Buying a home is one of the biggest decisions you’ll ever make in your life.
You might be wishing right about now that your high school or college had offered a few classes on what to know about buying a house. It can be an overwhelming process with plenty of room for catastrophic mistakes.
First-time homebuyers usually don’t know what they don’t know about buying a house because, well, it’s their first time! Some buyers might not even know that actually, they’re already prepared to start shopping!
You’ve probably heard horror stories about new homeowners who regret their decision. They fell in love with a home and rushed into buying, heedless of whether it was outside of their price range or maybe ignoring issues found during the inspection. Overall, around 44% of homeowners end up regretting their home purchase, according to a Bankrate survey.
These mistakes could stick with you for years to come and have far-reaching implications, so it’s crucial that you carefully consider the details. In this article, we’ll take a look at what to know about buying a house as a first-time homebuyer as well as give tips for how to avoid buyer’s remorse.
1. You might be more ready to buy than you think
Buying a home for the first time is a scary prospect. Affordability is the top concern for around 60% of homebuyers. There are a lot of costs you have to worry about, such as the down payment, closing costs, your monthly mortgage amount, and more. It’s enough to send anyone into a panic.
However, you might be surprised to know that you don’t necessarily need a massive savings account to purchase a home. There are several options available for homebuyers who have a small down payment.
While 20% is named as the standard down payment amount, it’s a standard that’s rarely met by most homebuyers. According to a 2019 report by the National Association of Realtors, most first-time buyers only manage a 6% down payment.
If you expect to pay between 3% (the minimum for a down payment) to 6%, then some of your options include an FHA loan, a Fannie Mae HomeReady loan, or a conventional loan.
You also don’t want to forget to calculate how much the monthly mortgage payment will be and whether you’ll be able to easily afford it.
“Buy a home where the payment will be comfortable for you, not the max amount you’re approved for,” recommends Ryan Ogle, a top-selling real estate agent in Grand Rapids, Michigan, who’s sold 66% more single-family homes than other agents in his area. “Remember, you still have to buy furniture and other things.”
What if you have a low credit score? That may not necessarily prevent you from buying, either! The Freddie Mac Home Possible loan is designed for buyers with lower credit scores. There are also other loans available for buyers with low credit scores, which your loan officer can share with you.
That said, there are pitfalls you should be aware of while looking into your options. It’s likely you’ll have to file some extra paperwork and deal with additional monthly fees if you have a low down payment or credit score.
Risky loan environments (such as the COVID-19 pandemic) can also affect the standard minimums for down payments and credit scores. Choosing to shop for a home below your maximum loan approval limit can help you out a lot.
Stay tuned for the next part in this series!
