Useful Tips for First-Time Home Buyers

Written By Alla Levin
February 25, 2021
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Useful Tips for First-Time Home Buyers

Are you about to purchase your very first home? Need some tips for first-time homebuyers? Being a first-time homebuyer can be an amazingly stressful experience due to the qualification criteria mortgage lenders impose on applicants.

Even though getting a mortgage is the most feasible solution for becoming a homeowner, one can save some cash before applying for a loan. Besides the down payment, homebuyers are faced with numerous other costs such as closing fees, taxes, and move-in expenses. Being debt-free is highly recommended before entering the world of mortgages and moneylenders. The following tips will prove useful for first-time homebuyers.

Start saving

The initial step towards purchasing a home is saving up cash to pay for the down payment, closing costs, and move-in expenses. The earlier you start saving, the better. Since saving up money to pay the entire price of a house or flat is mission impossible for most first-time homebuyers, you can at least save enough cash to pay the down payment. The approximate deposit mortgage lenders require borrowers to pay is a minimum of twenty percent of the total loan sum.

Nevertheless, the deposit amount is generally determined by the type of home loan you choose, as well as the type of lender. For instance, borrowers with stellar credit scores might be required to make a deposit as low as three percent. Irrespective of how low this percentage seems, the sum of money you’ll be required to save is still going to be high. For instance, a deposit of three percent on a home of AUD 200,000 is AUD 6,000.

Nevertheless, the down payment isn’t the only sum worth taking into account. The closing costs account for at least two to a maximum of five percent of the loan sum. These include home inspection, appraisal, attorney, homeowner’s insurance fees, etc. Anyhow, a portion of these expenses can be covered by the seller if both parties agree. Visit this website to gain insight into the multiple types of closing costs.

Besides, the move-in costs should be given some thought as well. Once the home purchase is completed, homebuyers aren’t completely free from additional expenses. In most cases, new homes require repairs and upgrades, which are rather costly unless the house one buys completely renovated.

Calculate how much you can afford

Apart from saving money, first-time homebuyers are advised to determine how much they can afford to invest in a new home. Being realistic about your budget limitations will help you avoid disappointment in the long term. When doing the calculations, there are numerous aspects to keep in mind, such as your monthly income, credit score, deposit, the location of the house, etc.

Moreover, the monthly mortgage payment comprises the largest portion of the housing costs, but there are other expenses to think about. For example, one should consider property taxes, homeowner’s insurance, and HOA fees. The entire sum you will be required to pay every month shouldn’t exceed a quarter of your monthly income.

Pay off your debt

Before becoming a homeowner for the first time, it’s paramount to be debt-free. Despite the monthly mortgage installment, you’ll also be in charge of covering maintenance costs. Nowadays, first-time homebuyers are provided with a myriad of mortgage broking services, such as https://rarebreedfinance.com.au/first-home-buyers/, assisting clients on their path to a debt-free future. Also, it’s a wise idea for homebuyers to set up an emergency fund.

To build an emergency fund, you are supposed to save a sum worth three to six months of monthly mortgage payments. You won’t have to get stressed every time unexpected expenses come out of the blue by having such a fund. Many people sink deeper into debt by decorating the entire house from the moment they move in. It’s always a better idea to be debt-free, even if it means decorating room after room.

Boost your credit scoreBoost your credit score

Eliminating your debt is actually one of the most efficient ways of strengthening your credit score. This score is of the utmost importance when applying for a loan, as it affects your eligibility and interest rates. Make sure to obtain credit reports from a couple of credit bureaus to dispute potential errors, which might ruin your qualification chances.

Besides obtaining these documents, don’t be tempted to close your credit cards, as you’ll only be reducing your score. Most individuals have a wrong idea about how these cards affect their score, without considering the negative effect of closing them. Always strive to pay the bills promptly, as it does wonders for your credit score.

Tips for First-Time Home Buyers: Get preapproved for a mortgage

After you’ve saved a sufficient amount of money, you can apply for a pre-approval. Getting a pre-approval letter speaks volumes about your serious intentions as a first-time homebuyer. It means the moneylender will review all your documents related to debt, income, and assets. In case the lender considers you a suitable candidate, you might get a loan without having an outstanding credit score.

A pre-approval letter is the only thing to make you different compared to most of the other applicants. Check out this URL to learn how to get preapproved for a mortgage.

Tips for First-Time Home Buyers: Final word

There is nothing more exciting than becoming a homeowner for the first time. Follow the above-mentioned tips to get qualified for a mortgage!

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