From navigating the complexities of real estate markets to understanding financing options and legal aspects, the path to homeownership can seem daunting for first-time buyers. However, with the right knowledge and guidance, you can confidently navigate the steps involved in purchasing your first home and protecting it with the right home insurance policy. In this article, we’ll provide you with eight helpful tips to guide you through the process and ensure you’re prepared for this significant milestone.
1. Start Saving Now for Expenses Later
There are quite a few costs to keep in mind when saving up to buy a home. You’ll want to save for the down payment required by your mortgage lender, typically a percentage of the home's purchase price, and be prepared for closing costs, including loan origination fees, appraisal fees, and title insurance. The cost of the down payment will depend on which type of mortgage you choose, while the closing costs are the fees and expenses you pay to finalize your mortgage.
It’s important to budget for professional movers or rental trucks if you plan to hire a moving company, as well as packing materials, temporary storage, and any travel expenses associated with the move. You’ll also want to have cash on hand for move-in costs such as home repairs, upgrades, and furnishings.
2. Increase Your Credit Score
Your credit score helps determine whether you qualify for a mortgage and it also can affect your interest rate. Before you purchase a home, you’ll want to be in the habit of paying your bills on time and keeping a low credit card balance. This will help you prepare financially for the responsibility of a home and will also strengthen your credit score, showing lenders that you’re reliable and capable of routinely making on-time payments and paying down debt. Maintaining a low debt to income ratio can also help you demonstrate your financial stability, improving your credit score and validating your reliability to lenders.
3. Decide How Much of a House You Can Afford
You’ll want to evaluate your financial situation, including savings and monthly budget, to determine how much you can afford to spend on a home. While you may think your mortgage payment is cheaper than what you currently pay for rent, there are various housing expenses that can add up, often making it more expensive than you initially thought. Consider additional expenses beyond the purchase price, including closing costs, property taxes, homeowners insurance, applicable homeowner’s association fees, and maintenance, to accurately budget for homeownership.
4. Shop Around for Loans or Mortgage Rates
There are a variety of loan types and payment options available, all with different eligibility requirements. You’ll want to consider whether you want a shorter term loan to lock in a lower interest rate or if you want a longer term loan with lower monthly payments. You’ll also have to decide whether you want an adjustable-rate or fixed-rate mortgage. An adjustable-rate mortgage features an interest rate that can fluctuate over time, typically after an initial fixed-rate period. Instead, with a fixed rate mortgage, the interest rate remains constant throughout the life of the loan.
5. Get a Mortgage Preapproval Letter
Getting pre-approved on a mortgage loan before you start house hunting will give you an idea of how much you can afford and how much the loan is going to cost. This will also show home sellers and real estate agents that you are a serious buyer.
6. Find a Good Real Estate Agent
Look for a reputable and experienced real estate agent who can guide you through the home-buying process, represent your best interests, and provide you with valuable insights and industry knowledge. Consider asking for referrals from friends and family, learn about their experience with real estate agents, and review several professionals until you feel you’ve found the right agent. A good real estate agent will take the time to understand your needs and budget as they search the market and will help navigate the negotiation and closing process.
7. Negotiate with the Seller
Be prepared to negotiate the purchase price and terms, leveraging market research and guidance from your real estate agent to secure a favorable deal. If there are repairs needed on the house, you may be able to have the seller pay for the repairs in advance or lower the price of the house to account for the cost of repairs you’ll have to make. You can also ask the seller to cover some of the closing costs. How much power you have negotiating will depend on the market, but you’ll want to work with your real estate agent on a negotiation strategy.
8. Protect Your New Home with Homeowners Insurance with SelectQuote
After investing your time, energy, and resources into purchasing a new home, it’s essential to keep your most valuable asset protected with the right homeowners insurance policy. Not only is it often required by mortgage lenders, but securing homeowners insurance offers you financial protection in the event that your house is damaged or destroyed.
Knowing how much coverage you need or what you should be looking for isn’t always that simple, especially as a first-time homeowner. Fortunately, SelectQuote is here to help. In just minutes, our licensed insurance agents can compare quotes from several of the most highly trusted carriers in the nation, all in one place. We can answer your questions, explain the details of your policy coverage, help you find home insurance discounts, and more.
