One of the most rewarding yet financially significant investments someone can make is buying your first home. Before making this huge decision, you need to know exactly what steps to take and the benefits you can expect as a first-time home buyer.
One benefit for which you may qualify is the FHA loan, which allows for a down payment as low as 3.5 percent, in contrast to the standard requirement for most mortgages. This step-by-step guide to buying a house will help you save money while finding the home of your dreams.
Save Up for a Down Payment
Before you can consider buying a home, you need to take a look at your financial situation. Consider your salary and a mortgage that fits your budget so you know exactly how much you can pay each month and how big of a down payment you can place.
Ideally, a down payment will be 20 percent of the home’s price, which typically allows you to enjoy a lower interest rate. If you don’t think you can afford a 20 percent payment upfront, you can negotiate a down payment as low as 15 percent, 10 percent, or even lower. Discuss your financing options with an expert financial advisor who can help you find the right plan.
Check Your Credit Score
For first-time home buyers, having a good credit score is essential alongside a down payment. Lenders assess your credit score and report to determine the likelihood of you making monthly payments. This information influences their decision on whether to grant you a loan, how much to lend, and the interest rate. Managing your debt over time can help you receive a better deal for your loan, as this will keep your credit in good standing.
Get Pre-Approved for a Mortgage Loan
The next step in the home buying process checklist is to seek pre-approval from a lender for a home loan. This involves meeting with loan officers to assess your financial background and determine the loan amount and monthly payment you can afford. There are many mortgage loan programs you can rely on, including:
Using an online home affordability calculator can also provide an initial estimate of your affordable monthly mortgage payment before meeting with a lender.
Find a Real Estate Agent
Once you have an idea of your budget, location, and house style, you need to find a trustworthy real estate agent to help you find your ideal home. It is important that you work with someone who has a vast knowledge of the area you are interested in living in and will help you get the best price possible.
Start Home Shopping
Attending open houses and tours can be really fun. Stepping into a potential home for the first time and envisioning the memories you may make can take the stress of the home-buying process off of your shoulders.
However, while you’re shopping around for homes, remember that it’s also important to take into account the price, upkeep, and other financial considerations.
Make an Offer
After finding a house that you love, it’s time to make an offer. A tip for first-time home buyers we always recommend is to act quickly. While ensuring affordability, it’s important to have all your documents and finances prepared. You should be ready to negotiate the price, make a down payment, and conduct a thorough house inspection.
Get an Inspection Scheduled
Before closing on your new home, you will want to have professionals examine the house and ensure its safety. There are many aspects you want to inspect, including:
- Structural Integrity
- Roof Condition
- Plumbing System
- Electrical System
- HVAC System
- Windows and Doors
- Pest and Termite Inspection
- Water Damage
- Appliances and Fixtures
- Property Drainage
- Environmental Factors
Get a Home Appraisal
Similar to having the house inspected, your lender will want to assess whether this purchase is a smart financial investment. The appraiser will examine the house and help the lender determine if the loan is right and if you are receiving a fair deal.
Close on Your New Home
If everything goes according to plan, you can now close on your home! During this process, you will meet with the seller, lender, and other parties involved in the transaction. On the day of closing, you will be expected to pay your closing costs, which can average between two and seven percent of the home’s price. Additionally, you will need to purchase homeowner’s insurance, another cost added to your monthly budget.
The last step is the most rewarding part – moving in! You need to take the cost of moving into account, which can average between $500 and $1,000. Once you have moved in, be grateful that the stressful process is over, and enjoy the memories you and your loved ones will make in your new home. Our financial advisors at First Fidelis are dedicated to making your first home-buying experience as easy and affordable as possible. If you are buying your first home in Overland Park, Kansas, or the surrounding areas, contact us today or fill out our pre-approval application to get started.