5 Tips for First Time Homebuyers

When it comes to buying a home, it can seem a little scary. All the things as it relates to getting pre approved, saving for closing costs and down payments, finding a house you love and then signing your life away for the next 15 to 30 years.

I think what scares people the most is the fact that they don't know how to prepare to purchase home. Well, let me share a few tips with you to help you get started on your journey to home ownership.

Here are my top 5 tips for first time homebuyers:

1. Make sure you're ready to commit to a loan.

As I stated earlier, the average mortgage loans range between 15 and 30 years, with 30 years being the most common. In order to determine if you're ready to commit to such a loan, start to ask yourself these questions:

Am I ready to commit to this city and home for at least the next 5 years? Most people don't stay in their homes the entire 15 to 30 years unless it's their forever home, but most people do tend to stay in the first home they purchase on average 5 years. You need to make sure that whatever city you choose to live in when you purchase is one you'll be comfortable in and that it's suitable for your life and your lifestyle, especially if you have growing children who will be attending public schools the in the area.

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Do you have at least 3 to 6 months (preferable 6 months) of expenses set aside for emergencies? This is very important as you will spend a great deal of funds to get into your home on down payment and closing costs. In addition to that, you want to make sure you have some emergency funds set aside as well. So, during the time you are saving up for down payment and closing costs for your home, be sure to take the time to calculate your monthly expenses and save that times 3 before getting your home as well. This will definitely come in handy in the event of an emergency, not with your home, but could be other things such as your car, falling ill, etc.

Do I truly have stable income to pay for and maintain my home? One thing about home ownership, you can't call up your landlord or your property management company to fix things. So, you have to make sure that you're ready to face any possible repairs to your home that may arise. And although you will have home warranties and insurance to cover certain things, you'll still have to come up with any deductibles which may be required of you (the homeowner) to pay out of pocket before your warranty or insurance company will pay out for repairs.

2. Get Pre Approved

Getting pre approved is the most important step in the home buying process because you want to make sure that when you're searching for a house, you're looking in the correct price range based on how much the bank is willing to loan you to get the house.

**Here's a tip: Just because the bank approves you for a certain amount doesn't mean you have to buy a home for the total amount, in other words max out your loan. Make sure that you're making a sensible choice based on your finances including bills outside of your mortgage and allow for emergencies before you choose a home in a certain price range. Remember, as a homeowner all the expenses fall on you. You want to leave room to save for the "just in case". I'll address how to determine how much house you truly can afford in another blog post.

3. Maintain Your Credit Score

When you're in the market to buy a home, this is NOT the time to add anything new to your credit profile or open any new lines of credit, this includes co-signing for family and friends. Opening new lines of credit or making late payments during this process could affect your final approval. Be sure to make your payments on time during this time. Lenders want to see that you're responsible with spending and consistent with on time payments.

4. Save for a Down Payment

Most first time homebuyers can qualify for down payment assistance loans and grants within your state, but you will still need to save at least 3-10% down (depending on your credit score) or as much as 20% down if you want to avoid mortgage insurance on conventional loans. The amount of down payment are mostly based on credit score as well as the type of loan. FHA loans normally have the lowest down payments of 3.5%.

5. Save for Closing Costs

When purchasing a home, your down payment may not be the only thing you need to save for. You may have to pay closing costs as well.

Closing costs are expenses that go to your lender in exchange for arranging certain loan services including, but not limited to: