you spot actions, choices, and errors that can affect your score.
Check your history. Did you pay off a student loan? Ensure your lender reported that payoff correctly. Does your credit score reflect an account you never had? Write the credit bureaus and petition to have the account removed from your history. Make sure the score and history you’re going to be judged on is correct!
Life changes. Be cautious about changes in address, name, or occupation. These can cause lenders confusion or concern. It may be best to wait until after you have purchased your home to make big changes like these.
Gifts. If parents, grandparents, or a recent inheritance will be affecting your down payment, talk to your lender. There may be additional paperwork or concerns for your mortgage application. Your lender is your best advocate through this process.
If you have any other questions or need to connect with a reputable lender, don’t hesitate to ask us – we’re happy to help!
My husband Jack and I have lived in our home for over 15 years. We raised our kids here. There are plenty of memories that we very much cherish. The kids are all grown up and the house is just too big and quiet. Also, there is too much maintenance. We have been travelling a lot lately and find it rather inconvenient to tend to such a large house. We know we should sell rather quickly but we are a little apprehensive about the whole process. We are also not quite sure we want a house or condominium. If it is a house, we will need to downsize; something else that seems a little unsettling. Anyhow, I am curious if you could provide some suggestions that will alleviate the doubt that comes from selling our very special home?
A : Dear Rose,
First, I want to thank you for reaching out for advice. As a real estate agent and homeowner, I know firsthand
how important it is to make your house a home only to put it on the market for someone else to enjoy. Just like the cycle of life, homeownership follows the same pattern. As you contemplate the next chapter of your lives full of more traveling and new experiences, I urge you to be as optimistic as you are realistic.
Here are a few suggestions to help ease your mind when you finally decide to put your gem on the market:
PREPARE YOUR HOME FOR THE IMPENDING SALE:
ou may be thinking does my home have feelings? Maybe not actual feelings but think of all the positive emotions your home evokes and promotes. One of the first things prospective buyers look at when they enter a house is the “feel” of it. Is it homey? Can I see myself on the corner of that couch with a good book after a long day of work? Do I like the colors on the walls? Paint is a huge factor when considering sprucing up and a good agent can help you neutralize your home. You may also want to omit anything that takes away from the positive feelings you want to induce. You do not have to do all this alone. Be sure to hire an agent that knows how to stage your home. Staging a home is crucial in this competitive market and hiring someone who is an expert will definitely help!
CONSIDER YOUR HOUSING OPTIONS AND FINANCES:
This one is mighty important! Earlier you had mentioned downsizing. Once you sell your home; you will switch roles and become a buyer. This means you will have to plan your finances accordingly. The transition can be a little daunting but again, with the right agent to do the leg work, it can go smoothly. Most sellers looking to downsize can still reap benefits of exclusivity by purchasing a condominium. It’s a great alternative and most gated communities have accessible amenities such as club houses, swimming pools, picnic areas etc. Make sure you ask your agent about all your options.
This is a new and exciting step in your life. Do not forget to bask in the impending adventures that await you and
your husband. As you treasure the memories of your old home, remember there will be new ones to add to your journey.
Thank you for your question, Rose. Please do not hesitate to call me if you need anything. I’m always happy to
help. Good luck!