Buying a home is a complex undertaking for anyone, especially if it's their first time; it involves a series of interconnected steps, starting from saving up and closing the deal. Our brief advice is aimed primarily at those tackling this venture for the first time. It covers how to prepare for the purchase, how to choose a mortgage, and what to do when purchasing a home.
Set aside a basic amount
Depending on the type of mortgage you choose and the lender that grants it, the down payment can certainly vary. Keep in mind that for first-time homebuyers with a good credit score, a down payment of around 3% may be sufficient. Naturally, this small percentage can be difficult to save if your dream home is expensive. Also consider the fees you'll need to pay to finalize the mortgage, which can range between 2% and 5% of the loan amount. Then there are the costs of initial renovations, moving, and possibly furniture, which must be paid in cash after the home is purchased.
Determine what home you can reasonably afford
How much can you really commit—safely—to your first home? Establish a price range based on your income, debt, down payment, credit score, and where you plan to live.
Check and strengthen your credit
Your credit score will determine whether you'll be approved for a mortgage, and this will influence the interest rate lenders will charge you. You can still improve your credit score by obtaining free copies of your credit reports from the agencies, paying your bills on time, and keeping your current credit cards active.
Choosing a mortgage
Looking at the various types of mortgages available, there are several types available, depending on the down payment percentage, eligibility requirements, and other options. Regarding the term of the mortgage, you can choose from a short term of about 15 years to a longer term of up to 30 years. Keep in mind that a 15-year mortgage generally has a lower interest rate than a 30-year mortgage, but the monthly payments are higher.
Choosing a good real estate agent
Rely on a good real estate agent who will help you find the home that meets your needs and assist you in negotiations. It's best to use at least two qualified brokers, whose experience will benefit first-time homebuyers.
Choose the right home for you
Consider the pros and cons of different types of housing: while a condominium may be more affordable than a detached house, you'll certainly enjoy less privacy, compounded by shared expenses. In the case of a single-family home, which is cheaper than well-maintained homes, you'll only need extra budget for renovations, which, however, can be financed along with your mortgage. Consider your long-term needs and whether a starter or permanent residence is better. If you plan to start or expand your family, it might make sense to purchase a more spacious home or one with resizable rooms. Choose a home with everyday amenities within walking distance.
