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Smart Money Moves for First-Time Home Buyers

written by The Residential Real Estate Council
       
Jun 3, 2022

Money Saving

You’ve dreamt of the day you’re able to buy your first home. But what you probably haven’t dreamt of are all the steps that have to happen beforehand. For first-timers, the process of buying a home can feel intimidating — and thinking about the cost of it all can be overwhelming. Don’t get discouraged. Check out these smart money moves to help you buy your first home this summer.

Grow your savings

It’s no secret — buying a home is expensive, but with the right planning, it doesn’t have to break the bank. It all comes down to what you’re comfortable with financially. Experts suggest calculating out two to three months of your income and expenses, including committed debts, to see what you can free up for a mortgage payment. This will either help you determine your home-buying budget or show you that you may need to save a little longer.

Don’t forget about your credit score. With an average score of around 700 or better, you shouldn’t have a problem buying a home. A higher score, however, may allow for a lower interest rate. If you’re not in a rush or notice your credit score could use a boost, don’t be afraid to take a step back. Pay off credit card debt and don’t miss payments on any of your loans to help quickly improve your credit score.

Make a list of priorities

It can be exciting to enter the house hunt, but be careful to not get carried away. Fenced-in backyards and beautiful front porches could entice you to spend more than you can afford. It’s important to remember that just because you were pre-approved for $200,000, doesn’t mean you can comfortably afford a mortgage on $200,000.

Sit down before you start looking and build out a priorities list that matches your budget. How many bedrooms does it need? Does central air conditioning matter to you? Are you interested in a fixer-upper, or would you prefer something turnkey? Knowing what you’re looking for before you’re surrounded by options is the best way to keep the excitement from turning into overspending.


Learn the dos and don’ts

● Do your homework: Before making an offer, do your research on the sales trends of homes in similar neighborhoods. Strategy is a big part of the home buying process.

● Do apply to several mortgage lenders: Researching your loan options will allow you to compare interest rates and decide what is right for you. Plus, looking at several loans at once will quicken the process, which won’t hurt your credit score.

● Don’t get hung up on paying private mortgage insurance: PMIs are required for down payments less than 20%, but if a large down payment will wipe out your savings, a smaller down payment will be the better financial choice — even with a PMI.

● Don’t rush the process: Be thoughtful about your decision and think about the future. If you ever think you’ll sell the home, it’s important to consider factors preferred by buyers, like location, now. Take your time when picking your first home. You only get the opportunity once.

Becoming a homeowner requires careful analysis of your finances, the market, and your lending options. And while it often takes time, with proper planning, you will be well on your way to finding a home that’s right for you and your financial plan.

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