- Work with a real estate agent to help navigate the process.
- Compare different types of mortgage payments and choose the right one for your budget.
- Identify what you need versus want in a home.
- Make an offer on your dream home that is competitive but protects your interests.
- Take advantage of government assistance programs to help with the cost.
Buying a home can be an intimidating experience, especially for first-time buyers. With the help of real estate agents and other resources, you can make this process smoother and easier to understand. Here are five tips for buying a home as a first-time buyer that will ensure you get the best deal possible.
1. Work with a Real Estate Agent
Working with a professional real estate agent is one of the smartest decisions you can make when buying your first home. An excellent real estate agent has seen hundreds of homes in all price ranges, so they have extensive knowledge about what makes a good investment. They can also provide valuable advice on which neighborhoods may suit your needs better than others and help you navigate the complex paperwork involved in a home purchase.
2. Compare Different Types of Mortgage Payments
When shopping for a home, getting overwhelmed by all the different mortgage payments available can be easy. Take time to compare other options and determine what kind of monthly payment plan will work best with your finances. When comparing different mortgages, consider the total amount that must be paid over the full loan term and any additional fees or points associated with each option.
Here are the different types of mortgage payments:
Fixed-Rate Mortgages
If you opt for a fixed-rate mortgage, the stability assurance is yours — monthly payments that remain consistent throughout the loan term. This makes budgeting more manageable as you won’t have to worry about interest rate fluctuations and their effect on your payments. The disadvantage of this payment type is that if rates drop, you won’t benefit from it unless you refinance your loan.
Adjustable-Rate Mortgages (ARMs)
An adjustable-rate mortgage involves having a variable monthly payment over the life of the loan, which is tied to an index like LIBOR or CMT. The initial interest rate may be lower than a fixed-rate mortgage but can increase at various times, usually every one to five years. This type of loan might be beneficial if you expect that your income will increase over the life of the loan or that interest rates will drop in the future.
Interest-Only Mortgages
With this type of payment, you only pay the interest on the loan for a specified period, typically up to 10 years. After this period is up, you must start making principal payments as well as interest payments until your loan is paid off. This can be beneficial if you don’t have much money saved but expect your income to increase significantly within a few years.
Refinancing
Refinancing your mortgage involves taking out a new loan with more favorable terms than your current loan. Utilizing mortgage refinancing can be beneficial if you have built equity, your credit score has improved, or interest rates have dropped significantly since you initially took out the loan. Also, if you have a higher-than-average interest rate on your current loan, refinancing could save you money over the life of the loan.
3. Identify What You Need vs. Want In A Home
Once you’ve narrowed down your search criteria, it’s essential to identify what you need versus what you want in a home. Some features, like location and square footage, may be essential for your lifestyle; but extra bedrooms or a pool are not as necessary. Prioritizing your needs over wants can save money and help you find the right home faster.
For example, if you’re a newlywed couple, your needs might include finding a house in a safe neighborhood with two bedrooms and two bathrooms. But if you have the budget, you may want to add features like an updated kitchen or walk-in closet. Being clear on what you need versus want can be a helpful guide when searching for the right home.
4. Make an Offer on Your Dream Home
When you’ve finally found the home of your dreams, submit a competitive offer that will give you the best chance of buying it. This means ensuring that your offer is within the average range of what other buyers have been paying for similar homes in the area. Including contingencies such as inspection and financing that will protect you if the deal falls through is also helpful.
5. Take Advantage of Government Assistance Programs
The government offers a variety of assistance programs to help first-time buyers with their home purchases. These include grants and loans for down payments, tax credits, and other incentives that can lower your monthly mortgage payments. Research these programs to find out which suits you best and your budget.
Additionally, many state and local governments offer unique programs to help first-time buyers. These may include lower down payment requirements and lower interest rates. Be sure to check with your local government to see their available assistance.
In Summary
Buying a home as a first-time buyer can be overwhelming, but with the right preparation and research, you can make it smoother. Use these five tips to help you find the perfect home that fits your needs and budget. Working with a real estate agent, comparing different types of mortgage payments, identifying what you need versus want in a home, making an offer on your dream home, and taking advantage of government assistance programs can help ensure you get the best deal.
