First-Time Homebuyer’s Guide

According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is an individual who meets any of the following criteria:
An individual who has had no ownership in a principal residence during the 3-year period ending on the property’s purchase date. This includes a spouse (if either meets the above test, they are considered first-time homebuyers).

• A single parent who has only owned with a former spouse while married.
• An individual who is a displaced homemaker and has only owned with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local, or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

Purchasing a home is still a significant aspect of the American dream, as a home typically increases in value over time.  However, you may be anxious about making an expensive mistake as there are many steps, tasks, and requirements.  Buying a home can be overwhelming for anyone, but the process can be extremely challenging for first-timers.  It is important to note that some unique advantages are available to first-time homebuyers to assist with their first real estate purchase.

Benefits of Being a First-Time Homebuyer
Suppose a first-time homebuyer doesn’t have the minimum down payment.  In that case, they can qualify for tax breaks and federally backed-loans.  As a first-time buyer, you could also benefit from a down payment or closing cost assistance programs.  You can get financing for your down payment and closing expenses through these programs, which state governments and nonprofit organizations can run.  This can help you realize your goal of becoming a homeowner.  In addition, even if you are not a rookie, you can be eligible for a first-time purchase tax credit.

Tips Before you buy
Determine your financial picture
Before beginning your home search, you should take the time to evaluate your finances.  
Start by doing a monthly budget.  But first, you need to know precisely how much your income is and how much you spend every month.  This calculation will help determine how much you can allocate to a mortgage payment.  

Be prepared for a home’s purchase and ongoing expenses.  It is recommended to have an emergency fund to cover up to six months of living expenses.  Also, consider the upfront costs such as earnest money, down payment, and closing costs when you buy a home.

Check your credit report.  You typically need strong credit, a track record of on-time bill payments, and a debt-to-income (DTI) ratio of 43% to qualify for a house loan. 
Lenders also aim to keep housing costs, including debt, interest, taxes, and homeowner’s insurance, to no more than roughly 30% of the borrower’s gross monthly income.  However, depending on the regional real estate market, this number might fluctuate significantly.

Get Prequalified
Get prequalified with a lender to see how much you can afford to spend before you start looking.  Many real estate agents will not waste their time showing homes to customers who have not clarified their financial situation.

Establish the budget that you are comfortable with for your purchase 
It’s common for lenders to qualify a borrower for more than they were expecting.  Just because a lender approves you for more money, it doesn’t mean you should borrow that amount.  This is a pitfall that first-time home buyers make, leaving them “house poor” with little money left over after paying their monthly mortgage.

It would be best if you considered the entire cost of the property when choosing the size of the loan, not simply the monthly payment.  For example, consider the neighborhood’s high property taxes, the price of homeowner’s insurance, the amount you want to spend on upkeep or improvements to the home, and the closing cost.

Purchasing a lesser-price home than what you are authorized for will give you greater financial flexibility.  It might also be advantageous to you in a tight housing market. 
Finding an inexpensive home might become increasingly difficult when demand for homes exceeds supply. However, if you shop with enough room for error, you might avoid losing a bidding war for your dream home.

Establish your must-haves
When buying a residential property, you have various choices, such as single-family homes, duplexes, townhouses, condominiums, cooperatives, and multifamily structures with up to four units.  A fixer-upper can save money on the purchase price.  However, It may take much more time, money, and sweat equity than you anticipated to transform a fixer-upper into your ideal house.  Each alternative has advantages and disadvantages, so you must choose the one that will enable you to achieve those objectives.

Although it is a good idea to remain flexible, you deserve to have the largest purchase of your life meet your must-haves.  Your wish list should cover everything from fundamental criteria like size and neighborhood to more specific items like bathroom design and a kitchen with sturdy appliances.  You can obtain a sense of the costs and availability of homes with the qualities that are most important to you by browsing real estate websites.

Choosing the right real estate agent
A buyer’s agent will represent you in finding a house that suits your needs and falls within your budget.  Once you’ve decided on a home to purchase, these experts can help you with every step of the negotiation process, from making an offer to obtaining financing and filling out paperwork.  Additionally, most agents get paid a commission on the sale price.  

Contact me today to talk about buying a home.