First-time homeownership is a huge decision. Finding the right home, negotiating with the seller, and ultimately achieving those house keys can be complicated and overwhelming if you aren't prepared.
Hiring a real estate agent who knows all the tools of the trade is the best decision for most first-time home buyers. Ricky Allen and Cathy Griffith are skilled Santa Fe real estate agents you can trust to walk you through your first-time home purchase stress-free. Here are their expert tips to follow before buying your first home.
1. Be prepared financially
First-time home buyers are likely to finance 93% of the home, unlike repeat buyers, who will likely finance 83%. A new home is an investment, and lenders want low-risk customers. Evidently, you will have to prove financial stability. A lot goes into this first step, and you and your lender will need to:
Assess your debt
Assess your credit
The higher and healthier your credit score, the lower your expected interest rate on your mortgage payment. Assessing your credit score beforehand gives you ample time to improve on it. Several tips to boost your credit score before buying a home include:
- Review your credit reports
- Get a handle on bill payments
- Consider debt consolidation
- Pay down credit card debt
- Dispute errors.
Review your budget
- Property taxes
- Homeowners’ insurance
- Utility bills
Determine your down payment
If you put down anything less than 20%, the lender will mitigate the risk by charging Private Mortgage Insurance (PMI). Consult a mortgage expert to help you explore possible loan options, including those requiring PMI, and determine the ideal down payment to avoid paying the PMI.
The preapproval process helps you understand how much you can borrow, effectively limiting your home search. By shopping within your limits, you can also avoid stretching your budget.
Preapproval also poses you as a serious buyer. More importantly, it allows a real estate agent to make offers on your behalf confidently.
2. Figure out the type of home you want
- Single-family homes
3. Understand your loan options
It is possible to decide between multiple mortgage loan types. The loan type you choose can determine your down payment amount, the home type you can purchase, and more. Below are the familiar loan types to choose from:
- FHA Loans: You can get an FHA loan with a credit score as low as 580 and a 3.5% down payment.
- Conventional Loans: You can buy a home with as little as a 3% down payment.
- USDA Loans: These are for individuals who want to purchase a home in a qualified suburban or rural area. A USDA loan can require a 0% down payment, subject to household income restrictions.
- VA Loans: These are strictly for veterans, active-duty service members, and qualified spouses.
4. Compare loan offers
5. Have a list of needs
What are your reasons for buying a home? These reasons can help inform your home purchase. For instance, a duplex may be an ideal choice if you're buying your first home as a real estate investment.
Create a list of priority features you want in your home, depending on your needs. Do you plan to start a family or have a home office? You may want to focus your search on homes with extra bedrooms. Listing your needs helps you compare available options in the market and make a perfect choice.
6. Research the neighborhoods
- Availability and proximity to good schools
- Transport systems
- Nearby shopping centers, grocery stores, and restaurants
- Property taxes
7. Work with a real estate agent
A trusted real estate agent is essential to finding a home in your desired community that checks all the boxes while staying within your budget. Your agent thoroughly understands the local Santa Fe real estate market and can provide a comparative market analysis to help you comprehend market trends and determine the best offer on a home you love.
8. Avoid buying based solely on the market
Timing a real estate market is tricky, and you risk a continued rise in home prices or spending more money renting as you wait. Consult with the Ricky Allen & Cathy Griffith Real Estate Group to help you buy your first home based on the right factors.
9. Plan your offer and negotiate
However, how you plan and make your offer won't always be compelling if you aren't familiar with negotiating. Fortunately, this is one scenario that makes hiring a realtor a sound investment.
You may need to negotiate if the seller doesn't accept your initial offer. Additionally, if you choose to conduct an inspection before making an offer, you can use any issues that turn up to bargain lower prices.
Always be ready and willing to negotiate the best deal.
10. Hire a home inspector
An extensive home inspection uncovers underlying issues with the property. Key things to check during a home inspection include:
- Structural integrity
Bonus tip: keep copies of your paperwork
As soon as you start the home purchase process, ensure you don't forget about the paperwork. Keep physical copies of your deed, mortgage statements, closing disclosure, and other relevant documents secure.
Buy your first home with the help of a professional realtor
*Header photo courtesy of Pexels