Purchasing a house will likely be one of the biggest investments in your lifetime. Also, it will likely have an effect on your finances for years to come, if you decide to take the mortgage route. As such, it is imperative to do your homework to ensure you don’t end up making a financial blunder. That being said, here are some of the do’s and don’ts to keep in mind as a first-time homebuyer.
However, before we get into the do’s and don’ts, it is important to ask two crucial questions. That’s because everything that follows, both in financing and the transaction depends on the answers to the following:
1. Is it the Best Time to Get a House?
First and foremost, you need to sit down and determine whether it is really the right time to get a house, based on your situation or circumstances. Do not just buy a house because it is a buyer’s market or simply because mortgage rates are at a low. Purchase a home because you are looking forward to being a homeowner and want a place where you can live for years. Also, ensure that you are financially capable to get your dream home.
2. How Will You Afford It?
Next, it is important to determine if you can and how you’ll afford the house. Foreclosures tend to occur mostly because the individual didn’t plan far enough ahead or did not factor in all the expenses that come with homeownership. If you look back at all the foreclosures that occurred during the 2008 economic downturn, then you know how serious mortgages can be.
Purchase Affordability Calculator
Maximum Monthly Payment (P&I Only)$0
Maximum Monthly Payment (Total Payment)$0
Max Mortgage Amount$0
With that being said, here are the do’s and don’ts when it comes to financing for first-time homebuyers:
1. Separate Wants from Needs
One of the most important do’s when it comes to financing a house for the first time is carefully looking at what you need and what you want from a house. By separating the two, you will be in a position to make concessions and compromises and be able to stay within your budget when it comes to the features you need.
2. Know Your Credit Score
When it comes to home loans, your credit score plays a major role in determining the amount you can get (if any) and also the rate at which you can secure the mortgage. If your score is low, then your best chance is to find ways to improve it before seeking home financing. Some of the common ways to improve credit score include correcting our credit report, keeping credit card balances low, paying debt, and paying the bills when they are due.
3. Check Less Conventional Options
If you are among the first-time house buyers in a certain neighborhood, you may not need to make a huge down payment of up to 20 percent. For VA, USDA and FHA loans, you can get low to no down payment options. Some cities have programs where they help first-time homebuyers, in an effort to build the community.
4. Get Pre-approved For a Home Loan
For sellers to view you as a serious buyer and get more leverage in negotiations, you’ll want to get pre-approved for a mortgage first. Pre-approval is a written guarantee by the mortgage broker or lender showing that they will loan you up to a specific amount for the house purchase. Getting a pre-approval also gives you better chances of landing a better deal than a buyer who isn’t pre-approved.
5. Look For the Right Real Estate Agent
When buying a house for the first time, having a competent agent by your side can be extremely helpful. Having the right agent dictates the total amount that you will ultimately pay for the house and if you get any concessions such as a portion of the closing costs covered. So, ensure you do your research in finding the best one in your area.
1. Make a Big Purchase
It is advisable to avoid making any big purchases before you have all the papers signed at closing. If you do, you may ruin your chances of securing the financing you need to buy property. So, if you have been looking forward to a new car, or appliance, but need to purchase a home, it’s best to wait.
2. Become Overly Attached to the First Home
You might think you like it, but when buying a house for the first time, the last thing you want is to get attached. Chances there are others who want what you’re eyeing and at a better price. There are so many factors that come into play and so, it’s best to look at your options and consult the agent about the local market so that you can have realistic expectations from the onset.
3. Waive an Inspection
As a first-time homebuyer, your lender will most likely ask for a home inspection. Even if they don’t, doing it is a smart thing. The last thing you want is to encounter problems with the house after closing the deal as you’ll be responsible for any and all expenses that arise.
4. Miss the Chance to Negotiate
This is one of the most common mistakes first-time homebuyers in Michigan make. Keep in mind that how much you pay for the house will largely depend on the negotiation. So, never miss this chance and consider using an agent as they have more experience.
5. Switch Jobs
When looking to get financing for your house, you may want to avoid making job changes. Even if the switch does not prevent you from getting approval, it is bound to make the entire process harder and more time-consuming.
And there you have it, 5 do’s and 5 don’ts when it comes to buying a house for the first time in Michigan. With these tips, you should be in a less frustrating position to own a home.