If you are considering purchasing a home in 2021, there are some important things to evaluate before you begin the process. By staying informed and approaching the home buying journey equipped with knowledge, you can put yourself ahead of other home buyers and ensure that you make a wise purchase. Consider these tips for first time home buyers who are looking for a residence in 2021.
1. Determine The Budget Of Your Home
The first step to take when considering the purchase of a home is to determine a budget. Online calculators can be helpful; however, be sure that you evaluate your own situation carefully. In general, no more than 28% to 30% of your income should be spent on housing. Calculate how much you bring home for all paychecks combined in one month, and then figure out 30% of that amount. In many situations, you should be able to afford a mortgage payment in that range. Understanding your budget helps you shop for homes within your reach.
2. Pay Off Any Outstanding Debt
The terms of your mortgage are an important part of determining how soon you will be able to pay it off. If you have outstanding debt, mortgage lenders may not give you the most competitive terms possible. Additionally, debt beyond your mortgage leaves more of your money accounted for each month, so it is wise to remove the challenge of outstanding debt before pursuing a home purchase.
3. Get Preapproval For A First-Time Home Buyers Loan
A mortgage preapproval occurs when you contact a mortgage lender such as a bank, who reviews your financial situation and pulls your credit to offer you an estimated loan amount that you would be approved for. This is a valuable resource, because it gives you insight into how much of a loan you could get for a home. However, always be sure to evaluate the cost of the home and whether it fits into your budget, regardless of how much you are preapproved for.
4. Save Up For Down Payment And Closing Costs
The down payment is the amount of money you pay immediately toward the cost of the home when you make the purchase. A higher down payment leads to a lower mortgage and less spent over the life of the loan, so it is important that you save for a down payment. If your down payment is too low, your mortgage could come with PMI, or mortgage insurance, that adds a fee each month until you own a certain amount of equity in the home. And do not forget about closing costs, an often overlooked additional sum that you must pay in order to file the paperwork for the mortgage and place utility bill payments or other money in escrow according to the agreements you sign.
5. Choose The Right Mortgage Lender
The right mortgage lender can save you significant money during the home buying process. Shopping around helps you secure the lowest interest rate and the most favorable terms, such as no prepayment penalties. Banks are not the only locations where you can acquire a mortgage.
6. Research Homes And Attend Open Houses
Even individuals who have been dreaming of home ownership for years may be surprised to find that they like or dislike certain features of a home once they see them in person. Researching homes and attending open houses is the best way to get a feel for what sort of home would make you the happiest and serve your needs.
7. Acquire An Experienced Real Estate Agent
A real estate agent’s job is to guide you through the purchase process, advocating for your best interests and representing you during closing. Choosing an experienced agent will secure you a good deal and help you to liaise with the seller.
8. Make A Strong Offer Within Your Budget
Once you have found a home you like, making a convincing offer will seal the deal. An offer can be made stronger by including a mortgage preapproval, acting quickly, and including an earnest money deposit, among other strategies that your skilled real estate agent can suggest based upon the market.
9. Do Not Make Changes To Your Credit
One of the most important but most commonly neglected facets of purchasing a home is not to interfere with your own credit. You may be tempted to begin purchasing furniture or taking out a store card at a hardware store, but these small changes to your credit can ruin a mortgage deal before it is closed. Save these decisions for after closing.
10. Prepare For The Home Closing Process
In order to prepare for closing, be sure to have the home appraised, and work with a home inspector. If the appraisal or inspector discovers unexpected information, you can negotiate with the seller based on what is discovered.
Get Assistance With A First Time Home Buyer Loan Today
If you are considering buying your first home in 2021, the process can seem overwhelming. Fairfax Mortgage Investments would be happy to offer guidance on your home buying journey so that you can focus on finding a home you love without the stress and challenge of doing everything yourself. Reach out to schedule an appointment with a home buying professional.
