Home buying can be a challenging process to undergo, especially your first time. Luckily, if you financially and mentally prepare, you can make the experience significantly easier. Follow these tips to help you plan your budget and home buying strategy to bring you steps closer to finding your dream home.

Build Up Your Credit by Paying Down Debt

Attractive Home with Two-Car Garage

Image via Flickr by adkins1654.

As you consider buying a new home, you should immediately begin paying down your debt. Pay down your debt as much as possible to build a higher credit score. You can do this by paying off any large credit card bills and staying away from opening new credit accounts.

Having a higher credit score by the time you apply for a mortgage increases your chances of getting approved, paying a lower interest rate, and receiving more reasonable loan terms. Take your time when building up a credit score and keep your credit card usage at an appropriate amount.

Carefully Set a Budget and Stick with It

Before shopping for your home, sit down and build your budget. To start, it’s best to spend only 25% or less of your monthly take-home income on a house and other home-buying expenses. A great way to determine how much you should spend is to take your monthly income and multiply it by .25.

You can also purchase a house under your budget, giving you more money to spend on other expenses and emergency house care. Be sure to also budget for closing costs and any additional home buying fees like plumbing or heating,

Research Different Mortgage Loans

Once your credit score is improving and you set a budget, search for mortgages to help pay for your home. A mortgage is a legal agreement between a lender and the home buyer that states you’ll make the agreed-upon payments for your loan.

Apply for loans you’re pre-qualified for and become pre-approved by a lender. Getting pre-approved means a lender has looked through your financial information like your proof of income and has decided that you would be a great candidate for their loan. Types of ideal loans are:

  • Fixed-rate conventional: If paying unsteady loan interests concerns you, a fixed-rate conventional loan ensures you’ll only pay the same interest amount throughout the loan’s life.
  • 15-year term loan: This loan often requires a higher payment every month, but allows you to pay off your loan quicker than a 30-year term loan. These loans also offer lower interest rates.

Other available loans that may not be as financially beneficial are:

  • VA loans: These are given by the Department of Veterans Affairs. Many home buyers find them appealing because they don’t require a down payment. Unfortunately, due to the shifting real estate market, you may end up paying more for this loan than the market value of your home. Additionally, these loans regularly require paying many fees and high-interest rates.
  • ARMs: This stands for Adjustable Rate Mortgage. ARMS typically offer lower initial interest rates, but the chances of these rates increasing over time are very high.

Research Neighborhoods to Find the Ideal Location for Your Family

As you find possible houses, research their neighborhoods. Since buying a home is usually a long-term investment, plan for the future. For example, if your goal is to have children in a few years, search for homes within a reasonable distance from local schools. Research the crime statistics within the neighborhood as well to make sure it’s a safe area to live in. You can search online for these numbers or request them from your real estate agent.

Save for the Down Payment Early On

Before you even begin shopping, start saving for your mortgage down payment, which is the amount you’ll pay up front that secures a loan for your home. Aim for paying a down payment of 20% or more on your mortgage. Consider using a down payment calculator to help you better understand what you can afford.

Find a Quality Real Estate Agent

Since you’ll be working with them regularly, make sure you find a knowledgeable real estate agent you can trust. Search for one who you can build a strong relationship with and who will be there whenever you need answers to your home buying questions. Search for real estate agents with great online reviews or ask for recommendations from friends and colleagues.

Closely Analyze Open Houses

Open houses are days when a house up for sale is available for all interested homebuyers to tour. At the open house, ask several questions about the home including:

  • What year it was built
  • If children lived in the home and if so, from what ages
  • Which household items were once broken and replaced
  • The condition of the heating and cooling system, the water heater, and other important household items.

When you’re at the open house, try to notice any strange smells, stains or defects. If anything looks difficult to fix, tell your real estate agent. They may be able to make an agreement with the seller by knocking down the price or providing you with a better value for the home.

Pay Close Attention to What’s Being Inspected

Once the seller accepts your offer, you should immediately have it inspected. An inspector closely examines the house’s overall condition from the inside out. Some inspectors claim to check for all possible conditions but may end up missing a few key elements. Important things to test for in a new home include:

  • Bugs and other pests
  • Mold
  • Radon

Compare Homeowner’s Insurance to Find the Best One

Before you close on your house, purchase homeowner’s insurance. Homeowner’s insurance is financial coverage for possible damages or losses to your property or its assets. Try not to pick the first insurance offering you see. While there are very affordable options available, cheaper insurance can mean they grant you fewer protections. Compare different rates and pay close attention to what each one covers to make sure you’re getting the best deal.

As you shop for a new house to make your home, learn more about our gorgeous and affordable houses at Steiner Homes. Give us a call or email us at [email protected] to learn more or set up a tour.