Tips for First-Time Home Buyers

Model House and Set of Colorful Keys

Buying a House in 2023

Buying a home for the first time can be complicated. There are lots of steps, tasks, and requirements to follow, and you don’t want to make a costly mistake.

Here’s a rundown of what you should think about before you buy to help you get the most out of your purchase.

Improve Your Credit Score

Improving your credit score takes time and effort, but it is possible. Here are some tips to get you started:

  1. Check your credit report for mistakes – It’s important to regularly check your credit reports for any errors or incorrect information that could be damaging your score.
  2. Pay your bills on time – Paying your bills on time is one of the most important factors for maintaining a good credit score.
  3. Keep credit card balances low – Keeping your credit card balances low will help improve your credit score. Try to keep your balances below 30% of your available credit.
  4. Limit applying for new accounts – Opening too many new accounts at once can have a negative impact on your credit score.
  5. Use different types of credit – Having a mix of different types of credit, such as installment loans and credit cards, can help improve your credit score.

SAVE FOR YOUR DOWN PAYMENT

A minimum down payment will most likely be required, depending on the loan. Expect to pay at least 3% of the property’s purchase price.

How much you’ll put down on your home depends on the type of mortgage you receive. The typical mortgage down payment ranges from 3.5% to 20% of the property’s purchase price.

If you put down less than 20%, you may be required to pay private mortgage insurance (PMI) or other fees.

Things To Know About Down payments

  • The size of your down payment has a direct impact on the interest rate your mortgage lender will set for your loan. The larger the down payment you offer your lender, the lower your interest rate may be.
  • A larger down payment generally means you’re a less risky borrower, and a less risky borrower means a lower interest rate.
  • It’s now possible to get a mortgage for as little as 3% down, although some loans (like Department of Veterans Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans require no money down.

FIND A REALTOR AND A LENDER

Real estate agents are home-buying experts who know the local market and can take you to houses that meet your needs in your target area. They make finding the perfect home much easier and faster.

Now is the time to start researching lenders. Ask for recommendations from friends and family and conduct online research to find someone who will work well with you and your needs.

GET PRE-APPROVED

Mortgage pre-approval is a critical step in the home-buying process that you should not overlook in 2023. Getting a mortgage preapproval accelerates the lending process. If you find a home you like and need a loan quickly to buy it before another prospective homebuyer does, being preapproved will allow you to secure the purchase sooner.

A preapproval letter shows you have earnest money to put down on a property and will help you in your house hunting in any real estate market.

MAKE A WISHLIST

What kind of home do you want in terms of square footage, features, and so on? Make a list of your non-negotiables.

Are you ready for your dream home? Let Shawn Realty help you find that perfect home for you and your family.

Is your primary home a liability or an asset?

According to Rich Dad, Poor Dad author Robert Kiyosaki, a primary home is categorized as a liability because of the debt obligation that you have to pay down. However, after the home is fully paid off or has built enough equity, it becomes an asset due to the appreciation. For some people, their primary home is the biggest asset that they’ve accumulated in their lifetime, other than stock options or their business. For me, primary homes are an asset, not a liability.

How To Build Home Equity Faster!!

https://youtu.be/_bW2kiPWMp4

I will give you short answers on how to build home equity faster:)

  1. Buy well: A good chunk of equity is made when you buy a property at a lower price than the current value.
  2. Do some fixes: Simple as adding new paint on a property can add value.  Let’s say a property has been neglected for many years and removing wallpaper and adding a fresh coat of paint in and outside for around $10,000.  After the paint, can this property sell for around $50,000 more?  If so, you just made $40,000 equity the day you bought it.  How about adding new countertops, cleaning up the yard and fixing the broken fence?  You get the idea.
  3. Structure improvements: Do you have an unfinished basement that can be finished for around $20,000 while nearby homes with finished basements sell for $50,000 more?  Then yes!  Unfinished attic with potential to add a media room and a bathroom?  How about an unused garage space that can be converted into living space?  Big enough yard where you can build an ADU (additional dwelling unit–think of an independent studio/apartment building)?  Or big enough yard that can be divided up?
  4. Zoning opportunity: Does it have a mixed use zoning that can be used as commercial and residential with good food traffic in an attractive area?  Commercial property is typically in higher price ranges and can yield higher returns when it comes to cashflow or equity building.

So, I’d like you to think about the above opportunities when you are looking for a home.  This applies to a first-time home, move-up home or downsize home.  Unless you want just a turn-key home that you don’t have to do anything with.  Which is fine, but you’ll have less equity building opportunities.

How about if you are thinking about selling and looking for equity return opportunities?  If you have a budget that you can spend toward some of the above ideas, it might be worth looking into.  Just be careful on improvement choices and don’t overdo it.  It will be a good idea to talk to your realtor about what kind of updates/upgrades will be attractive to a majority of the buyers and the ROI potential before pulling the trigger.