The idea of a first-time home buyer usually means someone buying a home for the very first time. But sometimes, it can include people who don’t have a big down payment saved up. In these cases, they might still qualify for help through first-time homeowner grants and loans, even if it’s not their first-ever home purchase. The main rule is that you shouldn’t have owned a home in the last three years.
Starting the journey to buy your first home can be overwhelming and stressful. That’s why we’ve put together seven smart steps to help you through the process, making it easier and bringing you closer to owning your dream home.
1. **Building Your Savings**
There’s a common belief that you need a 20% down payment for a mortgage. But even if you haven’t saved that much, don’t worry. Talk to a mortgage lender to figure out a realistic down payment goal, which could be as low as 3%. Boost your savings by putting money aside regularly or automating your savings and cutting unnecessary expenses.
2. **Knowing Your Credit Score**
Generally, a credit score of 700 or higher is great for buying a home. A better score can get you better loan terms, saving you money in the long run. Even with a lower score, like 500 for an FHA loan or 620 for a conventional loan, you can still get a mortgage. Aim for a score of 760 or more for the best rates and terms. Keep an eye on your score and fix any errors or issues that might lower it.
3. **Receiving Quotes from Lenders**
Start by getting a rate quote to compare different loan offers. Mortgage rates change frequently and can vary among lenders. Try to get quotes from at least three lenders. A lower interest rate means you’ll spend less each month and over the life of the mortgage.
4. **Getting Pre-Approved**
Getting pre-approved for a mortgage strengthens your buying power. This means a mortgage company has agreed to lend you a certain amount under specific conditions. The pre-approval letter will state how much you can borrow, which loan program you’re using, and the expected down payment.
5. **Selecting a Trustworthy Real Estate Agent**
It’s important to work with an agent who has your best interests in mind and knows how to represent buyers well. A good agent understands your needs, knows the real estate market inside out, and communicates effectively. You can ask friends or family for recommendations. When choosing an agent, consider how they communicate, how many properties they’ve successfully closed in the past year, and the terms of their buyer’s agency agreement.
6. **Searching for Your Home**
Tell your agent your budget and must-haves to avoid wasting time on homes that don’t fit. If possible, visit homes in person instead of relying solely on online photos and descriptions. When you visit, take a good look at the home and its surroundings. Check for issues like heavy traffic, noisy areas, or poor-performing schools nearby.
7. **Placing an Offer on a Home**
When you find a home you love, be ready to make an offer. With your agent’s help, write an offer letter that includes your proposed price and any conditions, like a home inspection. Include an earnest deposit, normally 1%-2% of the total price, to show the seller you’re serious. If the seller accepts your offer, this deposit will go towards your down payment.
**Summary**
Buying your first home involves carefully looking at your finances, understanding the housing market, and exploring lending options. It doesn’t have to be stressful. With the right knowledge and steps, you can become an informed buyer and move into your dream home sooner than you think. We hope these steps help guide you through the process smoothly and effectively.