4 Smart Moves for First-Time Homebuyers
Increase Your Buying Power. Decrease Your Stress.
Being a first-time homebuyer can feel intimidating and, quite frankly, like you have no idea what you’re doing!😅
That’s why we’ve put together 4 of the smartest moves you can make as a first-time buyer. Following these steps will give you a competitive edge in the buying process and move you steadily toward your dream of homeownership. Let’s dive in.
SMART MOVE #1: GET PRE-APPROVED
Being pre-approved means you’ve got buying power.
Technically, it means that a mortgage company has agreed to lend you a certain amount of money based on specific terms. We don’t mean to brag (okay, maybe a little😏), but Legacy Mutual’s pre-approval letter is as good as gold in your market. If you’re pre-qualified✅ with us, you’ll be seen as a serious buyer by realtors and sellers.
SMART MOVE #2: PREPARE FOR FINANCING
Before you begin looking at homes, you’ll want to consider things like your monthly income and available savings. Buying your first home is less like Jerry Maguire’s “SHOW ME THE MONEY!!!” and more like…
“show me a little money”
and
“show me how you handle money.”
If you’re not planning to pay for a home in cash, these are the financial factors you need to be thinking about.
Down Payment
Use our mortgage calculator to get an estimate of how much you’ll need for a down payment based on your target home price. You might be pleasantly surprised!😍 First-time homebuyers average paying 6% down compared to the traditional 20% down payment amount. Some first-time buyers even qualify for $0 down. View some of the different types of loans here.
Closing Costs
These are fees you’ll pay to finalize your mortgage, which typically range from 2% to 5% of the loan amount. These are sometimes covered in part by the seller, and working with a savvy real estate agent will help you navigate this part of the contract. In a seller’s market like we have today, buyers rarely walk away from the closing table without paying at least some of these fees, so be sure to have some funds💰 set aside to cover these costs!
✋🏼Are you getting overwhelmed with all this money talk? Take a break and skip to Smart Move #3 and you can come back here later!😎
Credit Score
Having a good credit score will give you a better interest rate on your loan. Obtaining a pre-approval letter through Legacy will include us asking for your permission to pull your credit score from the credit bureaus and provide it to you with a complete analysis. If you’d like, you can get your own free credit report to see if there is anything negatively affecting your credit standing.🧐 You can improve your score by always paying your bills on time (set up auto-pay if you can!), keeping your credit balances low, and keeping all current lines of credit open. Do not open any new lines of credit, as this can adversely affect your credit score!
Debt-to-Income Ratio
Your debt-to-income ratio (often referred to as DTI) calculates how much of your monthly income goes toward paying off debt (think car🚗 payments, loans, and credit cards). Basically, this is where you don’t want to be if you’re looking to purchase a home…
A low DTI ratio means that you have a good amount of income in comparison to your debt. This will result in a lower interest rate, which will result in a lower monthly payment (cue the happy dance!)
SMART MOVE #3: EVALUATE WHAT MATTERS IN A HOME
We’ve all been there. You want to sleep in, but you need to get up and go to the gym. Sometimes our wants and needs get in each other’s way. Throughout the buying process, this is helpful to keep in mind. You should walk into a house and feel like you’re home, but you also want to make sure you’re not sacrificing in areas you’ll regret later. Prioritize what matters most to you:
Is it a big backyard? An open floor plan? Number of bedrooms? A certain monthly payment?
Thinking through your must-haves and nice-to-haves ahead of time will help you make good decisions and stay focused on your end goal. Having a professional to help you determine property value can be extremely helpful when making these decisions, which brings us to our last tip.
SMART MOVE #4: FIND A TRUSTED REAL ESTATE AGENT
It’s important to work with an agent who has your best interest in mind and who has experience representing buyers. A good agent will listen to your needs, know real estate like the back of their hand, and be a great communicator. One of the best ways to find a good agent is to ask your friends and family for referrals – and then do some “digging” and some “dating.”😉 You can find out a lot about an agent by digging into their social media profile or website. When meeting with an agent in person, these are some great things to find out:
- Do they communicate with their clients throughout the buying process?
- How many homes they have closed the past year?
- Are they familiar with your target neighborhood?
- What are the terms of their buyer’s agency agreement (if they require one)?
Purchasing your first home should be a memorable and exciting process. Following these steps will position you for a smooth process, and we hope you found them helpful! Legacy Mutual assists buyers of diverse financial portfolios in finding a home that fits their lifestyle and budget. We’ll walk you through every step, from pre-approval to closing on your new home. Let us know how we can serve you!
👋🏼 Hey there! Did you skip some of the financial information we shared? Click here to read the rest😇
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