My 5 Best Pieces of Advice to First-Time Homebuyers
Getting your first home is exciting. It’s also a big decision. If you play your cards right, you can save money and have the cash to spend on other things you love. Before you sign on the dotted line, take a look at these tips for first-time home buyers.
1. Take Care of Your Credit
A common mistake for first-time homebuyers is focusing so much on the sticker price of the new home that you forget about loan details. Shaving a single percentage point off your mortgage’s interest rates can save you tons of money. Check this out:
- $240,000 loan at 3% interest rate over 30 years: $124,000 in total interest paid.
- $240,000 loan at 3.5% interest rate: $148,000 in total interest (difference of $24,000)
- $240,000 loan at 4% interest rate: $172,000 in total interest (difference of almost $70,000!)
Protect your credit score! Pay off bills every month and keep card balances as low as possible.
Pro tip: Don’t cancel credit cards. Just control how you use them. Canceling approved credit cards messes up your ratio of debt to available credit, which can hurt your credit score.
2. Look at Buying a Home Like a Marriage, Not the Wedding
Take the long-term approach to buying. Don’t focus just on the day you sign your purchase agreement. Think about how to keep your finances healthy afterward, too.
This was my major mistake. I opted for a 10% down payment rather than going for 20%. Sure, I avoided $20,000 at the beginning, but I regretted it down the road with the larger monthly payments.
Start saving for a solid down payment ASAP. That money can make life way easier when you’re living in your new home.
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3. Get Preapproved Before House Hunting
What’s the first thing you should do when deciding to buy a new house? Check listings online? Nope. Get preapproved!
Sellers are more likely to accept your counteroffer when they know you’re preapproved for the money. You can make smarter decisions about your wish list when you know exactly how much you can afford to spend.
The second you lay eyes on your dream home, you’re going to want it. That can affect your judgment and lead to major risks if you’re not in a good financial position to afford the loan.
4. Make a List of Things You Hate (and Love) in Houses
Know ahead of time which things are needs and which are just wants. You’re probably going to make sacrifices, but some items on your list shouldn't be negotiable, such as the number of bedrooms or total square feet.
Don’t just focus on positives. Include things you can’t stand as well. Does too much noise outside drive you insane? That’s something to listen for when you’re visiting a potential home.
5. Know How To Ask the Tough Questions
No one wants to seem rude, but there are important questions you have to ask sellers and real estate agents. For example, you should always ask about past problems with mold.
One of the best ways to be specific is to prepare a list of tough questions ahead of time. That way, you can just read the questions off your list without coming across as confrontational.
Whether you’re buying a house solo or as a couple, planning is worth the time invested. The right choices depend on your personality, lifestyle, job and family.