5 things first-time home buyers should know
For first-time home buyers, the process of finding and buying a home can seem overwhelming. Here’s a quick guide on a few important things you should know before diving into that purchase.
9/2/2022 · 3 min read
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Some first-time home buyers may qualify for down payment assistance.
It may be helpful to compare lenders for the best mortgage rate.
Usually, it’s best to determine a budget at the beginning and stick to it.
Buying your first home is an exciting time—but it’s not something you should rush into. There are some important things to know about buying a home that could make the process easier and save you money.
1. You May Qualify for First-Time Home Buyer Assistance
Many states and local governments offer special programs to help first-time buyers become homeowners. Assistance may include grants to help with the down payment, closing costs, and other things. Your agent or lender should have information on programs where you live.
You may also qualify for a special mortgage—a VA loan, FHA loan, or USDA loan— which may be ideal for first-time home buyers. Offered by private lenders and backed by the federal government, these loans may be relatively easy to qualify for if you have certain qualifications. They may also have lower interest rates and comparatively low down payment requirements.
2. Consider Shopping Around for a Mortgage Lender
Although it may be tempting to apply for a mortgage with a lender because you already do business with them or they are well-known, you could save big on interest and fees by doing some comparison shopping. A half-point difference in the interest rate between lenders may not sound like much, but it could represent thousands in savings over the life of your loan.
You may also want to consider local credit unions. Because these lenders are non-profit organizations, they tend to have lower fees and interest rates than banks.
3. A Mortgage Pre-Approval Letter May Give You an Edge
Before you are officially approved for a mortgage, a lender may pre-approve you for a loan. Pre-approval means a lender has done a preliminary review of various qualifying factors, like your finances and credit, and is tentatively willing to let you to borrow up to a certain amount.
Your lender will give you a pre-approval letter that you can show to relevant parties in the purchase process. It lets them know that you are serious about buying. A seller may also be more willing to consider an offer from someone with a pre-approval letter than from someone who doesn’t have one, which could give you an edge in a competitive housing market.
4. Determine How Much Home You Can Afford
Although a lender may be willing to loan you a certain amount, that doesn’t mean you have to buy the most expensive home you can. Before you make an offer on a home, it’s important to make sure you can afford it. An online mortgage calculator can be used to estimate your monthly payments.
Making an offer on a home that is less than the maximum you can borrow may also be helpful in a hot housing market. If there are multiple offers on a home, you may have to make adjustments to your offer to close the deal.
5. Be Sure to Negotiate
Unless you are in a competitive housing market, it's always a good idea to negotiate as much as possible with the seller. In addition to asking for a lower price, be sure to request that the seller fixes anything identified in the home inspection before the closing. The seller may also be willing to pay for part of the closing costs if asked.
This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.
Cyrus Vanover is a finance and real estate writer who specializes in making complex topics easy to understand. He is also the author of "Earn a Debt-Free College Degree." Based in the mountains of Virginia, he enjoys hiking the local trails, listening to 80s music, and reading books on military history in his spare time.