Tag: House

Being a Firts-Time Home Buyer: Tips & Tricks

Buying a home can be nerve-racking, especially if you’re a first-time home buyer.

These tips will help you navigate the process, save money and avoid common mistakes. We organized them into four categories:

  • Mortgage down payment tips.

  • Mortgage application tips.

  • House shopping tips.

  • First-time home buyer mistakes to avoid.

    Mortgage down payment tips

    1. Start saving for a down payment early

    It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. But putting down less than 20% may mean higher costs and paying for mortgage insurance, and even a small down payment can still be hefty. For example, a 5% down payment on a $200,000 home is $10,000.

    Play around with this down payment calculator to help you land on a goal amount. Some tips for saving for a down payment include setting aside tax refunds and work bonuses, setting up an automatic savings plan and using an app to track your progress.

    2. Explore your down payment and mortgage options

    There are lots of mortgage options out there, each with its own combination of pros and cons. If you’re struggling to come up with a down payment, check out these loans:

    • Conventional mortgages They conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.

    • FHA loans Loans insured by the Federal Housing Administration permit down payments as low as 3.5%.

    • VA loans Loans guaranteed by the Department of Veterans Affairs sometimes require no down payment at all.

    Making a higher down payment will mean having a lower monthly mortgage payment.

    If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Use our calculator to determine whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.

    3. Research state and local assistance programs

    In addition to federal programs, many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.

    Mortgage application tips

    4. Determine how much home you can afford

    Before you start looking for your dream home, you need to know what’s actually within your price range. Use this home affordability calculator to determine how much you can safely afford to spend.

    5. Check your credit and pause any new activity

    When applying for a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.

    So check your credit before you begin the homebuying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.

    To keep your score from dipping after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.

    6. Compare mortgage rates

    Many home buyers get a rate quote from only one lender, but this often leaves money on the table. Comparing mortgage rates from at least three lenders can save you more than $3,500 over the first five years of your loan, according to the Consumer Financial Protection Bureau. Get at least three quotes and compare both rates and fees.

    As you’re comparing quotes, ask whether any of the lenders would allow you to buy discount points, which means you’d prepay interest up front to secure a lower interest rate on your loan. How long you plan to stay in the home and whether you have money on-hand to purchase the points are two key factors in determining whether buying points makes sense. You can use this calculator to decide whether it makes sense to buy points.

    7. Get a preapproval letter

    You can get pre-qualified for a mortgage, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. But as you get closer to buying a home, it’s smart to get a preapproval, where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you, and under what terms. Having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.

    House shopping tips

    8. Hire the right buyer’s agent

    You’ll be working closely with your real estate agent, so it’s essential that you find someone you get along with well. The right buyer’s agent should be highly skilled, motivated and knowledgeable about the area.

    9. Pick the right type of house and neighborhood

    You may assume you’ll buy a single-family home, and that could be ideal if you want a big yard or a lot of room. But if you’re willing to sacrifice space for less maintenance and extra amenities, and you don’t mind paying a homeowners association fee, a condo or townhouse could be a better fit.

    But even if the home is right, the neighborhood could be all wrong. So be sure to:

    • Research nearby schools, even if you don’t have kids, since they affect home value.

    • Look at local safety and crime statistics.

    • Map the nearest hospital, pharmacy, grocery store and other amenities you’ll use.

    • Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.

    10. Stick to your budget

    Look at properties that cost less than the amount you were approved for. Although you can technically afford your preapproval amount, it’s the ceiling — and it doesn’t account for other monthly expenses or problems like a broken dishwasher that arise during homeownership, especially right after you buy. Shopping with a firm budget in mind will also help when it comes time to make an offer.

    In a competitive real estate market with limited inventory, it’s likely you’ll bid on houses that get multiple offers. When you find a home you love, it’s tempting to make a high-priced offer that’s sure to win. But don’t let your emotions take over. Shopping below your preapproval amount creates some wiggle room for bidding. Stick to your budget to avoid a mortgage payment you can’t afford.

