Helpful tips for first-time home Buyers

Tips for First-Time Home Buyers

Buying a home for the first time can feel overwhelming. This is especially true with the current state of the real estate market – the median cost of an existing home is around $300,000, and available properties are being scooped up fast. However, don’t be tempted to make an impulsive purchase. Purchasing a home is a major investment and worth doing right. You want a home that you love, but that also doesn’t hurt your financial future. Here are some tips to help you.

“Class aptent taciti sociosqu ad litora per conubia nostra, per inceptos himenaeos .Aenean non turpis vitae ligula tristique sagitt isras varius erat pulvinar eros pretium”

Become Debt Free and Build an Emergency Fund

Homeownership is expensive. Even if a mortgage payment is similar or less than your rent, you will be responsible for upkeep and maintenance. So put yourself on a sound financial footing before you start looking at homes. Ideally, you should be debt free with an emergency fund that can cover three to six months of expenses.

Be Honest About What You Can Afford

Ideally, your monthly housing costs (including taxes, HOA fees, insurance, etc.) should not exceed 25% of monthly take-home pay.

Example: If you bring home $5,000 a month, your monthly home costs should not be more than $1,250. Let’s see how this works out, assuming a 15-year mortgage with a 4% fixed interest rate. Here’s what’s affordable (not including taxes and insurance):

However, if you enter $211,000 into this handy mortgage calculator, you’ll discover that your monthly payment of $1,249 increases to $1,513 with taxes and insurance added (which vary by region). To lower that figure to $1,250, you will need a home costing $172,600.

Save a Down Payment

Making a down payment of 20% or more means not paying private mortgage insurance (PMI) (usually around 1% of the total loan amount annually).

A single-digit down payment and a longer-term will cost you more in the long run. The best way is a 15-year, fixed-rate conventional mortgage with a 20% down payment.

Here’s the breakdown between a 15- and 30-year mortgage at 4% on a $172,600 house:

Save for Closing Costs

Closing costs average 3-4% of a home’s purchase price. On a $172,600 home, 4% means $6,904 in closing costs. If you add that to your 20% down payment, you need to save $41,424.

Tips to Help You Save: Put retirement savings on hold, take a second job and move into a smaller space with a lower rent.

Get Loan Preapproval

Once you have enough cash saved and are ready to handle the other 80%, talk to a mortgage broker. Get pre-qualified for a home loan and obtain a preapproval letter. A seller will regard you as a serious buyer, which will help you in a competitive real estate market.

Research Neighborhoods

Don’t make a purchasing decision based on the property alone. Factor in neighborhood quality, distance from schools, commuting times, etc. Visit the neighborhood on different days and at different times and check it out. Only choose a community that you feel good about.

Tip: Buying at the bottom of the price range in a good neighborhood gives you room to build value into your home.