16 Tips for First-Time Home Buyers

Buying your first home is stressful. There are costs you may not know about, terminology you may not understand, and steps you may not be prepared for. It’s okay to be stressed. We’re here to help. We compiled 16 tips below to make everything a little easier.

Figure Out How Much Home You Can Afford

Before you start looking at homes, you need to determine a price range. Try using the affordability calculators offered by sites, such as NerdWallet and Bankrate.

Build Your Credit

Your credit score helps determine whether you’re approved for a mortgage loan and the interest rate you qualify for. Credit score is a major factor. Small things like reducing debt help build your credit. Here are seven simple ways to improve your score.

Stop New Credit Activity

When you get a new credit card or take out a loan, lenders pull your credit. This pull typically reduces your credit score by a few points. You want a high credit score when you get pre-approved for a mortgage loan, so pause your credit activity to keep your score high.

Your Monthly Payment is Larger if You Don’t Put 20% Down

A lot goes into a monthly payment (more on that soon). If your down payment isn’t at least 20%, Private Mortgage Insurance (PMI) will be added to your monthly payment. But that leads us to our next point.

Don’t Drain Your Account for a Down Payment

It’s tempting to put most of your savings toward a down payment because it lowers your monthly payment. However, you need to keep a healthy account balance. Set up a savings plan for a down payment.

Try a Loan With a Low Down Payment Option

Connexus offers several mortgages that require as low as 3% down payments. The 30-, 20-, and 15-year fixed loans, as well as the 5/1 and 7/3 ARMs, all have down payment options as low as 3%. This could make it easier to qualify for a loan.

Know Everything That Goes into Your Monthly Payment

Your monthly mortgage payment is more than principal and interest. You have to factor in property taxes (varies by location), home insurance, PMI (if you don’t put at least 20% down), and possibly Homeowner Association Dues.

Get Financing Before You Fall in Love with a House

You may fall in love with a home only to have your heart broken. It could be sold while you’re getting pre-approved, or you could find out you weren’t even approved. Find a Mortgage Loan Officer for help.

Find a Good Mortgage Loan Officer

A Mortgage Loan Officer will help you through every step of the home buying process. They’re experts when it comes to mortgages, so you can turn to them for any questions about your loan. (We have a great team of Connexus Loan Officers ready to help you.)

Pre-Qualified Isn’t the Same as Pre-Approved

Being pre-qualified helps you know what you can afford, but it doesn’t mean you have a loan in place. Being pre-approved requires a credit check and tells you exactly how much money you can borrow. In fact, some realtors may not work with you until you’re either pre-qualified or pre-approved. For more information on the differences.

Work with a Realtor

Realtors help you navigate certain elements of the process. For example, setting up tours, recommending homes, etc. They’ll also know which first-time home buyer programs are available in your area.

Be 100% Sure

Buying a home is a big decision. If you’re absolutely positive it’s the right home for you, make an offer. Take your time and think about it.

But Don’t Waste Time

Not all homes stay on the market for long. Once you’re sure you’ve found a home you love, make a smart offer right away.

Make a Smart Offer

Low-balling your first offer could backfire, but you don’t want to overpay or get into a bidding war. Stay aware of current market conditions and consult your realtor. Use every resource available to you.

Be Aware of Closing Costs and Loan Fees

When considering how much you’re spending, remember to factor in the closing costs and loan fees. This could be a few hundred dollars or it could be more than $1,000. Ask your lender what to expect.

Reserve Money for Home Improvements

Many first homes aren’t perfect. And some people look specifically for fixer-uppers. When thinking about overall cost, add the expenses that come with renovations (paint, flooring, roof, appliances, etc.).