    11. Make the most of open houses

    When you’re touring homes during open houses, pay close attention to the home’s overall condition, and be aware of any smells, stains or items in disrepair. Ask a lot of questions about the home, such as when it was built, when items were last replaced and how old key systems like the air conditioning and the heating are.

    If other potential buyers are viewing the home at the same time as you, don’t hesitate to schedule a second or third visit to get a closer look and ask questions privately.

    First-time home buyer mistakes to avoid

    With so much to think about, it’s unsurprising that some first-time home buyers make mistakes they later regret. Here are a few of the most common pitfalls, along with tips to help you avoid a similar fate.

    12. Not budgeting for closing costs

    In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent’s commission. Calculate your expected closing costs to help you set your budget.

    13. Not saving enough for after move-in expenses

    Once you’ve saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and any improvements you may want to make after moving in.

    14. Buying a home for today instead of tomorrow

    It’s easy to look at properties that meet your current needs. But if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. Consider your future needs and wants and whether the home you’re considering will suit them.

    15. Passing up the chance to negotiate

    A lot can be up for negotiation in the homebuying process, which can result in major savings. Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs? If you’re in a buyer’s market, you may find the seller will bargain with you to get the house off the market.

    16. Not knowing the limits of a home inspection

    After your offer is accepted, you’ll pay for a home inspection to examine the property’s condition inside and out, but the results will only tell you so much.

    • Not all inspections test for things like radon, mold or pests, so be sure you know what’s included.

    • Make sure the inspector can access every part of the home, such as the roof and any crawl spaces.

    • Attend the inspection and pay close attention.

    • Don’t be afraid to ask your inspector to take a look — or a closer look — at something. And ask questions. No inspector will answer the question, “Should I buy this house?” so you’ll have to make this decision after reviewing the reports and seeing what the seller is willing to fix.

    17. Not buying adequate homeowners insurance

    Before you close on your new house, your lender will require you to buy homeowners insurance. Shop around and compare insurance rates to find the best price. Look closely at what’s covered in the policies; going with a less-expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim. Also, flood damage isn’t covered by homeowners insurance, so if your new home is in a flood-prone area, you may need to buy separate flood insurance.

How to Save Energy in the Summer

Most people expect higher energy costs in the summer. We crank up the air conditioning to get out of the sun; the kids are home from school and spend all day on their electronics; and, when you finally convince them to play outside, you find yourself washing extra loads of bathing suits, beach towels, and muddy clothes. The warm weather comes with a price. But, with a little preparation, you can manage your energy use wisely and cut down on your bill. We’ve shared 7 tips below that will help you use less energy in the summer and save you valuable money on your utilities.

1. Wash with Cold or Warm Water

 Avoid using hot water whenever possible. Because 90% of the energy used by your washing machine goes toward heating the water, doing your laundry on either the cold or the warm cycle will save you a tremendous amount of electricity. When you’re done, take advantage of the warm weather and dry your clothes outside instead of putting them through the dryer. You’ll both save energy and avoid raising the temperature of your home with heat-generating appliances.

(Hint: the same logic applies to dishes as well. Use cold water and let them air dry instead of running them through the drying cycle.)

2. Be Smart with Your Thermostat

It feels good to blast the AC after getting home from a workout, time spent outside, or just a generally sweltering summer day. But it probably won’t feel so good later when you see that your utility bills have skyrocketed. Keep in mind that for every degree you raise your thermostat above 72º, you save up to 3% of your cooling expenses. Try setting your thermostat to 78º, or as high as your comfort allows.

When you’re away from home, set the temperature even higher or, if it’s not too hot, turn it off altogether so you don’t waste air conditioning on an empty house. If you install a smart or programmable thermostat, you won’t have to go through the trouble of manually changing the temperature each time you leave. These thermostats will automatically adjust your home’s climate control while you’re away.

