6 Tips for Buying Your First House in the United States
Are you about to buy your first home? Congratulations! Owning a home is one of the most exciting achievements for most people, and not everyone gets the chance to buy one. That being said, buying your first home can be tricky. How much can you afford to spend? What interest rate should you pay? And how do you know you’ve picked the right house? These are all questions that probably bother. Don’t worry, though, by following these 6 tips, you’ll pick out the right home with the best interest rate in no time!
First-Time Home Buyer Struggles
Buying your first house isn’t easy. The real estate market has a well-deserved reputation for being cutthroat and frustrating for first-time buyers, specifically. First-time buyers are :
These challenges make your bids less competitive. You might find yourself outbid numerous times before you finally secure a home you like. Compounding this, house prices have been rising recently.?
Multiply your annual income by three to calculate your affordability. For example, if you have an annual income of $100,000, then you can afford a $300,000 home. Unfortunately, the average house price across 50 of the US’s most populous cities was 5.5 times the median annual income on average.?
Tips for First Time Buyers
1. Identify your needs
List down your requirements. You need to write down your house goals and needs in a document. Writing down your goals is good because it clarifies what you need in front of you. You need to have a concrete understanding of your needs instead of an abstract one.?
Recognize your needs by thinking of your long-term goals. Do you intend to raise a family in that house? If so, you’ll need more bedrooms. You might also want to see how good the local school is.?
2. Determine the exact cost of your house
You need to know what you’re paying for your home. The true cost of your house includes your mortgage plus additional costs, including your property taxes, homeowner’s insurance, maintenance costs, and utility service costs. You need to be aware of all these costs before buying your home.?
The best way to begin estimating your home’s true cost is with an online mortgage calculator. Use an online mortgage calculator to calculate your monthly payments, then ask your real estate agent to provide you property tax and maintenance cost estimations. Add all these costs.?
3. Start saving early
Once you know what your house will cost, you need to plan your finances accordingly. The costs you need to account for include your down payment, closing costs, and maintenance costs. You need to plan for each of these expenses.?
A down payment is the partial up-front payment for your house. Depending on your credit history and the type of mortgage you apply to, your down payment percentage could be as low as 4% or higher than 20%. Make sure you have the required down payment amount.?
A closing fee is for finalizing your mortgage. Closing fees are usually expensive, and they range between 2% to 5% of the loan amount. You can request your seller to partially pay your closing costs.?
Move-in expenses are what it costs to set up your new home. These expenses include home repairs, upgrades, and furnishings. Make sure you have cash after making your down payment for move-in expenses.?
4. Build your credit wisely
Lenders decide whether to lend to you based on your credit score. They also use your credit score to decide what interest rate to charge you and what loan terms to offer you. So, make sure you have good credit.?
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You can build good credit by being financially responsible. Don’t open new credit lines shortly before applying for a home. If you apply for a loan shortly before a home loan, for example, your credit score will deteriorate. To see your credit report, request an annual free copy from the three major credit bureaus.?
5. Shop for Mortgage option
There are different mortgage types in the U.S. Each type has its own down payment and eligibility requirements, and some of these mortgages were specifically made for first-time home buyers. First-time home buyer loans can require a down payment as low as 3%.?
There are three major mortgage types:?
Conventional mortgages are provided by banks. They’re not guaranteed by the government, but you can find good mortgage options with down payments close to 3% for first-time home buyers.?
2. FHA Loans
The Federal Housing Administration, FHA, issues FHA Loans. These loans have a minimum down payment percentage of 3.5%.?
3. USDA Loans?
The United States Department of Agriculture(USDA) provides USDA loans. These loans are targeted at rural residents and have down payment requirements as low as 3.5%.?
If you’re a military veteran, you’re guaranteed to receive a VN loan from the Department of Veteran affairs. These loans normally don’t require a down payment.?
Apart from loan type, you can also choose loan terms. Most homebuyers choose a 30-year fixed-rate mortgage. The terms you choose should depend on your financial circumstances.?
For example, you could opt for a 15-year loan, which would have a lower interest rate and larger monthly payments, if your income is above the median. You can use online mortgage-calculating tools to figure out what works best for you.?
6. Get a real estate agent
A real estate agent guides you through the homebuying process. They’re professionals who maximize your interests and help you secure the best deals. There are many benefits of hiring a good real estate agent.?
Real estate agents understand the market better than you. They have access to more information, are better experienced with the real estate market, and will help you with negotiations.?
A good agent will provide you with a list of available homes and inform you of what competition you’ll face. They can also identify problems that you might not. For instance, your agent might notice that your planned new home has a furnace problem, leaky faucets, and a mold infestation in the yard. These problems can be hard to identify if you’re not looking for them.
Most importantly, real estate agents are excellent negotiators. With years of practice and experience, they understand how to speak to home sellers and how to convince them to agree to your terms. An agent will also prioritize getting you the best possible price.?
Wrapping everything up, buying your first home can be a challenge. But as long as you’re financially responsible, do your research, and take advice from a good real estate agent, you’re all set to get your first home.?