Becoming a homeowner has a strong appeal. Your priority might be to create generational wealth or to create an investment to sell when you retire. Whatever your motivations for purchasing a home, there are several steps between where you are now and the moment you can relax and enjoy it. Here are our top tips for first-time homeowners. You’ll be prepared in no time.
Learn more: Important Guide On Real Estate & Home Buying In Delaware
1. Be certain you’re ready for a loan commitment.
The most important piece of advice we can give to first-time homeowners is to ensure they are prepared. The typical mortgage loan duration is between 15 and 30 years.
Even if you don’t have to remain in your house for that long, purchasing a home is a significant financial investment. Before you take out a mortgage, be very certain that you are ready to become a homeowner. Ask yourself these 3 questions:
- Am I willing to make a 5-year commitment to this house and city?
- Do I have a three-month emergency fund?
- Is my revenue consistent?
If you answered “no” to any of these questions, you may wish to postpone your purchase for the time being.
2. Do Not Ignore Preapproval
As an aspiring homeowner, it might be tempting to start looking for the perfect property right away, especially if this is your first time. It is a good idea to acquire a mortgage preapproval before you start looking at houses.
If you’ve heard of prequalification, you should know that it is different from a preapproval. Let’s go over that distinction again.
Learn more: How To You Buy A House In Delaware
Letter of prequalification:
A prequalification is an estimate of the home loan amount you could be eligible for. It is based on an informal assessment of your income and other factors.
Letter of preapproval:
A mortgage preapproval is a document issued by a lender that specifies the amount of loan money you are eligible for. It is based on your financial data, such as W-2s, bank statements, and credit score.
The Advantages of Preapproval
- You know exactly how much money you have:
Once you have a preapproval letter in hand, you and your real estate agent will know exactly what you can afford. This will help you to shop within your budget.
You can make a more compelling offer:
Sellers must be confident that the buyer they select can afford their house. A preapproval letter informs a seller that you have the funds to purchase the house.
- You’ll have fewer surprises:
You’re less likely to encounter last-minute surprises or delays with your lender if you’re preapproved.
What’s the bottom line? Before you start looking for a house, get a preapproval letter. You should know that a preapproval may not represent the final loan offer. Keep reading to find out why.
3. Keep Your Credit Score
As an aspiring homeowner, now is not the time to start a new credit line. Lenders will pull your credit record when you apply for mortgage preapproval. They’ll do it again before you sign the mortgage and close on the house.
If they discover that you have taken up another loan or line of credit, that your credit amount has grown, or that you have begun to make late payments, your final approval may be jeopardized.
Don’t try to affect your credit rating for the better or the worse, and don’t start any reckless expenditure. Lenders want to verify that you can be counted on to make future payments.
Learn more: Good Home Insurance In Delaware
4. Put Money Away for A Down Payment
One of the Federal Housing Administration’s (FHA) top goals is assisting first-time homeowners with the purchase of their first house. If you are a first-time homeowner, you may be eligible for state programs, tax incentives, and an FHA loan.
A first-time homeowner is defined as someone who satisfies certain requirements, according to the website of the United States Department of Housing and Urban Development (HUD).
If you are a first-time homeowner, you may be eligible for a variety of help programs, such as down payment assistance loans and grants.
5. Different types of loans
Did you know there are several sorts of mortgage loans available to homeowners? The sort of loan you pick will affect your down payment, the type of property you may buy, and other factors. Here are a few examples of more well-known types:
Conventional loans: The most popular form of house loan is a conventional loan. A property can be purchased with as little as 3% down.
FHA loans: An FHA loan allows a homeowner to purchase a house with less stringent financial and credit standards. An FHA loan is available with a 3.5 percent down payment and a credit score as low as 580.
USDA loans: USDA loans are available to homeowners who want to purchase a house in a qualifying rural or suburban region. Subject to family income limits, you can receive a USDA loan with no money down.
VA loans: these are only available to homeowners who are veterans, members of the armed services, the National Guard, and qualifying spouses. If you qualify for a VA loan, you may purchase a home with no money down.
Each loan kind has its own set of qualification requirements that you must satisfy. For example, VA loans need you to have served in the military.
6. Don’t Forget About Closing Costs
As a new homeowner, don’t assume that your down payment is all you need to close on your home loan. You will also need to pay closing expenses before you can take possession of your home.
Closing costs are fees paid by a new homeowner to a lender in exchange for the arrangement of certain loan services. The following are some examples of frequent closing costs:
- Lawyer’s fees
- Fees for pest inspections
- Fees for appraisals
- Fees for escrow
- Fees for title insurance
Your precise closing expenses as a new homeowner will be listed on a document known as a Closing Disclosure. Closing fees should typically range between 2% and 5% of the entire loan amount.
7. Collaborate with A Real Estate Agent
To discover the ideal property, work with a real estate professional or REALTOR®. Agents and REALTORS® are local specialists who understand the home-buying process, the local market, and your unique needs as a new homeowner. They can assist you by:
- Displaying homes in your region that meet your requirements and budget.
- Accompanying you to showings to understand more about your priorities as a homeowner.
- Assisting you in determining how much to offer for a property.
- Submitting an offer letter on your behalf.
- Carrying out negotiations with the seller or the seller’s agent.
- Attending the closing with you to ensure that everything with your transaction is in line.
8. Maintain Physical Copies of Your Documents
As a new homeowner, don’t forget about the paperwork once you’ve decided on a house. Yes, online storage is the logical choice for document storage, but you should retain a physical copy of your mortgage statements, deed, Closing Disclosure, and other papers in a secured, fireproof filing cabinet. Inform anybody else listed on your loan about the location of the papers and how to obtain them in the case of an emergency.
Are you a first-time homeowner?
Purchasing a house for the first time does not have to be a long haul. It is you and your loved ones that bring a home to life wherever you land. As a new homeowner, it is important to maintain your financial health to get there, so that your quality of life improves rather than degrades as a result of the purchase.
If you’re a first-time homeowner, talk to the professionals at Ashley Lyon about your choices. We are here to assist you at every step of the journey!