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Being a first-time homebuyer is exciting, and the moment you purchase your first home is a big event. Overlooking some steps of the home buying process can have consequences, but you shouldn’t let that stop you from taking the journey. To help you with the home-buying process, here are our top five tips for the first-time homebuyers of the world.
1. DETERMINE YOUR DOWN PAYMENT AMOUNT
When applying for a mortgage, you’ll need a down payment for the rest of the loan. A down payment is often measured as a percentage of the total price of the home (i.e., a 10% down payment of a $300,000 home would be $30,000). It’s a way of showing lenders that you’re serious about owning a home, and the amount you pay down will help determine the interest rate of the loan. If you want to learn more about how mortgage loans work, read our blog on the subject, but otherwise, you just need to know that the size of your down payment determines how much of the full price you’ll have to borrow.
You may have heard that a 20% down payment is what’s necessary to secure financing. Although there are a lot of opinions on how much you should pay down on a property, requirements are based on the lender you use and the loan type for which you qualify. The takeaway here: Determine how much you are willing to pay down for a home before house hunting and work backward from there. Build your budget around how much you can pay now, and not the other way around.
2. GET A REALISTIC VIEW OF YOUR EXPENSES
Knowing your down payment is important, but you also have to account for the monthly expense associated with a mortgage. The size of your monthly payment is determined by a variety of factors, but before we get to that, you should also consider your monthly budget.
Take time to get a clear picture of your monthly expenses. This should include everything outside of your current housing expenses. How much do you pay for food? Do you have any hobbies that take up some of your regular budget? What about any standing monthly subscriptions?
3. SAVE A LITTLE EXTRA
Knowing how much to save for a down payment is important, but there are also some expenses associated with moving you should account for upfront. Whether that means setting aside some cash for new furniture, paying deposits for utility providers or any other costs associated with transporting your life to its new home—it’s better to be prepared now than surprised later.
4. TAKE YOUR TIME
House hunting is where the real excitement begins. You’ll likely be working with a realtor to see houses in a desired area and within your budget, and you may be bombarded with tons of great options for you and your family. It’s a fast-paced, fun time, and as much as you might want to go straight to signing on the dotted line for the first good property you see, it’s a move that may lead to buyer’s remorse.
The home buying process can feel like it’s moving at a million miles a minute, but if you’re in no rush to move, why rush to pick the first house you see?
5. KNOW WHAT YOU NEED AND WANT
It’s the old adage you’ve probably heard from your parents once or twice: Is it a need or a want? We’re not here to be your parents, but we do know you can save yourself a lot of money by understanding what is a luxury and what is a necessity—and treating them as such.
Perhaps the best way to manage these expectations is to prepare a list of must-haves before the home buying process begins. How many bedrooms do you need? Is there a big enough backyard for your pets? Do you need extra space to host frequent guests? This will give you a baseline of what your future home absolutely needs to have, and if you find a property with a few extras as well, then it’s a win-win. Simply put: Know what you need before you start looking, but don’t be afraid to use some of your budget on a few luxuries as well. It’s all part of the fun.
RENASANT BANK MORTGAGES
Here at Renasant Bank, we want to make your first home buying experience as simple as possible. Our loan experts will walk you through the process of taking out your first mortgage and work hard to get you approved. We also offer home insurance options to protect your new house. Contact our banking professionals to get started with your first home buying process today!