Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage. In addition to federal programs, many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.
Use this home affordability calculator to determine how much you can safely afford to spend. So check your credit before you begin the homebuying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts. To keep your score from dipping after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.
Many home buyers get a rate quote from only one lender, but this often leaves money on the table. Get at least three quotes and compare both rates and fees. How long you plan to stay in the home and whether you have money on-hand to purchase the points are two key factors in determining whether buying points makes sense.
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You can use this calculator to decide whether it makes sense to buy points. You can get pre-qualified for a mortgage, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. The right buyer's agent should be highly skilled, motivated and knowledgeable about the area. But even if the home is right, the neighborhood could be all wrong. So be sure to:. Look at local safety and crime statistics. Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels. Look at properties that cost less than the amount you were approved for.
Shopping with a firm budget in mind will also help when it comes time to make an offer.
How Do Mortgages Work? A Guide for First-Time Home Buyers
Shopping below your preapproval amount creates some wiggle room for bidding. Ask a lot of questions about the home, such as when it was built, when items were last replaced and how old key systems like the air conditioning and the heating are. Here are a few of the most common pitfalls, along with tips to help you avoid a similar fate. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent's commission.
Calculate your expected closing costs to help you set your budget. Once you've saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and any improvements you may want to make after moving in.
It's easy to look at properties that meet your current needs.
But if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. A lot can be up for negotiation in the homebuying process, which can result in major savings.
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Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs? Not all inspections test for things like radon, mold or pests, so be sure you know what's included.
Make sure the inspector can access every part of the home, such as the roof and any crawl spaces. Attend the inspection and pay close attention.
Budget for the other costs of buying a home
And ask questions. Before you head out to find your new home be sure to download this Mortgage primer with six-mortgage must-knows. Download PDF. Check out the realtor. Learn more.
Keep It Affordable
Should you rent or buy? This tool can help you calculate the net cost of buying a home versus the cost of renting over time. Time to get started! Tag your photos on Twitter or Instagram with OwnHome to share your snags and successes here along with other first-time homebuyers. All rights reserved. Go to your professional dashboard. Toggle navigation. Sign Out. Home Renting Tips Debunked!
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First-Time Home Buyer Resources. Buying Your First Home. Understanding Mortgages. Share Covering credit: Learn ways to improve yours. Share Down payments: What can you really afford? More Home Buying Resources.