Finding good housing can be a challenge. Perhaps you’ve decided that you’re tired of paying a landlord to rent a place. Maybe now you’re also ready to be a first-time home buyer. According to Statista, in 2021, 81% of people buying a home for the first time were between the ages of 23-31 years old. Here are 10 foolproof ways to do just that.
1. Know Your Credit History
Before you even start looking for a place, you need to know what the people involved in the purchase process are going to see. That means you need to get intimately familiar with what’s on your credit report. They are going to base a lot of their decisions on what they see in this report. It’s not going to be just the number, though having a high score is a good thing. They will be looking at your spending habits and your overall financial health.
Use that report to your advantage. See what your strengths are and what your weaknesses are. Are you spending your money wisely? If the report says that you’re not, then adjust accordingly. Also, make sure there aren’t any errors and have them fixed if there are. We can offer advice on good ways to check your credit.
2. Create a Budget
Set your home-buying budget based on how much debt you have. In our experience, if you have none, then you can think about homes that are five times your income. If you pay less than 20% of your income on debt, then you can think about something that’s four times your income. If your debt/income ratio is higher than that, then think about homes that are three times your income or less. If it’s the last one, then you should consider paying down your debt first. Please reach out for our suggestions on good budgeting.
3. Set Aside Money for a Down Payment
One of the most important things you need when you’re buying a home is to have the ability to afford a down payment. You might have to save for a bit first; many Americans have to save for at least six years to be able to offer 20% of the home price. Start saving early so that you will be able to do this without worrying about it. That means cutting back on certain areas of spending and investing those savings in high-yield accounts. We can speak to you about some ideas for this if you’re looking for that kind of support.
4. Understand the Hidden Costs
There are a lot of things that you’re going to have to pay for when you buy a home. Your mortgage is going to be the tip of the iceberg. There are going to be other costs, too. Things like dues for your HOA, property taxes, utilities, and maintenance will add up. You need to know about these so that you won’t have a nasty surprise when you first move in.
5. Get Pre-approved for a Mortgage
Think about this one from the perspective of the seller. Would you want to have someone come to your place with the intent of buying it, go through the early stages of the sale, and then find out that they aren’t eligible for a mortgage? You’d be aggravated about having to go back to the beginning and find another buyer. Don’t be that person. Go get yourself pre-approved for a mortgage beforehand; it’s going to be a good thing to be able to produce when you meet with a seller.
6. See About Programs and Loans
Are you finding yourself just short of being a desirable candidate as a buyer? There are programs out there that can help you get there. You could take out a loan or you could even look into programs, especially ones that help people who served their country. If you’re a veteran, then it could be well worth looking into. There’s nothing wrong with getting a little help to push you over the finish line. You also need to demonstrate that you can pay them back, of course.
7. Compare Lenders
Just like lenders will be vetting multiple candidates, you can do the same for these lenders. See what kinds of rates they have. How long are the terms? What is the interest rate? All of these things can work in your favor, or you might find yourself owing a lot more than you’d like. Find the lender that will most closely align with your budget and apply with them. We’re happy to help you with this step as well.
8. Keep Your Credit Stable
Think of your credit as being like a ship that will get you on the path to getting you home. You want to keep it on the best path, where the water is calm and there’s no danger. If you don’t do that, then the conditions can get rough, especially if the credit drops a good amount. You don’t want to hit any rocks and sink your chances. Look into credit monitoring services and make changes if you get any alerts that negatively impact your credit. The last thing you want is a possible fraud situation causing you problems.
9. Leave Some Money in Your Bank Account
While there are a lot of upfront costs when it comes to buying a home, you don’t want to empty out your bank account paying for them. That will leave you in a very dangerous situation if you find out that there are other things, or if you run into an emergency. Think about creating a separate bank account for any other scenarios. That way, you won’t be caught unprepared.
10. Seek a Real Estate Agent
It can be challenging trying to find a place on your own. A real estate agent can be a big help when it comes to that. They can take you around specific neighborhoods that are within your budget and also arrange showings. This will take a lot of the stress away and make things easier for you. You can instead just focus on looking at the homes and seeing whether you would want to live there.
There are other things to do, like having a home inspector look at the place to make sure you won’t be sinking money in repairs later. That means things like making sure that the roof is in good shape, among other things. Another thing to do is avoid opening any new lines of credit. That can change your credit report at the worst possible time. Also, when you’re trying to determine your monthly payment, see if you can get something that you can comfortably pay.
Yes, it can be a bit nerve-wracking when you’re a first time home buyer. There are a lot of different factors, and some of them are out of your control. It can depend on the demand for homes in your area, how many other people are trying to get the same place, and whether they try to entice the seller with things like an all-cash offer. If you do all the above things, though, you will be giving yourself a leg up on all that competition. Then you can enjoy owning your first home.
We’re always glad to work with a first time home buyer. Our goal is to make the process as easy as possible for them. We’ll work closely with you and come up with the best solution. Contact Canal Bank today to get things started!
