Buying a home is one of the most exciting times in your life, but it can also be one of the most daunting experiences. The home buying process does not have to be stressful if you use the right strategy and prepare beforehand. This article discusses the best advice for home buyers from those who have already gone through the process, including the many resources available to help you get to your dream home.
Prequalify for a Mortgage
The first piece of advice most people who have already bought a home would give to first time home buyers is to take the steps to prequalify for a mortgage before putting in any offers. Some first time buyers are so excited about the prospect of owning a new home that the fear of someone else buying the property they want leads them to put in a premature offer. To avoid losing a property you are interested in, secure your financing first. Additionally, many sellers trust an offer from someone who is prequalified as opposed to not.
Save for a Down Payment
Putting aside some extra cash is the best way to save for your down payment. The ideal amount for a down payment is 20% of the home's cost. If you choose to put down less, your monthly mortgage payments will increase due to a higher interest rate or Private Mortgage Insurance (more on this below). Making a sizable down payment is one piece of advice for first time home buyers that you don't want to overlook, since it has a significant impact not only on the home you are able to buy but on your long-term finances as well.
Private Mortgage Insurance
Private Mortgage Insurance (PMI) may seem like just another expense, but it is necessary if your down payment is lower than 20%. This insurance protects your lender from losing money in the event of a foreclosure and also allows you to get a mortgage without having saved the full 20% down payment.
If you choose to follow only one piece of advice for first time home buyers, let it be finding a qualified lender. Financing is the key to getting the home you want at a rate you can afford, and the right lender should be willing to answer your questions throughout the process to match you with the right mortgage product. Avoid lenders who seem like they are too busy to answer questions or to provide you with the documentation and information you need to make informed buying choices.
You will need to prepare all relevant documentation prior to getting pre-qualified for a mortgage. If you’re unsure what you need to bring to a meeting with your mortgage lender, click here. Additionally, keeping important papers and files you receive throughout the home buying process organized is the key to home buying success. Without proper documentation, your real estate transaction could be significantly delayed.
From making an adequate down payment to working with a qualified lender, following this advice for first time home buyers will create a solid foundation for your financial future as a home owner. For more helpful first time home buyer education, download our eBook now!