Top 5 Tips for First-Time Homebuyers

Buying your first home should be an exciting time – but it can also be a stressful time, especially if you are not prepared to purchase a home when you find one that you love and want to put an offer in on. In order to try to make the home buying process as smooth and stress-free as possible, we’ve compiled a list of Top 5 Tips for First-Time Homebuyers:

1.  Determine what you can comfortably afford.

Mortgage lenders will determine how much they are willing to lend to you, based on your income, your assets and liabilities and your credit score. However, they may not take into account monthly expenses you have that don’t report to your credit bureau, such as daycare or private school tuition, and they don’t take into account savings goals you may have each month. Therefore, it’s important for you to figure out how much you are comfortable paying each month, taking into account all of your expenses and any planned savings or retirement goals.

2.  Determine how much you have to use as a down payment, and where that money will come from.

How much will you put down, and where will your down payment be coming from? If a parent or other family member will be gifting you some or all of your down payment, they may be required to sign a form stating that the money they are giving is a gift, and not a loan, so you’ll want to know ahead of time so you can inform your lender and find out what their requirements are for gifted money.

3.  Is your credit ready for a home purchase? Can you work on your credit?

Borrowers with higher credit scores, generally 720 and above, will have the easiest time working with lenders. If your credit score could use a little work, talk to your lender. They may have suggestions on how to clean up your credit, or ways to boost your credit score before you apply for a mortgage loan.

4.  Determine your wants vs. needs in a home.

This one is a fun one. Going into the home buying process with some parameters will make it easier for you, and your real estate agent, to find you your perfect home. Are you only interested in certain neighborhoods? Do you need 2, 3 or more bedrooms? What about lot size, square footage? Determining a few “needs” as well as a few “wants” will narrow the scope of homes you look at to only those that will truly interest you and be the right fit for you and your family.

5.  Look, look, look – and get pre-approved so you are ready to move!

The more homes you see, the more you’ll be able to narrow down exactly what works, and doesn’t work, for you and your family. Don’t be afraid to go to open houses, or to ask to see homes that are for sale. Getting pre-approved for a home loan by a lender is also another quasi-requirement of home buying these days. Many sellers will not accept offers on their homes where the prospective buyer hasn’t already been pre-approved for the mortgage, so it’s in your best interest to know you’ll be approved for a home loan before looking for the home of your dreams

THE FED’S NEW RATE INCREASE – WHAT DOES IT MEAN FOR HOMEBUYERS?

 

This month the federal government, via the Federal Reserve, increased its benchmark interest rate for the first time in nearly a decade. After years of historically low mortgage loan interest rates, what does this rate increase mean for future homebuyers? The good news is that this increase may not mean that you’ll see mortgage loan interest rates go up immediately – and certainly not at rates that correspond directly with the federal increase.

This interest rate hike was widely expected – both in terms of its timing and its amount. As with any market change, there will be some initial volatility as people react to the change and start to prepare for the future. However, because mortgage interest rates have been so low for so long, many people are likely to want to purchase quickly, in order to seal in the lower rates before they have a chance to rise.

John Wake from Real Estate Decoded explains that “the real estate economy is more sensitive to interest rates than most of the economy.” Because of this sensitivity, he explains, the expectations of higher interest rates can have a bigger impact on the real estate market than on other financial sectors.

Many financial experts see more of a tie between mortgage rates and the 10-year Treasury yield, rather than between mortgage rates and the Federal Reserve benchmark rate. Still, it is likely that some prospective homebuyers who were previously on the fence about purchasing may feel the push to go forward and close on a new home.

For the market, this could result in higher average home prices next year compared to last and demand increases, at least in the short term. For most people, their home will be the largest financial purchase they make, and so understandably, people want to shop around for the absolute lower interest rates and best terms that they can find.

No matter what happens to the average mortgage interest rate over the next year, you can take steps today to get yourself ready to qualify for the best mortgage rates available on the market. If you are not sure what your credit score is or what your credit report reflects, take advantage of your yearly right to request one free copy of your credit report. Review it to make sure that there are no errors on your report which could impact your ability to qualify for a mortgage. You can also work on building a down payment, unless you plan to utilize a low or no down payment options, like those available through FHA and VA loan options.

prices next year compared to last and demand increases, at least in the short term. For most people, their home will be the largest financial purchase they make, and so understandably, people want to shop around for the absolute lower interest rates and best terms that they can find.

No matter what happens to the average mortgage interest rate over the next year, you can take steps today to get yourself ready to qualify for the best mortgage rates available on the market. If you are not sure what your credit score is or what your credit report reflects, take advantage of your yearly right to request one free copy of your credit report. Review it to make sure that there are no errors on your report which could impact your ability to qualify for a mortgage. You can also work on building a down payment, unless you plan to utilize a low or no down payment options, like those available through FHA and VA loan options.