The median price tag for an existing home in May 2021 was $350,300, according to the National Association of Realtors. A home is a major purchase, so it’s no wonder that home buyers are interested in hearing any advice that might give them an advantage. These tips for first-time home buyers could help you get a better deal on the home of your dreams.
Tips for First-Time Home Buyers
Buying a home is an adventure, but it’s not one that you want to embark on blindly. After all, missteps have the potential to be pretty costly. Paying attention to some tips for first-time home buyers can give you a chance to think ahead and prepare you to make better decisions when you’re ready to make your purchase.
Tip #1: Know What It Means to Be a First-Time Home Buyer
Sometimes, the obvious answer isn’t the right answer. Believe it or not, that’s the case when it comes to defining the term first-time home buyer. Oddly enough, you can be a first-time home buyer even if you’ve previously purchased a home. The U.S. Department of Housing and Urban Development defines a first-time home buyer as someone who meets the following conditions:
- A person who hasn’t owned a principal residence in three years. If one member of a married couple has owned a home within that period, but the other has not, they can purchase a home together as first-time home buyers.
- A single parent or a displaced homemaker who has only owned a home with a former spouse.
- A person who only owned a property that was either not affixed to a permanent foundation or one that was not in compliance with applicable building codes and could not be brought into compliance for less than the cost of constructing a permanent structure.
Tip #2: Explore the Benefits of First-Time Home Buyer Programs
As PrimeLending points out, being a first-time home buyer has its perks. There are a variety of programs that you can take advantage of to snag lower down payment options, help with your down payment and closing costs, and other potential benefits. Federal, state, and local governments can all offer programs. Local entities may also get involved, and lenders often have their own incentives for novice buyers. Take some time to explore the possibilities so that you know your options and how to get the most out of them.
Tip #3: Start Saving Early
While you may be relying on a home loan to do most of the heavy lifting, there will still be plenty to pay for when you buy a home, so start saving as soon as possible. That way, you’ll have funds for things like the down payment, closing costs, moving expenses, new furnishings, and an emergency fund.
Tip #4: Check Your Credit
Lenders review your credit report and your credit score carefully when deciding what interest rates they’ll offer you. A higher interest rate means that you’ll pay more to borrow money. A lower interest rate means that you’ll pay less. Therefore, it’s worth it to spend a little time checking that your credit is the best it can be before you approach lenders. Make it a habit to pay your bills on time and in full. Then, check that your credit report reflects that. If it doesn’t, contact the credit bureau to have any errors that you see corrected.
Tip #5: Get Preapproved
When you get preapproved, you get a written offer from a lender to loan you up to a specific amount under specific terms. As NerdWallet makes clear, it offers several benefits. Getting preapproved confirms that you have that much to spend, which can be handy if you’re unsure of your budget. It also allows you to show sellers that you’re a serious buyer. In addition, getting preapproved gives you an edge when you’re ready for the actual approval process because you’ve already done much of the paperwork.