Hello, future homeowners!
I’m excited to share some valuable tips and pearls of wisdom with you as you embark on the exciting journey of buying your first home. Whether you’re tired of renting, planning a wedding, or combining homes, these insights will help you navigate the home-buying process with confidence. Let’s dive in!
1. Our First and Strongest Recommendation: Get Pre-Approved for a Mortgage
One of the first steps in the home-buying process is getting pre-approved for a mortgage. This will give you a clear understanding of your budget and make you a more attractive buyer to sellers. Pre-approval involves a lender reviewing your financial situation, including your income, debts, and credit score, to determine how much they are willing to lend you.
I remember when my husband and I were house hunting for the first time. We found a charming little bungalow that was perfect for us. However, we hadn’t been pre-approved for a mortgage yet. By the time we scrambled to get everything in order, another buyer swooped in with a pre-approval, and we lost the house. Lesson learned! Getting pre-approved not only helps you understand what you can afford but also shows sellers that you are a serious buyer. It can give you a competitive edge in a hot market.
Click below to get Pre-Approved with Shout Mortgage
2. Understand What a Mortgage Payment is Comprise Of
A mortgage payment typically consists of four main components, often remembered by the acronym PITI:
- Principal: The amount borrowed that you need to repay.
- Interest: The cost of borrowing the money, typically expressed as an annual percentage rate (APR).
- Taxes: Property taxes that are usually collected and held in an escrow account by your lender.
- Insurance: Homeowners insurance and, if applicable, private mortgage insurance (PMI).
Pearl of Wisdom: Make sure you fully understand each component of your mortgage payment. Knowing how much you’ll pay in taxes and insurance is crucial for budgeting and avoiding surprises down the road, because unfortunately as some people are learning, taxes and insurance can fluctuate.
Before I was in the mortgage industry and getting my first home I was surprised by how much property taxes and insurance added to our monthly payment. It wasn’t something I had initially considered when calculating what we could afford. Thankfully, the mortgage advisor at Shout Mortgage will break it all down for you, making it clear and manageable.
3. Your Credit Score: Keep in Mind Good Enough to Buy, Room to Improve
Many first-time home buyers worry that their credit score isn’t high enough to qualify for a mortgage. However, you can often qualify for a mortgage with a lower credit score than you think. FHA loans, for example, are available to buyers with credit scores as low as 580!
Once you’ve secured a mortgage, you can work on improving your credit score. As you make timely payments on your mortgage, your credit score can increase, opening up the opportunity to refinance at a lower interest rate in the future, which can reduce your monthly payments.
Pearl of Wisdom: Don’t let a less-than-perfect credit score discourage you from buying a home. You can start with an FHA loan and focus on improving your credit score to refinance at better terms later.
4. Combining Homes and Finances
For many couples, buying a home coincides with major life changes, such as getting married or combining households. It’s important to have open and honest conversations about your finances and homeownership goals. Make sure you’re both on the same page about your budget, desired home features, and long-term financial plans.
My Best Advice: Communication is key in life, relationships, and even business. Discuss your financial situation, savings, and debts openly with your partner. A unified approach will help you navigate the home-buying process more smoothly and ensure that both parties are comfortable with the decisions being made. You’ll also discover if one person has a completely different idea on what type of a house, neighborhood, or amenities you want.
When my husband and I decided to buy our first home together, we sat down and laid out all our financial details. It wasn’t the most fun conversation, but it was necessary. We discovered areas where we could save more and made sure we were both comfortable with the budget. It definitely made the process smoother and strengthened our partnership. In the end, once we got pre-approved, we purchased a beautiful starter home that appreciated and allowed us to find a home that better fit our family needs.
5. Additional Tips
- Save for a Down Payment: Aim to save at least 20% of the home’s price to avoid PMI and get better loan terms.
- Budget for Closing Costs: These can range from 2% to 5% of the loan amount and include fees like appraisal, title insurance, and inspection costs.
- Think Long Term: Consider your future plans and how long you intend to stay in the home. This will impact your loan type and terms.
By taking these steps, you’ll be well on your way to making informed and confident decisions as a first-time home buyer. Remember, the journey to homeownership is a significant milestone, and being prepared will make the process much smoother and more enjoyable.
Happy house hunting! 🏡
If any of the items I covered here seem confusing and you’d like more information one of our team members would be happy to go over any questions you have or offer advice. And, if you’re wanting to get Pre-Approved and find your new home, we can help with that too. At Shout Mortgage, we’re here to help you every step of the way.
