Owning your first home, especially when house hunting in Princeton, Texas, is an enticing adventure that brings to mind comfort and stability. But, the road to get there can be very daunting and stressful. In the midst of all the house-hunting excitement, it's important you keep your mind focused on your budget, your needs, and what you really want.
Your real estate agent is likely going to show you countless beautiful homes that have all the bells and whistles, but if it's across town from where you want to be or has a twice as long commute to your job, is it worth it to you in the long run?
These are the sort of questions you'll have to answer as you start your house hunting search. But, before you step out the door, here are 10 tips you have to follow if you want things to go smooth.
1. Save for your downpayment first.
It can be disheartening, especially to younger individuals, when they step into the world of homeownership and realize that--before they can even qualify for a mortgage--they need to have thousands of dollars in savings to cover just the up-front cost of buying a home: the downpayment. Traditionally, most lenders required 20% of the home's selling price to be paid in full, up-front.
Today, most lenders require you to put down much less, and many first-time home buying programs allow for as little as 3.5% down. This can leave you more money for home renovations and moving, but keep in mind that the less you put down, the more you'll pay later in interest.
2. Set a realistic budget.
We all want that multi-million dollar mansion on the hill or by the water, but unfortunately, that is simply out of reach for most people. That is why you need to begin calculating your monthly available income, what you can realistically and consistently put towards a mortgage, and how much homes go for in Princeton, Texas, on average. Calculate how much you can spend before focusing on how much space you need.
3. Check your credit.
You cannot buy a home with a low credit score, it is that simple. To qualify for a good interest rate, you will typically need a credit score of at least 600. However, some programs will help first-time home buyers who have a lower score. Just keep in mind that your credit health will directly impact how much you have to pay in interest, and even how much you have to put down as a downpayment. Pull your official credit report through FICO, as this is the score lenders will use.
Free credit-checking apps like Credit Karma will allow you to monitor your progress over time as they go up-and-down with events in your credit report, but the score you see on Credit Karma isn't the same one lenders will see when they pull your official report, and it could be off by 50 points (or more).
4. Stop taking out loans.
An "inquiry" will show up on your report each time a potential lender pulls your credit file. This means an inquiry comes from credit card companies about new credits cards you are applying for, and even when you are applying for a credit line increase. Mortgage lenders will also pull your report and cause an inquiry to appear when you begin shopping for loans.
Inquiries will stay on your report for up to 2 years, and lenders will tend to shy away if they see you have recent inquiries. To them, this shows you are in need of more credit, which can signal that you do not have a good enough financial picture to be purchasing a home right now.
5. Explore your options.
Being educated about all the different types of loans and downpayment options out there is essential to qualifying for a mortgage that fits your budget and lifestyle. If you don't think you have a large enough downpayment, you may need to ask family and friends to pitch in--or put the home buying process off for another few months until you can accumulate enough savings to buy a home on your own.
6. It's more than just the downpayment.
Your downpayment is not the only thing you will have to fork up money for when you sign a mortgage agreement. You will also have to pay for closing costs, and a few other fees. All of this will be due on the day of closing and it can add up. Factor these things in when determining how much of a house you can afford.
7. Save a little bit more.
On top of your downpayment, closing costs, and other fees, you need to have another layer of savings. After all, who wants to own a home without any money to spend on it? Aside from moving costs and basic furnishings, you may also need to address small repairs, like hanging up curtains and installing a new deadbolt for the front door, upon moving in.
8. Get realistic.
Even with a realistic budget in mind, your idea of the perfect home might not be truly realistic. Consider every home's size, location, maintenance costs (landscaping, the roof that needs replacing, etc.), and style. If you are not going to be happy with the home in the next few years because your family outgrows it, or it's too far from work, keep looking.
10. Look for help.
Educating yourself on the entire mortgage lending process will prove extremely beneficial to you as you begin moving forward in your search. This can also reveal some state and local assistance programs that can help you buy the perfect home for your needs. These may include lower downpayment loan options, tax credits, and even interest-free loans and offers.