5 Financing Tips for First-Time Home Buyers
Buying a home is a huge investment, and if this is your first time, you must be sure that you are financially capable of making such a significant purchase. From improving your credit to saving up for a down payment, first-time home buyers must take a proactive approach if they want to finance a house successfully.
If you’re a first-time home buyer looking for budgeting tips, allow Mark Spain Real Estate to help you! With decades of industry experience, our real estate professionals can help you prep your finances for a home purchase. Whether you need help nailing down your budget or finding the right mortgage lender, we’re here to help every step of the way! Read below for our expert’s top five financing tips for first-time home buyers.
5 Financing Tips for First-Time Home Buyers
Pay off Debt and Build an Emergency Fund
As a first-time home buyer, the best thing you can do before investing in a home is to wipe your slate clean of debt. When you buy a house, you’re looped into a continuous cycle of spending for the foreseeable future, as you’ll now have to account for monthly mortgage payments and other recurring homeownership costs. Knowing this, it’s in your best interest to pay off as much of your debt as possible before you become a homeowner. And considering the homeownership costs we just mentioned, you’ll also want to build a hefty emergency fund in case of unexpected financial hiccups.
Monitor Your Credit
If you plan to finance your home with a mortgage loan, you must monitor your credit score. Credit is pretty simple when it comes to acquiring a mortgage loan. The higher your credit score, the better the interest rate on your mortgage. So, before you apply for a loan, you’ll want to access your credit reports and determine how you get your credit in the best shape possible.
To maintain good credit, pay your monthly bills on time and keep your credit card balance as low as possible. If you’re applying for a mortgage loan soon, you’ll want to be extra careful with closing credit cards or opening new accounts. Closing a card could increase the portion of available credit you use and lower your score. Opening a new line of credit could reduce the average age of your credit accounts on your report, which could also lower your score.
Save for a Down Payment
Even if you’re financing your home purchase with a mortgage loan, you’ll still have to pay a portion of the home’s sale price upfront. Called a down payment, this percentage of the sale price will vary depending on your lender and type of loan. Down payments can range from 3-20% of the property’s sale price. However, even if your payment falls toward the lower end of the spectrum, it could still be a large sum of change. For example, a 3% down payment on a $500,000 property is $15,000. That said, you’ll want to start saving for your down payment earlier rather than later!
Account for Closing Costs and Home Ownership Fees
Unfortunately, your down payment isn’t the only thing you’ll have to save up for as you plan to buy a home. You’ll also have to account for closing costs, which can amount to 2-5% of your mortgage loan. These upfront expenses will go to your mortgage lender as you close on a home and typically include fees for attorneys, pest inspection, home appraisal, escrow, homeowners insurance, title insurance, and property taxes. On top of these, you’ll also want to plan for homeownership costs once you’re officially in your new place, such as maintenance fees and homeowners’ association dues.
Finalize a Budget
After you’ve analyzed your finances from all angles, it’s time to finalize your budget. This step is crucial before you dive headfirst into your house hunt, as you never want to get your hopes up with a home that’s out of your price range. An age-old tactic that some buyers use to finalize a budget is the 28% rule, which recommends your mortgage be no more than 28% of your gross monthly income. Once you’ve calculated your affordability, you can then work with a real estate agent to narrow down a scope of listings that meet your needs and fall within your price range.
Buy a Home with Mark Spain Real Estate
Are you a first-time home buyer who needs some financial advice? Rest assured, Mark Spain Real Estate has got you covered. Offering valuable industry insight into the home-buying process, our experts promise to make your house hunt as smooth and stress-free as possible. Check out our Guaranteed Offer Program for the potential to receive a competitive cash offer on your home in only 21 days. Contact our agents today!