3. Keep Your Home Easy & Breezy

Another easy way to cut down on cooling costs is by using fans. Ceiling fans are great for cooling an entire room, and many homes already come equipped so there’s no purchase necessary. Even if you don’t have one, portable fans are inexpensive and readily available at any home goods or big-box store. A good fan will allow you to raise your thermostat 4º while maintaining the same level of comfort. If you don’t mind the light breeze, go ahead and lower the temperature on your AC because fans can be very effective.

4. Consider LED Lighting

After you’ve blocked out the sun, you might find yourself turning on more lights than you normally do. Be careful which lights you choose, though, because incandescent bulbs actually turn 90% of the energy they use into heat. Consider replacing your incandescent bulbs with LED bulbs, which operate at a lower wattage and produce only half as much heat. LED bulbs also use 75% less energy and last 50 times longer than traditional bulbs, saving you money on electricity and replacement costs.

5. Use the Barbeque

Trying to cook in a hot, steamy kitchen can be unbearable, especially when it’s hot and steamy outside as well. Kitchens are full of heat-producing appliances: ovens and stoves can raise your kitchen’s temperature up to 10º. To save yourself the sweat (and the higher utility bills), try using the microwave whenever possible since it uses just one-third the energy that an oven does and produces only a fraction of the heat. Another great way to take the heat out of the kitchen is to cook outdoors. Pop some burgers on the grill or invite some friends over for a barbecue. You can enjoy the great weather while you avoid raising the temperature in your home.

6. Keep Track of Your Electronics

When you place heat-generating devices such as lamps or TVs near air-conditioning thermostats, you can trick them into thinking the room is hotter than it really is. Your thermostat will sense the heat from these devices and spend extra energy trying to cool the house down. Be mindful of where your thermostats are and try to keep electronics away from them. Devices like computers, curling irons, hair dryers, stereos, and televisions heat up your house as well, so make sure they’re turned off when they’re not being used.

7. Keep the Sun Out and the Cool Air In 

The summer sun is great for tanning, great for your mood, and great for beaches, picnics, and sunsets. However, it’s not so great if you want to keep your house cool. Sunlight coming through your windows will heat up your home, causing you to spend more on air conditioning. Try drawing the blinds during the hottest parts of the day, especially if your windows are facing south. You can open your windows again at night when it gets cool; this will allow you to turn off your air conditioning. Just don’t forget to close them again in the morning to trap in the cool air.

Also, if you’re planning to invest in landscaping, keep in mind that trees provide great natural shade. Strategically placed shrubs, trees, and vines can block sunlight from your windows, roof, and walls, saving you $100 – $250 per year in cooling costs.

How to Save Money for a House

Buying your first house is the pinnacle of adulthood. But as you’re probably well aware, the road to home ownership isn’t exactly easy to navigate. Unless you’re completely debt-free and disciplined enough to live below your means to save money, buying your first home in the near future can seem more like a fantasy than an actual possibility. In fact, a 2017 Zillow survey of 13,000 adults found that only 39% of millennials are able to make the standard down payment on a home, and just one in five can pay the bare minimum to secure a home loan. Yeah, it’s tough out there.

The good news is that buying a house doesn’t have to be something you only wish you could do. You can definitely make it a reality. But it may require you to make a bit of an adjustment. Fortunately, experts shared some sneaky ways you can save money for a house — and the timing’s perfect, since April is Financial Literacy Month.

What you need to know before you even think about buying your first house

When you’re looking to buy your first home, it is crucial to understand how to save money. As Dottie Herman, finance expert and CEO of Douglas Elliman, one of the largest real estate companies in the United States, tells us,

But before you even begin your search, Herman says it’s in your best interest to meet with a qualified mortgage lender. They’ll be able to help guide you through the process of qualifying and buying a home. Most importantly, constantly check your credit score. The higher the score, the better interest rate you will receive.

