4 Things Every First Time Home Buyer Should Do Now
January 29, 2019 |
Buying your first home is exciting. You can spend hours online looking at bathrooms and kitchens and outdoor spaces and closets; dreaming about what color you want to paint the accent wall in your new bedroom, which tiles to use for the kitchen backsplash, and how much glass to show on the front door.
But there are a few things you should be doing right now to make sure your first home buying experience goes as smoothly as possible. Here are the four things you should be doing as a first time home buyer before you sign on the dotted line.
1. Get up close and personal with your credit score.
The biggest determining factor for your mortgage rate (and if you’ll be given a mortgage at all) is your credit score. If you don’t know much about your credit score, check out Part 1 and Part 2 of our FICO credit score series for the rundown. The lower your credit score, the more of a risk you are to a financial institution or lender. The higher your score, the better for you.
The minimum credit score most places will consider for a conventional home loan is about 620, though the average is usually in the high-600s. If you are obtaining an FHA loan, you might be able to get away with a lower score, but not much lower than 580. Regardless of the kind of home loan you choose, the lower your score, the higher the interest you’ll pay.
To clean up your credit score, start by checking out this handy article, which has a whole section on improving your score. Paying your bills on time, keeping your debt ratio to about 30%, and establishing a long-term pattern of good credit habits will help you improve your score. Remember, your credit score is always changing, and as you remove debt and improve your payment schedules, it will continue to rise.
2. Ask questions. LOTS of questions.
This is the biggest purchase of your life (probably), and you need to make sure you’re comfortable at every step of the process. Your lender, your real estate agent, your bank and everyone else in the process are there to help you, so enlist their support. Make a list in your phone of any questions you may want to ask about your home purchase and financing, especially when they pop in your head late at night.
Review your wish list with your realtor and discuss which items are non-negotiable (gotta have that walk-in closet). Ask your realtor for their perspective about certain areas and if they have access to information on crime statistics for the neighborhood where you are looking to purchase your home.
Ask your lender if there are any first time home buyer perks or discounts (you never know). Additionally, you should ask if there’s anything the lender can do to improve the rate they’re offering.
Remember, you don’t need to look any farther than your own home and family for advice. Ask your parents, relatives or friends who have bought homes for their best advice, or any lessons learned. You’ll never know if you don’t ask. Don’t go through the process with questions. Go through it with answers.
3. Take your time.
Love at first sight is great in movies, but can prove risky when it comes to buying your first home. Especially when you hear that there might be other people interested in a property or that there are already offers on the table. It can lead to an increase in our competitive nature. Don’t make an emotionally driven offer just because you want to beat the other buyers.
Take a breather after you view a house and come back to it a day or two later to make sure you not only that you really love it, but that it makes sense. Is it really your dream house or a pipe dream? Is the kitchen perfect, but the bathrooms, plumbing and electrical outlets straight from another century? Just because other people have fallen in love with this house doesn’t mean you have to as well.
Your perfect house will come along, and as long as you aren’t pressed to adhere to a strict timetable for moving, you should be able to take your time finding the right house. That’s one of the great things about being first time home buyers — since you’re not selling a property, you can move when it’s right for you and when you find the right home. Take your time — the right house for you will show up one day.
4. Know your budget. And stick to it.
If you’ve done your homework, you already know how much house you can afford (if not, try this helpful mortgage calculator) and you know how much money you need to save. Keep your budget on you at all times. It’s not uncommon for real estate agents to show you homes a little above your budget if they think they can steer you more toward your wish list or they think the price is negotiable. Don’t worry, if you know exactly what your comfortable spending on your house (including utilities, repairs, etc.) then you can confidently tell your realtor what you will and won’t see.
It’s like having eyes bigger than our stomachs. If you’ve budgeted for a mortgage that will cost you $1,200 a month, and your real estate agent shows you a house that would be $1,500 a month, that $300 difference doesn’t seem like much until you do the math. Can you afford an extra $3,600 a year in payments? Even if the house does have vaulted ceilings and a powder room, are the amenities worth the extra cost? And don’t forget, that $300 difference is more because there’s interest on that amount.
Don’t bite off more than you can chew with your first home. Buy what you need for today, not what you might need for the future. Know what your budget is and stick to it. If it changes in the future, then you can reevaluate your needs, but buy the house you can afford today.
5. After you buy bonus — Buy new locks.
After you purchase your new home, and after you’ve officially taken possession, make sure you change the locks. It might seem unnecessary — there are perfectly good locks on the doors right now, why should I buy brand new ones? Well, do you know how many people the previous owner gave copies of that key to? How many repairmen, dog walkers, dog sitters, family members, friends, coworkers, and so on might have access to your home?
Sure, the homeowner says they got them all back and gave all the keys to you, but can you really be sure that was all of them? Maybe they’ll come across a spare one when they’re unpacking their own home, and use it to stop by and see what changes you’ve made. Better be safe than sorry — change the locks.
There are plenty of steps to take and many things to do; from the time you decide to look for your first home until you walk through the door of a house that now belongs just to you. For help with every step of the process, the experts at Dime are here to help. From application to closing, a Dime Mortgage Loan Officer will guide you through the process and is always a phone call away. And, we’ll also help you get off to the right start with a $500 credit toward closing costs1.
For more information about how Dime will help you finance your first or next home, check out this article on how the Dime Mortgage Team does things differently.