Hey soon-to-be homeowner,
We bet the thought of owning your own home and imagining that Freedom to do whatever pleases you heart to your home just won’t leave you along right! We understand. We’ll even take a wild guess that you already bought “something” you plan on upgrading for your new home with; especially if your already in the home-buying process… Yep we see that new fancy Nest thermostat.
So we decided to take the time to write about the best tips for first-time home buyers AND we also asked fellow local homeowners for advice they would give to someone thinking about buying a home for the first time.
These tips, along with personal advice from actual homeowners, will help you navigate the home buying process, save you some money and help you avoid common mistakes first-time home shoppers make.
See what they had to say!
Get Your Current Debt in Check
Before even stepping foot into a bank or applying online for a home loan, you need to know your credit score. If you plan on getting a loan, lenders will definitely check your credit worthiness to see if you are even responsible enough to pay that monthly mortgage.
Annual Credit Report allows you to check your credit report once a year for free with all three credit bureaus. Checking your credit report(s) gives you a chance to fix any errors, such as fraud or late payments, before seeing a loan officer. Giving you a better chance of being approved!
Next you should know your current credit score. This three digit number can make or brake the deal because it relates to how likely you are to repay debt – the higher the better!
If you already have a credit card chances are you already have access to some sort of credit score tracker; most credit card issuers give free credit scores on their customers statements or log in area.
If you have a credit score of 650 or higher, you are usually ok and approved 👍
However, its always a good idea to try and improve your score by paying off debt which we will discuss next.
Along with your credit, a mortgage officer will check your debt-to-income ratio; meaning how much monthly debt you currently have compared to how much you earn monthly expressed as a percentage.
This is really simple to calculate:
Say you have $200 minimum monthly payments in credit card debt, a car payment of $300 and you earn $3000 per month.
- Step 1: Add the two monthly payments (in this example its $500)
- Step 2: Divide total monthly minimum payment debt (500) by total monthly income (3000)
- Step 3: Analyze the result. In this case its .16 or 16%
As a general rule, you don’t want to have a DTI ratio more than 36%.
A percentage over this amount tells lenders you have too much monthly debt going on and you may have a hard time paying the mortgage.
Best advice here is to pay off any revolving debt (credit cards) off as soon as you can before applying for that home loan. This will give your credit score a boost!
Local Homeowner Tip
Do I Need A Down Payment For A Home?
This is a really important one!
Depending on your situation, you may have to come up with a down payment along with proof showing you have the monies in the bank. Not only that, be prepared to have money saved up for a few other things involved in the home buying journey:
Here are some averages of home ownership expenses in Illinois:
- Escrow money ~ $1000 (money used as a deposit to show your a serious buyer when placing an offer)
- Home inspection ~ around $400 but depends on the square footage of the house
- Closing costs ~ 3% of home purchase price
- Pre-paid home owners insurance ~ $1000 (we had to pay a full years worth of home owners insurance upfront 😳)
Down payment ~ Between 3% and 20% of purchase price
Local Homeowner Tip
Have Your Home Needs & Wants Before Home Shopping
When shopping for your forever home, you need to make sure it will last. What we mean by this is that it’s wise to make a list of your Needs & Wants. Last thing you want to do is buy something you will outgrow in a few years.
Plan on staying in your new home for at least 5 years; anything less will end up costing you more money to start the process all over again and moving again does not make financial sense due to how volatile home values can be. Save Yourself The Headache!
Bear in mind, there will not be a home out there with EVERYTHING on your list (unless you build it from scratch of course)
You will have to compromise, but heres the fun part, you can always customize it!
- Tearing down, adding new walls for additional rooms or open space
- Installing new floors
- Remodeling the kitchen or bathroom
- Get creative with paint
- Add some tech – smart lights, smart thermostat
These are just a few examples of what you can do to your newly purchased home and trust us when we say making the home yours and seeing the end result your work is just so pleasing 😊
Local Homeowner Tip
Buying A Home That Needs Work? Plan Ahead
Sometimes you may find a great deal on a home or a location you really want to live in but the home requires some fixing up. Buying a fixer-upper is a great option but you must be prepared and know exactly what you are getting into. Buying a home that needs remodeling work has its advantages and disadvantages, the “key” here is knowing about how much its going to cost to repair, the length of damage or work needed, and having the funds needed to complete the job.
Advantages & Disadvantages of a Fixer Upper
Remodeling a home from scratch can be a very exciting but lengthy process. Luckily, at Hercules Construction we have experience and expertise in complete or partial home remodeling and a simplified process to get your home looking like new and just the way you want it.
Connect With A Realtor
After deciding which agent to partner with, be sure to make him or her aware of your likes and dislikes. Some agents specialize in working with first time home buyers so be on the look out for those! Those agents understand the process well and have no problem explaining everything.
Your agent will start to show you houses according to your likes and budget. Its really hard to suppress emotions and think logically when your shown homes but please don’t fall in love with the first one! Explore whats out there. After all this is a big purchase.
Local Homeowner Tip
Top Traits of a Good Real Estate Agent
A Desire To Help Real estate agents are in a service profession. Their job centers on helping other people, whether they’re explaining the home-buying process, staging a home for a showing, or introducing a new family to the community. Without a desire to help people, agents can easily burn out from the constant demands on their time.
Experienced Knowledge is great but experience is worth its weight in gold. Like most professions, there’s a learning curve in real estate. More experience translates into better results for you and the confidence of knowing you’re in good hands.
Honest You want an agent who represents your best interests as a client and who is trustworthy. This is your future you’re putting in their hands. Dealing with an honest real agent is mandatory and as the saying goes: integrity is everything.
Personable Your real estate agent is not only working with you but with others, along with many more professionals throughout your home buying process. You want to have someone who is personable and can skillfully deal with others, while also exhibiting excellent communication skills. If you sense a personality conflict, it’s best to follow your gut and choose someone more compatible to work with.
Proactive The real estate market and business are very competitive. You want a proactive real estate agent who is actively pursuing your best interests. You want a go-getter with the ability to solve problems along the way, because there are always unknowns that arise in the process. A realtor who is ahead of the game and willing to be proactive as opposed to reactive to situations is a keeper!
Reputable Referrals are huge in the world of real estate. You want to choose someone who has good standing in the real estate community and with their clients. Word of mouth carries a lot of weight and shouldn’t be overlooked so ask friends and family if they know someone. It cant hurt to Google your agent’s name and see what comes up. If there are complaints or dissatisfactions, you should know before hand.
There is plenty of free money out there!
Heres extra ways to save some mula:
- Ask your loan officer about grants available for first time home buyers or any other incentives the city, state, county are giving away to attract new owners.
- Get a home owners quote from your auto insurance company – they usually give a discount for combining policies.
- Check with your employer – many companies will help with moving expenses if they really want you to work for them!
- Avoid paying for unnecessary liability insurance when renting a moving truck – some credit card companies automatically provide insurance when renting out cars or trucks to their card holders – just make sure its the card holders name filling out the rental paperwork.
- Take the time to search for these opportunities and you just might leave the signing table with a check in YOUR pocket.
We hope these tips have or will help you in your home buying journey. If you found them useful please share so others can have an enjoyable home buying experience too!