“For most people, buying a home is an exciting time. But it can also be a very long process that may seem like a financial hurdle that requires short-term sacrifices for long-term success,” Herman says. “By following a few smart and savvy ways to lower your expenses, you will be able to save enough money to purchase that dream home in less time than you think. In the end, it all comes down to discipline, desire, and you.”

So how can you save up for a house without making it seem like such a huge sacrifice?

Sneaky ways to save up for a house

1. Use cash as much as possible

Using cash may seem like such a hassle, but Adam Jusko, founder and CEO of ProudMoney.com, tells us it can save you a lot of money down the line.

“Many studies show that people spend more when paying with credit cards, so use cash instead,” Jusko says. “You’ll not only spend less on food and other items, but taking away the convenience of using credit means you simply won’t buy frivolous impulse purchases.”

According to him, the pain of going to the ATM to get cash will have a way of slowing down your spending. Just think, when you only have $10 in your wallet and no credit cards, you start to think of ways to prevent that money from being spent.

2. Split your paycheck into two separate accounts

This may not seem like a sneaky way to save at first, since you know you’re doing it. But if you have direct deposit, have your paycheck deposited into two accounts.

“I have my employer put the bulk of my paycheck into my everyday checking account, and then I have a specific amount from each paycheck that automatically goes into a savings account at another bank that I rarely use,” Jennifer Beeston, VP of mortgage lending at Guaranteed Rate Mortgage, tells us. “When it comes to saving, out of sight, out of mind can be very powerful.”

3. Skip online shopping every other month

Online shopping is the number one way people “mindlessly spend” money these days, Beeston says. Just think about your own online shopping habits. Are your purchases typically impulse buys, or do you mostly buy things you actually need? According to Beston, the nature of online shopping makes it difficult to truly understand or feel the cost of purchases.

That’s why she suggests banning online shopping every other month. Do a digital detox on your wallet. “This is a great way to save extra money,” she says. Just try it one month and see how much you end up saving. If it’s a lot, you might be more motivated to make it a regular thing.

4. Be flexible with your grocery list

When you’re trying to save money, flexibility is key. For example, if you really like Heinz Ketchup but there’s a sale on the generic store brand, go with the generic store brand.

Same goes for meals you’re trying to make. “When you see a sale, try to swap out a meal you’d planned to make with a cheaper meal using the discounted food,” Jusko says. This allows you to be a little creative, and can save you a bit of money at the same time.

“What are little things you can do to constantly remind yourself of the goal so you keep doing the right thing? No matter how frugal you are, there is one thing you are buying that you could leave at the store,” he says. “Make a game of figuring out how you could replace that item with things you already have at home or how to simply live without it.”

5. Make a calendar of things you’re not going to do

Most of us like to plan events on our calendar, but more often than not, those events mean spending money. Instead, Jusko suggests making a calendar of what you could do, but won’t. For instance, put down, “Not having dinner with Kim and Sam at that new restaurant on Friday.” Then, calculate how much money you saved by not doing those things.

“This may sound corny, but one of the hardest things about saving money is filling the time that would normally be spent on entertainment,” he says. “Being silly about the process by making it a game is key to making it happen.”

6. Buy a French press

If you’re a coffee lover, you probably know your daily drink of choice can seriously add up. You can even check your bank or credit card statements to see just how much you’re spending. But there is a way to save money without having to forego your caffeine addiction altogether.

“Instead of going to Starbucks in the morning and then again for your afternoon pick-me-up, go to Starbucks or another coffee specialty shop and buy the coffee grounds to make make your drink at home,” JJ Choi, an agent at real estate brokerage firm Triplemint, tells us. “A French press is an easy alternative vs. a big expensive machine. Coffee will net out to less than a dollar per drink compared to the $8 to $10 daily expense.”

Saving money to buy a house may take work and a lot of discipline, but if it’s something you really want, you can definitely do it.

