Last Updated on March 22, 2021 by Luke Feldbrugge
Do you want to stop writing rent checks and invest the money in a home of your own? Or are you needing to look for smaller properties? With interest rates at historic lows, more people able to work from home, and the need for more space, now is the perfect time to start thinking about purchasing your own home. But, the decision to buy a house can be both exciting and a little scary for many people. Here are 10 home buying tips to get you started on your journey to homeownership.
1. Save for a Down Payment
Ideally, buyers put at least 20% down on the purchase price of a house. This will eliminate the need for Private Mortgage Insurance, or PMI. PMI is extra insurance to your lender and/or bank to demonstrate your ability to make mortgage payments. If your down payment is less than 20%, you will pay PMI until 20% of the principal of the loan is paid.
For many first-time home buyers though, 20% may seem like a lot, or even be unattainable. Considering the national average home price is around $393,000, a 20% down payment would be $78,600. But, there are many different types of loans and loan programs that can make coming up with your down payment easier.
FHA loans help first-time home buyers get into a home with less money down upfront. Depending on your credit score, FHA loans require as little as 3.5% down. With the average home price of $393,000, that would only be $1,375. FHA loans often have higher loan costs, though, and you must purchase private mortgage insurance. However, FHA loans can be a great solution, especially for first time homebuyers.
Active military and veterans may qualify for a VA loan. This loan does not usually require a down payment and also waives the requirement for private mortgage insurance. You will need to pre-qualify from the military with something called a Certificate of Eligibility. You will present your COE to your mortgage lender to prove you are eligible for a VA loan.
If you have trouble coming up with your down payment, there are many down payment assistance programs in existence. A Homes for Heroes affiliate lending specialist will also be able to answer your questions and find a loan that best fits your financial situation.
2. Loan Pre-Approval
Getting pre-approved for a loan is a significant step in the home buying process. The pre-approval process details the loan amount and terms from the lender. It is a guarantee from the lender that you will get the loan. In addition to letting you know how much money you can spend on a house, the pre-approval letter convinces the seller that you are a serious buyer when you make an offer. This, in turn, can give you as the buyer more power when making an offer on the home you want.
If you’re unsure of how much you can realistically afford, don’t hesitate to call our specialists! We want you working within your budget to make a wise investment.
Remember that a pre-approval letter does not mean that you must spend that much money on a house. Savvy buyers sit down and calculate how much money is available in their budget to pay for a mortgage, insurance, taxes, and miscellaneous housing expenses. If you know that you will need to do some landscaping or replace appliances, do you have that in your current budget once you calculate your mortgage payment? Sometimes, cosmetic things can wait until you build up enough savings to pay for them. But, structural things or high ticket items like water heaters might need to be replaced or repaired right away. There can also be significant costs associated with moving, like paying for movers. Make sure you don’t deplete your savings before you’ve even moved.
One of the great benefits of Homes for Heroes is our Hero Rewards. When you buy and/or sell a home with a local Homes for Heroes real estate specialist, you will receive a check for 0.7% of the purchase price or $700 for every $100K. Plus, if you work with our mortgage, title and inspection specialists, you can save $500 on lender fees, $150 on title services, and $50 on a home inspection. That adds up to thousands of dollars in savings! These savings are also something you can calculate into your budget to cover some of those new home expenses.
4. Delay Extra Purchases
Once you have your pre-approval letter, it is essential that you avoid using credit for any expensive purchases. That is because a potential creditor will run a credit report on you, and a large purchase reduces your credit score temporarily. The loan amount and terms are determined using your financial status at the time of the loan. Changes to your credit scores could cause your lender to reconsider and alter the amount of money available to you. So, the best advice is to hold off on making any major purchases until after you buy your home. If you know that you’ll need to make a large purchase between the time you are pre-approved and put an offer on a home, consult your lending specialist.
