Tips for First-time Homebuyers

When you are thinking about buying a new home, there are dozens of factors to consider and decisions to make. For first-time homebuyers, you can begin the process more confidently with a sound foundation. Here are some tips to help you get started.

Make sure you are financially fit.
Your financial situation is crucial in determining what you can afford and what kind of mortgage you will qualify for. To get in your best financial shape, try to reduce your debt and save for a down payment and other expenses. A mortgage lender can assist you in determining what is right for your budget.

Know your credit score.
In making a lending decision, lenders look at the state of your credit. Generally, lower credit scores mean higher interest rates, and in turn, higher mortgage payments. With a lower credit score, you could end up paying more over the life of the loan. Typically, potential homeowners who have credit scores of 720 or above receive the most advantageous interest rates. If your credit score is not where you want it, there are steps you can take to improve it:

  • Reduce your debt.
  • Check your credit report and have inaccuracies removed.
  • Make your monthly payments on time.
  • Don’t apply for new loans or additional credit.

Get pre-approved.
Work with your lender to have your credit checked and your income and assets verified before you find your dream home. Pre-qualification for a loan can give you an edge.

Save for a down payment.
Ideally, your down payment should equal or exceed 20 percent of the cost of your home. That allows you to avoid paying private mortgage insurance (PMI), a fee charged to you to protect the lender’s investment in case you default on your loan.

Understand short- and long-term costs.
Home ownership includes a monthly mortgage payment, of course, but also upfront down payment and closing costs, plus insurance and maintenance costs. If you finance your home via a fixed-rate mortgage, your payments should not change over the life of the loan. Conversely, adjustable rate mortgages start with one rate, but may change depending on the market, which could mean a future increase in your payment. Even new homes require maintenance, so you should have some additional money set aside.

Have stable employment.
If you have recently changed jobs or are thinking about making a career change, it may not the best time to buy a home. Mortgage lenders typically require you to have been with your employer for at least a year or two before they will consider you for a loan.

Create an emergency fund.
Layoffs. Medical or car problems. If a significant unanticipated event happens, be prepared with an emergency fund before you buy a home. A good rule of thumb is to have at least a few months worth of living expenses set aside.

Looking for a new home this New Year? One of our New Home Specialists would be happy to help you.

Inland Empire 951-298-9675
San Diego 619-727-6105
Las Vegas 702-337-2753
Los Angeles/Ventura 661-713-1996

 

Disclaimer: Nothing herein constitutes legal, financial, lending, tax or any other type of advice, is not to be acted on or relied upon as such, may not be current and is subject to change without notice. All materials have been prepared for general information purposes only.

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