7. Lock money away in a certificate deposit (CD) account

A CD is a savings account with a fixed interest rate and fixed date of withdrawal. Essentially, these are savings accounts with a catch. “A lot of people can save money, but they can’t avoid the temptation of spending the money when it’s sitting there,” Holden Lewis, home financing expert, tells us.

“You can buy a certificate of deposit for six or 12 months, and there’s a penalty for withdrawing the money early. That can help you keep your hands off it.” It’s definitely a good option if you’re known to tap into your savings account every now and then.

Buying a House: Working with Real Estate Agents

Real estate agents love working with people, but there are always clients who may unintentionally cross the line. Here are a few simple protocols you can use while shopping for a home that will keep you out of hot water and on good terms with real estate agents—especially your own agent.

Choose a Real Estate Agent

  • If you are interviewing agents, let each agent know you are in the interview stage.
  • Decide whether you want to work without representation, dealing directly with listing agents, or if you want to hire your own agent.
  • If you decide to hire your own agent, interview agents to find an agent with whom you are comfortable.
  • Never, never, never interview two different agents from the same company.

Understand Agents Work on Commission

  • Most real estate agents are paid a commission. If an agent does not close a transaction, they do not get paid. Agents are highly motivated to do a good job for you.
  • Agents are not public servants and do not work for free. Do not ask an agent to work for you if you intend to cut the agent out of your deal.
  • Very few real estate agents work on salary and if they do, you probably don’t want them.

Keep Appointments and Be on Time

  • If you are running late, call and let your agent know when you expect to arrive. Just show respect.
  • Be respectful, use common courtesy, and don’t expect an agent to drop what they are doing to run out and show you a home. You are probably not that agent’s only prospect or client. And if you are, it’s not a good sign.
  • Do not make an appointment with an agent and then forget to show up.

Do Not Call the Listing Agent If You Are Working With a Buying Agent

  • Listing agents do not want to do the buying agent’s job. Let your buyer’s agent do their job.
  • Listing agents work for the seller, not the buyer. If you hire the listing agent to represent you, that agent will now be working under dual agency. Conflicts of interest may occur.
  • If a listing agent shows you the property, the listing agent will expect to represent you. Ethics prevent a listing agent from showing preferential treatment. If you ask a listing agent to do you a favor and try to discount the price, it’s compromising integrity, and most won’t do it.

Sign a Buyer’s Broker Agreement With a Buying Agent

  • Ask about the difference between an Exclusive and Non-Exclusive Buyer’s Broker Agreement.
  • If you’re not ready to sign with a buyer’s broker, do not ask that agent to show you homes. Otherwise, a procuring clause may pop up.
  • Ask your agent if they will release you from the contract if you become dissatisfied. If they refuse, hire somebody else. Your agent should also be respectful of your goals.
  • Expect to sign a buyer’s broker agreement. It creates a relationship between you and the agent and explains the agent’s duties to you, and vice versa.

Always Ask for and Sign an Agency Agreement

  • The best and most practiced type of agency is the single agency. This means you are represented by your own agent, who owes you a fiduciary responsibility.
  • By law, agents are required to give buyers an agency disclosure. This document varies across state lines.
  • Signing an agency disclosure is your proof of receipt. It is solely a disclosure. It is not an agreement to agency. Read it thoroughly.

Make Your Expectations Known

  • Set realistic goals and a time frame to find your home. Ask your agent how you can help by supplying feedback.
  • If you expect your agent to pick you up at your front door and drive you home after showing homes, tell them. Many will provide that service. If not, they will ask you to meet at the office.
  • Let your agent know how you want them to communicate with you and how often. Do you want phone calls, emails, text messages, IMs, or all of the above?
  • If you are displeased, say so. Agents want to make you happy. Don’t be afraid to speak up.

