Five Things First-Time Homebuyers Should Do
Posted on: 11 August 2021
A housing market that's crazier than ever is surely intimidating if you're looking to buy your very first home. But before you spend hours scanning websites listing houses for sale, there are a few other actions you should take. You don't want to be taken by surprise by not knowing about certain costs or programs. So, to be prepared, here are just five things that first-time homebuyers should do:
1. Look for Down Payment Assistance Programs
Even if you can afford a monthly mortgage payment, you may not have very much money saved up for a down payment. Saving thousands and thousands of dollars is quite the challenge when you've got other expenses and bills getting in the way, but you also don't want to have to wait for years just to get into a house. Don't despair just yet—many programs exist to give first-time homebuyers some down payment assistance, either through a grant or a special kind of loan. So talk to your lender and agent to see what you might qualify for.
2. Save Some Money for Closing Costs
Even if you have a hefty sum saved up, you won't want to use it all for a down payment. If you've never bought a house before, you might not be aware of closing costs. Both buyers and sellers have to pay closing costs. For buyers, it will usually be about 2-5% of the total price of the home. That money goes to the processing fees for the lender to review your application and prepare documents. You definitely don't want closing costs to take you by surprise.
3. Ask Your Real Estate Agent About Lending Companies
A mortgage is a huge chunk of change. When you go into that much debt, you're naturally going to want to be extremely cautious about who you lend from and on what terms. Once you have an agent you like, you should definitely ask them what lending companies they can recommend. Real estate agents have been in the business for a while and know who has the most ideal terms. They may even be able to point out lending companies that offer incentives, such as paying a portion of the closing costs when you sign with them.
4. Be Aware of Tax Credits
Interest rates, private mortgage insurance, and property taxes can get complicated. However, when tax season rolls around, you should check if you qualify for one of the many tax credits available to homeowners. You might be able to add your mortgage interest or private mortgage insurance costs as a deductible. If you're a low-income homebuyer, you may qualify for the Mortgage Credit Certificate, which can get you some mortgage credit on as much as 20% of your interest payments. Some of the payments might not seem so daunting after you find out what tax credits you can claim.
5. Factor in Extra Costs
The biggest thing to remember when buying a home for the first time is that when it comes to figuring out your budget, don't only look at the mortgage payment. If you max out your budget on just the mortgage then you may not be leaving enough to pay for homeowners insurance, private mortgage insurance, property taxes, HOA fees (if applicable), and the extra costs that come with maintaining a home. You don't want to be unpleasantly surprised when it comes to what you'll actually be paying every month, so make sure you take all those costs into account.
These are only five things to do when buying your first home, but there are plenty more. Talk to your real estate agent for even more information as you search for houses for sale.
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