5. Computer Research
There are plenty of websites online to start your initial home search, but when you are ready to get serious about your home search, sign up at HomesForHeroes.com. Real estate websites like Realtor.com or Zillow are useful tools to find houses and neighborhoods that pique your interest. But, once you start working with a Homes for Heroes real estate specialist, you’ll gain access to more specific information about houses in your area. Our local real estate specialists contain a vast amount of information on neighborhoods that national websites just can’t know. Using their knowledge makes choosing a location and home an easier decision. And our real estate specialists will be there to help you every step of the way!
6. Explore the Neighborhood
The house that you choose to buy most likely sits in a neighborhood. Buyers often neglect to explore a community before they buy. Do not make this mistake. If an area doesn’t fit with your needs and lifestyle, you probably won’t be happy in the house. Experts recommend visiting the neighborhood on different days and times before making a decision. Some things to consider are nearby parks and schools, crime rates, property taxes, and shopping options. If there are things that are important to you specifically, like proximity to your favorite coffee shop, make sure to make the walk or drive to those destinations. This can show you any hiccups on the way in real time, for example, if there is a cumbersome one-way street as the only viable option to get there or back.
When you’re researching neighborhoods, don’t forget to ask your friends and co-workers where they live and if they have any recommendations. Many times, a co-worker might know something about a town, such as having access to an early morning express commuter train, that sparks your interest.
How far are you willing to commute to work each day? An hour commute in the morning feels very different when you’re making that commute after a long day at work. Scope out the public transportation options if you don’t drive and for those inevitable days when the car is at the shop. Try out the commute before making an offer if you’re unsure about the practicality of the daily travel.
As more and more people transition to working from home, your commute time still should be a factor that you consider. Not all companies will be work from home forever, and even if they are, there will still be one off times when you need to go to the office for one reason or another.
8. House Showings
Get ready to walk through lots of houses. Buying a home is one of the most critical decisions that you’ll ever make, so you should take the time to look at all of your options. Condo? Townhouse? Single-family house? Take advantage of the opportunity to visit lots of different types of housing options before you make an offer.
It’s a very beneficial idea to take photos, videos, and notes on each house. Many people find that the details of the houses blend, making it hard to remember specific features of a particular option. A photograph of a fireplace, for example, might remind you of the fantastic family room that you loved in the third house you saw last weekend.
9. Future Fit
Of course, any house that you consider must meet your current requirements. However, a smart purchase also fits your future needs. Walk through your potential dream house and ask yourself some hard questions. Will it work if you have children? What happens if your elderly parent moves in with your family? If you have a double income family, can you still afford the house if one of you stops working? These are all important factors to consider before placing an offer. Try making a list with all your must haves and questions about functionality before you start looking at homes. This will help you sift through the extensive list of available homes when they come on the market.
Some other things to consider when thinking of living in your new home are functionality factors. Just because you fall in love with a newly remodeled kitchen, does that mean you are willing to overlook the fact that the backyard doesn’t have a fence for your dog and kids? While some features of a house make us fall in love, it’s best to evaluate the house as a whole and make sure it crosses off all the boxes on your list. Also, keep in mind cosmetic issues. You might find a house that is perfect for your family, but the house is painted a color you can’t stand. Paint is an easy fix for a house, whether you paint it yourself or hire someone to paint for you. Counting a house out based on cosmetics when the overall home is a perfect fit otherwise can cause frustration later on.
10. Resale Potential
It’s a fact that you’ll most likely sell your house someday. Keep this in mind when viewing a potential purchase. The primary driver of house price is location, so an expensive house on a moderately priced street will not appreciate in value as quickly as an appropriately priced home on the same street. Your realtor can offer valuable information about the resale potential of a house. This also applies to any remodeling you might think about doing right away or in the future.
We know home buying can be an exhausting and daunting decision, but it is also a rewarding step in your life! If you’re a healthcare professional, firefighter or EMS, law enforcement officer, active or retired military, or teacher, find out how Homes for Heroes can help make your dream of buying a home come true!