Do Not Sign Forms You Do Not Understand

  • Realize agents are not lawyers and cannot interpret law. Don’t ask agents to give a legal opinion, prefaced by the statement you are not asking for a legal opinion.
  • Do not feel silly for asking your agent to explain a form to you. It’s their job. Many forms are second nature to agents but not to you, so ask for explanations until you are satisfied you understand.
  • Try not to sign forms titled “Consent to Represent More Than One Buyer.” This is never in your best interest. But sometimes you can’t help it because your agent could work for a large brokerage. That brokerage could represent more than one buyer, not your agent.

Be Ready to Buy

  • Bring your checkbook. You’ll need it to write an offer because an​ earnest money deposit may be required to accompany your purchase offer. And please, be preapproved.
  • If you aren’t ready to buy, you don’t need a real estate agent. You can go to open houses by yourself and call listing agents for showings—but be honest. Say you are “only shopping.” Look at homes online, but don’t waste an agent’s time if you aren’t ready to act.
  • If possible, hire a babysitter to care for children who are too young to stay out all morning or afternoon touring homes.

Practice Open House Protocol

  • Do not ask the open house host questions about the seller or the seller’s motivation. Let your agent ask those questions for you. Your agent will probably use a different approach that works.
  • Ask your agent if it’s considered proper for you to attend open houses alone. In some areas, it’s frowned upon to go to open houses unescorted.
  • Hand your agent’s business card to the agent hosting the open house. Sometimes this agent will be the listing agent, but often it is a buyer’s agent also looking for unrepresented buyers. Announcing you are represented protects you.

With a little respect and courtesy on both sides, you and your agent can have a successful relationship and smoothly navigate the process of buying a home.

How to Know If You’ve Found the Right House

It’s normal to be cautious when you’re shopping for a home. After all, a house is a huge investment, and you’ll want to be sure that you’re making the best decision possible. How you’ll know that you’ve found the right property can vary by person. Some people have gut instincts. Others may need more convincing. Some indicators can tell you if you’ve found the right property for you.

It can be as simple as a strong tug because the place reminds you of another in your past where you felt happy, and you’ll realize that right off the cuff. But the tell—or tells—could be a bit more subtle.

    1. You feel defensive about the house. Maybe your agent points out a flaw or two or five and says, “There’s a stain in the kitchen sink” or “I’d update this, this, and this.” It could be a sign that you’re falling for the house if you find yourself getting defensive, sort of like the place is already yours. Just try to keep in mind how difficult (or not so difficult) it will be to remedy those flaws if you eventually find that you just can’t live with them.
    2. You want to go inside the house. Part of the excitement of looking at homes is not knowing which could be your new home when you pull up to the curb. Is it the one on the left, or does the place on the right strike your fancy? If it’s the house on the right and you like it better than the home on the left, that could be a sign. Something about this house appeals to you. First impressions are everything.
    3. You can’t wait to brag about it. Did you already snap a few photos and post them on Instagram? Did you text your mom about the house or hop on that group chat to tell your friends? You might have found the one if you’re feeling excitement after your first tour of the place.
    4. The house embraces you the moment you enter. You’ll know within about three seconds of entering whether the feels warm and comforting. Does it seem to speak to you? Does it invite you to explore? Does it feel like home? If so, it probably is.
    5. You don’t feel funny in the bathroom. Sometimes buyers feel so uncomfortable near a bathroom that they won’t walk into the room. They’ll stand outside, grab the door frame, and poke their heads in for a minute. This is your home if you walk into the bathroom and feel compelled to open the shower door or stroke the vanity marble.
    6. You begin to envision the furniture arrangement. This might be your house if you walk into the master bedroom and can immediately envision your bed against a particular wall. You’re already hooked if you find yourself thinking that the living room window is a perfect spot to put a tree come Christmas. Or maybe you can already see yourself driving up the street, heading home after a hard day at work. There’s a neighbor across the street throwing a frisbee to a dog, and it occurs to you that they might be people you’d like to know. Neighborhood counts as much as furniture placement.
    7. You want to stop looking at other homes. All the other homes you’ve been looking at no longer appeal to you. You compare each new property you visit to this one, and they’re not measuring up. The homes you had previously rated a “No. 2” have now fallen to a “No. 8” rating because they just pale in comparison to this one.
    8. You’re already planning to go back. If you got in the car, chatted with your spouse, and immediately planned your next visit to the property before you even left the driveway, you’re a goner. You want to see it at a different time of day or take your mom or best friend with you the next time. Ask your agent to send over the seller’s disclosures to make sure it’s in top condition. You should probably start discussing offers, too, because you’ve probably found your house.
    9. It checks the most important boxes. The property might not have every amenity on your want list, but it meets the basic requirements. It has the number of rooms and space you need. Maybe it doesn’t have a garage, and you realize in a flash of enlightenment that buying a house with a garage is really not that important after all. You realize you could build a garage if it turns out you really do want one. Sudden urges to be flexible are a good sign that you’re in the right place.

