First time homebuyer tips can certainly run the gamut from poor to invaluable. Depending on who you ask and when, advice can cover just about every end of the spectrum. That said, not all first time homebuyer tips are created equal. As a first time homebuyer, you will need to discern which tips pertain to your particular situation and which ones are best avoided. Mind due diligence, as they say.
It’s worth noting, however, that no matter who you ask, there are going to be — at the very least — three universal first time homebuyer tips that everyone reveres as gospel. No matter who you run into in this industry, there isn’t a person who won’t recommend the following first time homebuyer tips.
First time homebuyer tips are as varied as they are helpful, but that doesn’t mean there aren’t a few that have separated themselves from the rest of the pack. So, without further ado, here are three first time homebuyer tips you would be wise to adhere to.
1. Check Your Credit In Advance
Few factors, if any, carry more weight when buying a home than a buyer’s credit score. Essentially, it’s the best way for banks to gauge whether or not you are worth lending to. A great credit score would suggest you are less of a risk and fully capable of meeting any future mortgage obligations. Consequently, a poor credit score would suggest the alternative: that you do, in fact, represent a risk of default. There is no doubt about it, a lot of weight is placed on the “creditworthiness” of a prospective borrow, but I digress. What does a credit score really mean for borrowers?
The answer is relatively simple: Your credit score will play a large role in determining the terms, rate, amount and whether or not you are able to qualify for a loan. That said, it’s absolutely imperative that you know where you stand before you even apply for a loan. Of all the first time homebuyer tips you have probably heard before, this is the most relevant. When buying a home, everyone needs to know what type of loan they will qualify for, even before the process gets underway. The last thing you want is a surprise the moment you decide to start looking for a new home.
Do yourself a favor and stay ahead of the curve by getting in the habit of routinely checking your credit report. Perhaps even more importantly, scour your reports for inconsistencies, errors and omissions. Blemishes on your credit report can come in many different shapes and sizes, and it’s up to you to not only identify them, but rectify them as well. In doing so, you will make yourself more appealing to lenders, and perhaps even get a better rate at the same time.
Just remember one thing: repairing bad credit takes time and money. In the event your credit report is less than pristine, I would recommend addressing it at least six months prior to looking for a home; that’s just first time homebuyer 101, plain and simple.
2. Track Your Monthly Cash Flow
Buying a home is far and away one of the largest transactions the average person will make in their entire lifetime. The mortgage obligations that ensue will most likely represent a larger monthly payment than they have grown accustomed to. Whether you are used to paying todays high rents or not, monthly mortgage obligate are nothing to take lightly, so you had better be prepared for the long-haul — depending on your loan, you could be looking at 15 to 30 years of payments. Are you ready for such a hefty monthly commitment? There is only one way to be sure: track your current incoming and outgoing capital. How much are you spending, on average, every month? How much income can you count on every month? Better yet, how much are you able to save every month?
Knowing these numbers isn’t just good practice, it’s essential to determining the type of mortgage you can handle. After all, you can’t possibly know how much of a mortgage you can afford if you have no idea where your money is currently going. It’s also worth noting that the mortgage won’t be the only added expenditure. Maintenance can add up to a significant expenditure, so you had better have some money set aside to take care of your newly acquired home. Be sure that your current income can not only support a new mortgage, but all of the expenditures that coincide with homeownership.
And, not unlike your credit score, lenders will look at your debt-to-income ratio to determine whether or not you will qualify for a loan. So if you are planning on buying a home, it’s a good idea to make sure you track your monthly cash flow and confirm it is up to banks’ standards.
3. Exhaust Your Loan Options
Of the first time homebuyer tips I have come across in my time as an investor, few resonate more profoundly than the act of shopping around for a loan. To go with the first loan you come across is a practice in ignorance; one that could have devastating ramifications. You could even argue that not shopping around for a loan is the single, biggest mistake you can make. Why not take the time to see what the next lender has to offer? What do you have to lose? In a perfect world, you could find that going with a competing lender could knock a few fractions of percentage point off your loan. And all it took was a little due diligence.
Instead of deciding to go with the first mortgage you come across, I want to encourage you to do a bit of shopping. Conduct extensive online research to get a good idea of what’s out there. You may be surprised to learn that there are special programs and incentives for qualified buyers. Active and retired military, for example, are made privy to one of the best loan options out there: the VA loan. It’s also possible for first time homebuyers to receive incentives. So before you choose your lender, do a bit of research on your end. The right loan is out there, you just need to know how to find it.
I maintain that the right first time homebuyer tips are invaluable to those willing to listen to them. However, advice is irrelevant if you aren’t willing to take action. That said, if you are looking to actively participate in the market sooner rather than later, I highly recommend heeding the advice written above.