Tips that Every Young Homebuyer Should Know
According to the 2021 Home Buyers and Sellers Generational Trends Report from NAR, 33% of home buyers aged 22 to 30 found that understanding the process and steps was the most difficult part of the home buying process. Young homebuyers can sometimes be naïve in thinking that buying a home is a walk in the park. Here are five things that aspiring homebuyers should know about the home buying process:
Make Sure You’re Ready
One of the biggest mistakes a young aspiring homeowner could make is deciding to buy a home before they are truly ready. Owning a home is a huge decision– an expensive commitment that will inevitably require more financial investments in the future to retain its value. Before diving into the home buying process, be sure you know exactly what you’re getting into. Since the home buying process can be financially and emotionally draining, it’s important to make sure you are in a good head space and financially ready to make big decisions about your future home investment. If affording a home is a stretch for personal or financial reasons, it may be a good idea to push off the home buying process to a later time.
Apply for a Mortgage Before Looking
First-time home buyers often make the mistake of looking at homes before getting in front of a lender. However, it’s important to not get a mortgage with the first lender or bank you talk to. Shop around for mortgage lenders as you would when looking for a house. It may not be as fun as house hunting, but it’s worth your time to do this because it can save you thousands – so you can spend that money for something else such as a down payment or home renovations.
Keep an Eye on Your Credit
It’s always a good idea to periodically check your credit reports and scores, even if you are years away from shopping for a home and mortgage. Generally speaking, the higher and better your credit score, the lower your interest rates will be on your mortgage. Lower interest rates can mean lower monthly payments. So even if you are years away from purchasing a home, keep an eye on your credit score and work to make it the best it can be. If your credit is not the best and you’re in the market to buy a home, understand that you’ll need to be willing to pay higher interest rates, apply for loans, or come up with a larger down payment. If your credit is not the best, it may be best for you to take some more time to build your credit.
Save For Closing Costs
Many first-time home buyers know about saving for a down payment, but fewer know about the closing costs that exist in a real estate transaction. So, what are closing costs? Closing costs are the fees associated with a mortgage that can be split into two types: Bank related costs which includes the mortgage tax and bank fees, and title related costswhich includes transfer tax and title insurance. On average, closing costs amount for about 3% of the price of the home – but it’s possible to have a higher closing cost percentage, and it’s important to be prepared for those costs and fees. For example, if your home is $250,000 and the closing costs are 3%, you’ll need to pay $7,500 in closing costs. Don’t get blindsided by closing costs and save early.
Make a Competitive Offer
Once you have a mortgage pre-approval, you’ll be ready to make an offer on the home you desire. It may be hard to know how much to offer or what would be considered competitive as a first-time home buyer. That’s where your expert real estate agent comes in! A well-seasoned real estate agent will be able to help you with your offer to make sure it is competitive and also stays within your budget. Your agent will then write the offer letter and send it over to the agent representing the seller. Be prepared for one of three outcomes: The seller accepts the offer, the seller makes a counteroffer, or the seller declines the offer.
Get a Choice Home Warranty
It’s possible the seller will offer a home warranty, but even if they don’t, you should still make sure to get coverage for yourself. Purchasing a home may be the most important financial transaction of your life, and a home warranty offers protection on a budget from breakdowns and repairs on covered systems and appliances. Choice Home Warranty plans start at only $420 a year, a fraction of what the costs of an unexpected breakdown could be. Don’t wait until it’s too late!