Can You Sleep on It?

It’s important to act fast once you’ve found that perfect property. It might still be tempting to “sleep on it,” but that could be a big mistake.

Shuffle your feet, lose your seat, as the saying goes. It’s almost a given that you’re not the only homebuyer looking for a house with your specific criteria. Someone else could buy that home right from under you while you’re in bed counting sheep.

Housing markets are often highly competitive, so time can be of the essence when you find a property you like.

Most of the time, you can trust your instincts. You should probably submit an offer if you like a property and it’s in your price range. Talk to your agent, your spouse, or a trusted loved one and get guidance if you’re not sure, but acting quick is critical.

Don’t Overlook the Basics

Maybe you don’t want to sleep on it. Maybe you want to call the moving company now. Do be realistic in your fervor to have the house.

Don’t be tempted to slide outside your budget and what housing expenses it can reasonably accommodate. Check out the schools if you have children, and consider how long it’s going to take you to commute to work. Will that grow old if the house is some distance from your place of employment?

A home is a long-term decision. Be passionate…but treat it like one.

First-Time House Buyers: Essential Tips

Buying a home can be nerve-racking, especially if you’re a first-time home buyer.

These tips will help you navigate the process, save money and avoid common mistakes.

Mortgage down payment tips

1. Research state and local assistance programs

In addition to federal programs, many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.

2. Explore your down payment and mortgage options

There are lots of mortgage options out there, each with its own combination of pros and cons. If you’re struggling to come up with a down payment, check out these loans:

  • VA loans Loans guaranteed by the Department of Veterans Affairs sometimes require no down payment at all.

  • Conventional mortgages They conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.

  • FHA loans Loans insured by the Federal Housing Administration permit down payments as low as 3.5%.

Making a higher down payment will mean having a lower monthly mortgage payment.

If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Use our calculator to determine whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.

3. Start saving for a down payment early

It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. But putting down less than 20% may mean higher costs and paying for mortgage insurance, and even a small down payment can still be hefty. For example, a 5% down payment on a $200,000 home is $10,000.

Some tips for saving for a down payment include setting aside tax refunds and work bonuses, setting up an automatic savings plan and using an app to track your progress.

Mortgage application tips

4. Compare mortgage rates

Many home buyers get a rate quote from only one lender, but this often leaves money on the table. Comparing mortgage rates from at least three lenders can save you more than $3,500 over the first five years of your loan, according to the Consumer Financial Protection Bureau. Get at least three quotes and compare both rates and fees.

As you’re comparing quotes, ask whether any of the lenders would allow you to buy discount points, which means you’d prepay interest up front to secure a lower interest rate on your loan. How long you plan to stay in the home and whether you have money on-hand to purchase the points are two key factors in determining whether buying points makes sense. 

5. Determine how much home you can afford

Before you start looking for your dream home, you need to know what’s actually within your price range. 

