PMB First Time Home Buyer Tips
Becoming a first-time home buyer is a big step in life and a very exciting one! No question that it can be a mind-boggling process. Pizarro Mortgage Banking is here to provide our expert advice on buying a house. From becoming debt-free through making an offer and closing, we’ll cover all the tips for buying a home.
Pay Off Debt and Grow Emergency Fund
You want to enjoy home-ownership, not be burdened by it. Make sure that you are debt-free before even considering purchasing a house. Along with becoming debt-free, we recommend growing an emergency fund that can cover at least 3 to 6 months of expenses. The more prepared you are, the less stress you’ll experience.
How Much House Can You Afford?
Owning a home is expensive, far more than renting. You’re responsible for all costs, including maintenance, general upkeep, property tax and more. When determining how much house you can afford, the rule of thumb is no more than 25% of your monthly income before taxes. So if you make $6,000 per month, multiple that by .25 and you’ll be able to afford roughly $1,500 in monthly mortgage payments. Being conservative is best as you don’t want to max out your budget.
Down Payment and Closing Costs
If you haven’t noticed a trend yet, saving money is a major aspect of buying a home. You want to the down payment to make as large of an impact as possible, so aim for 20% or more. If that seems entirely out of reach, there are FHA loans which goes as low as 3.5% down. However, this does include private mortgage insurance (PMI) payments that protect the lender in case of default. And along with the down payment, there are closing cost to consider which a generally 3-4% of the purchase cost. This covers fees in the home-buying process, such as home inspection, credit report, attorney fees and more.
Get Pre-Approved for a Home Loan
Once you’re financially ready, it’s time start the pre-approval process online. This demonstrates to sellers that you are serious about buying a home which is a nice way to get ahead of the competition. Obtaining a pre-approval letter requires a lender verify your financial information and submit the loan for preliminary underwriting.
Research Multiple Neighborhoods
Everybody wants to move into the best neighborhood, but the definition is likely different for everyone. It’s good practice to research multiple neighborhoods before you buy a home. Think about the future (at least 5 years) and where you expect to be in life. If you anticipate having kids, review schools in the area or if you’re moving for work, review commute times. A real estate agent is a nice resource for finding your ideal neighborhood. And consider checking local crime maps to ensure you’re only analyzing safe areas.
Find a Home in Your Price Range
Now that you know how much house you can afford, it’s time to find your dream home that fits your budget. If you need some inspiration, attempt any open house events that you can find in the ideal neighborhoods you decided on. This will help you get an idea of transit times, noise levels and just general knowledge bout the area. So when you do find a home to buy, you’re already very familiar with the neighborhood. And aim lower on price in the neighborhood you want so the home value will build more over time.
How to Make an Offer on a House
Since you’re already pre-approved for a loan, you can make an offer the moment you find the house of your dreams. It’s a good call to work with a real estate agent and avoid high range impulsive offers to surpass the competition. Aim for competitive while remaining within your budget and consider methods to stand out, such as a personalized letter.