The home buying process is one of the single most important moments of your life. Be prepared and knowledgeable before beginning. In this article, we will go over 10 important tips for first-time homebuyers in 2021. These tips will help you understand the home buying process, save money, and close on your first home. Here’s what we go over:
Before buying tips
Mortgage loan tips
Home shopping tips
Let’s dive in.
Before Buying Tips
1. Saving Money
Down payment: Your down payment depends on what type of mortgage loan you choose. Conventional loans for first-time homebuyers with good credit can be as little as 3%-5% down. This means if you buy a home for $300,000, you’d have to put down a down payment of 3% which is a total of $9,000.
Closing Costs: These are fees that you will have to pay to finalize your mortgage. Closing costs typically cost from 2% to 5% of your loan amount. You pay this at the end of the home buying process.
2. Build a Home Budget
Decide how much you can afford to spend every month on a home. A mortgage should not exceed more than half of your monthly income. Consider estimating your budget by using the debt-to-income ratio.
3. Have a Strong Credit Score
Your credit score determines if you qualify for a mortgage. It also affects the interest rate your lender will offer. Here are some credit tips to qualify for a home:
Pay your bills on time, keep your credit card balances low.
Don’t close any credit cards, this can lower your credit score.
Track your credit score regularly to know where you stand.
Mortgage Loan Tips
4. Understand Your Mortgage Options
There are several mortgage loans available for first-time home buyers. All have a different down payment and eligibility requirements.
Conventional Loan: are insured by private lenders, not by the government. To qualify for a conventional loan you need a higher credit score, a low debt-to-income ratio (DTI), and a downpayment between 3% - 20%. First-time home buyers typically pay a downpayment of as little as 3%. Click here to learn more about Conventional loans.
FHA Loan: is insured and guaranteed by the government via the Federal Housing Administration (FHA). FHA loans have less-restrictive qualifications, which can make it a good choice if you can’t make a large down payment, have a lower credit score, or both. FHA loan down payments can be as low as 3.5% for first-time home buyers. Click here to learn more about FHA loans.
USDA Loan: are guaranteed by the U.S. Department of Agriculture. USDA loans are for rural homebuyers and usually require no down payment.