6. Get a preapproval letter

You can get pre-qualified for a mortgage, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. But as you get closer to buying a home, it’s smart to get a preapproval, where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you, and under what terms. Having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.

7. Check your credit and pause any new activity

When applying for a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.

So check your credit before you begin the homebuying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.

To keep your score from dipping after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.

House shopping tips

8. Pick the right type of house and neighborhood

You may assume you’ll buy a single-family home, and that could be ideal if you want a big yard or a lot of room. But if you’re willing to sacrifice space for less maintenance and extra amenities, and you don’t mind paying a homeowners association fee, a condo or townhouse could be a better fit.

But even if the home is right, the neighborhood could be all wrong. So be sure to:

  • Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.
  • Look at local safety and crime statistics.

  • Research nearby schools, even if you don’t have kids, since they affect home value.

  • Map the nearest hospital, pharmacy, grocery store and other amenities you’ll use.

    9. Make the most of open houses

    When you’re touring homes during open houses, pay close attention to the home’s overall condition, and be aware of any smells, stains or items in disrepair. Ask a lot of questions about the home, such as when it was built, when items were last replaced and how old key systems like the air conditioning and the heating are.

    If other potential buyers are viewing the home at the same time as you, don’t hesitate to schedule a second or third visit to get a closer look and ask questions privately.

10. Stick to your budget

Look at properties that cost less than the amount you were approved for. Although you can technically afford your preapproval amount, it’s the ceiling — and it doesn’t account for other monthly expenses or problems like a broken dishwasher that arise during homeownership, especially right after you buy. Shopping with a firm budget in mind will also help when it comes time to make an offer.

In a competitive real estate market with limited inventory, it’s likely you’ll bid on houses that get multiple offers. When you find a home you love, it’s tempting to make a high-priced offer that’s sure to win. But don’t let your emotions take over. Shopping below your preapproval amount creates some wiggle room for bidding. Stick to your budget to avoid a mortgage payment you can’t afford.

11. Hire the right buyer’s agent

You’ll be working closely with your real estate agent, so it’s essential that you find someone you get along with well. The right buyer’s agent should be highly skilled, motivated and knowledgeable about the area.

First-time home buyer mistakes to avoid

With so much to think about, it’s unsurprising that some first-time home buyers make mistakes they later regret. Here are a few of the most common pitfalls, along with tips to help you avoid a similar fate.

12. Not buying adequate homeowners insurance

Before you close on your new house, your lender will require you to buy homeowners insurance. Shop around and compare insurance rates to find the best price. Look closely at what’s covered in the policies; going with a less-expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim. Also, flood damage isn’t covered by homeowners insurance, so if your new home is in a flood-prone area, you may need to buy separate flood insurance.

13. Not saving enough for after move-in expenses

Once you’ve saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and any improvements you may want to make after moving in.

14. Passing up the chance to negotiate

A lot can be up for negotiation in the homebuying process, which can result in major savings. Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs? If you’re in a buyer’s market, you may find the seller will bargain with you to get the house off the market.

15. Buying a home for today instead of tomorrow

It’s easy to look at properties that meet your current needs. But if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. Consider your future needs and wants and whether the home you’re considering will suit them.

16. Not budgeting for closing costs

In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent’s commission. Calculate your expected closing costs to help you set your budget.

17. Not knowing the limits of a home inspection

After your offer is accepted, you’ll pay for a home inspection to examine the property’s condition inside and out, but the results will only tell you so much.

  • Don’t be afraid to ask your inspector to take a look — or a closer look — at something. And ask questions. No inspector will answer the question, “Should I buy this house?” so you’ll have to make this decision after reviewing the reports and seeing what the seller is willing to fix.

  • Make sure the inspector can access every part of the home, such as the roof and any crawl spaces.

  • Attend the inspection and pay close attention.

    • Not all inspections test for things like radon, mold or pests, so be sure you know what’s included.