What to Know When Buying Your First Home
posted on February 10, 2021 | by Ginger Abbot
Of the thousands of people purchasing homes in 2020, 19% were single women. This is turning the real estate market on its head — and turning women into powerful buyers and investors. As house prices and interest rates continue to decline and more women are considering buying their first home, self-driven women like us are sure to keep the trend rolling.
If you’re looking to make the switch from renting an apartment to investing in your first home, these first-time homebuyer tips will help you get on your feet — whether you’re making the leap with a partner or on your own. Here’s a guide to your first home, including everything you need to know to make the process go smoothly.
1. Purchasing Involves Upfront Costs
Buying a home can be a long, tedious process — and what you see isn’t always what you get. In other words, your house will cost even more than that number on the listing. Don’t stress, but make sure you go into the process with the right financial expectations.
If you take out a loan, you’ll have to pay upfront costs to cover origination and service charges. You may even pay title transfer taxes and recording fees, depending on where you purchase your home. To prepare, make sure you set aside cash for closing fees and consult your real estate agent. They can explain exactly what all those additional costs are for.
2. Good Credit Is Your Best Friend
Typically, you need good credit to qualify for a loan with a low interest rate. If you pay your bills on time and have a debt-to-income ratio of 43% or less, your credit should be high enough to score a decent mortgage. See, all that responsible money management really did pay off!
Check your score and continue to pay off credit card debts and student loans if you need to raise your score. And for the time being, try to hold off from buying any big-ticket items in the months leading up to your home purchase.
3. Mortgages Can Be Confusing
Plenty of homebuyers leave mortgage shopping to the last minute — which can mean that preapproved buyers get an opportunity to swoop in and claim your dream home before you’re approved. Just like when you’re apartment hunting, house hunting takes time, research and application. Be sure to present yourself as serious and qualified by shopping around for a mortgage and getting preapproved before you begin contacting real estate agents.
Comparing mortgages can be confusing, especially when you consider fixed and adjustable rates. Use a mortgage calculator to determine how much your monthly payment will actually cost. Input a few different numbers to see how different rates might affect the amount and which mortgage is right for you. You’ll find the right fit.
4. You Need to Budget for Insurance
You probably currently pay a monthly fee for renters insurance, right? Similarly, you’ll want to protect your home and its contents with homeowners insurance. This will typically cost more, so you’ll have to budget accordingly.
If your down payment was less than 20%, you also have to pay private mortgage insurance. The clincher? Most insurance providers require the first month’s premium at closing — so it’s wise to save up some cash and create more space in your budget for this additional monthly expense.
5. Building Equity Takes Time
Where do you see yourself in the future? If you don’t know, take your time and consider the next five to 10 years of your life. Do you want to be in the same house that long? If you’re more of a free spirit and your answer is no, you may want to reconsider your decision to purchase a home.
The average first-time homebuyer stays in their house for 13 years to help build equity and increase their financial stability. Of course, if the market switches to a seller’s paradise, it could be beneficial to sell sooner and scale up. But without any major fluctuations in the real estate market in the next few years, it may pay off to stay in your home a bit longer.
Take Your Time
You aren’t selling a home, so you have time to shop around. Spend a few months looking and taking time to consider what you want, and when the time is right, pounce. In a buyer’s market, you might even be able to land your dream home your first time around — and still turn a profit when you finally decide to move on.
Regardless of when, where, or how you buy your house, finding and purchasing one that’s right for you is a big, exciting decision. Plan ahead, take your time, and keep your eyes peeled. With preparation and a little bit of luck, you’ll be moving from an apartment to your first home in no time. And congrats!
Have you bought a home yet? Do you have any tips to add or share? We’d love to hear in the comments!