Financial Tips for First-Time Home Buyers
Use our financial tips to help you prepare before buying your first home.
Connect with experienced real estate agents and mortgage brokers.
Realtors and mortgage people usually work off of referrals. It is likely that somebody you know can refer you to a talented agent and broker based on a positive experience. A good realtor will be very well versed in the area where you are looking to buy and will try to find you a house that you want to buy rather than a house that they want you to buy. A good mortgage broker will help take the time to explain the various mortgage products that are available and will match you to the best one based on your needs and financial situation.
Refrain from applying for new credit.
Each time you apply for credit, there will be an inquiry into your credit file. Having too many inquiries can adversely affect your credit score. Another reason to keep credit clean is to receive the lowest possible interest rate available. People with good credit get good rates, people with poor credit bet poor rates. It's that simple.
Adjust your spending habits.
Getting into your first home is a monumental task. Whenever you consider making a purchase an item that is not an absolute necessity, you should literally ask yourself, "Will buying this help me toward my goal of purchasing a home?" If the answer is no, which it will often be, refrain from making the purchase. The biggest areas where people can save money are by not dining out (or at least doing so very seldom) and not spending money on new clothes. If you like to buy lots of music, movies, books, etc., try finding used items on eBay (www.ebay.com ). Things like car payments, vacations and an overall expensive lifestyle all cut into your ability to save for a home.
Keep existing housing costs low while saving.
Housing expenses represent the largest item in our monthly budgets. Take any and all steps to keep this expense as small as possible. This can include, but is not limited to; keeping heat low in the winter, living with family, and having a roommate. The more you save, the more you can save.
Be creative about financing your mortgage.
This is where a good mortgage broker comes in. Saving for a down payment can be difficult if not impossible. What many people are doing is to finance 100 percent of their mortgage. The biggest advantage of 100 percent financing is that you begin building equity in your home right away. What many would be home buyers have found out is that while they have been saving for a down payment, the prices of homes have been increasing at a faster rate than their savings!
People worry that if they go the 100 percent financing route they will have to pay private mortgage insurance (PMI). PMI is required when a loan is being financed with less than 20 percent down payment. What is not widely known is that PMI can be avoided by taking out two separate loans with the same lender. One loan is for 80 percent - a normal mortgage after a down payment. The second loan is for the remaining 20 percent. What is really happening, is that buyer's are borrowing their down payment in the form of a second mortgage.
Be flexible when looking for your first home.
Many people make the mistake of believing that their first home should be their dream home. Home ownership is something that many people dream about. Remember, that besides being something to live in, a house is an investment. By purchasing a home, living in it, and building equity, you are actually moving closer to your Dream Home. The goal is to get into an acceptable home - period. Maybe your first home isn't going to be two stories or have as many bedrooms, but it will be yours. That is the key.