For many people, the idea of owning a home is the fulfillment of a dream, a step toward putting down roots, and an investment in the future. But it also means dealing with costs and commitments unlike anything you’ve ever done before. This is likely the largest purchase of your life—and a mistake can have far-reaching consequences. But while the process can be intimidating, it doesn’t need to be scary. The more you know about buying your first home the better you can be comfortable along each step of the process. You can end up with a home you love with terms that don’t keep you up at night.
Here are 10 ways to get you on track to buying that first home.
1. Set a Budget
The first step is to figure out what type of home you can afford. A good rule of thumb is to keep your monthly spending on housing to around 30 percent of your pre-tax income, but everyone has different priorities on how to spend their money. Go ahead and write it out—what money is coming in and what money is going out.
Remember, buying a house means more than just the cost of the house: Interest on your loan, taxes, and insurance are all a part of your mortgage payment each month. Once you know how much you are comfortable spending, it’s easier to start looking for homes you can realistically afford.
2. Save for a Down Payment
In addition to a monthly mortgage payment, you’ll usually need to come up with a down payment. It’s common to shoot for 20 percent, but that’s often not realistic, and loans are available with much less down. Keep in mind that there are costs to coming to the table with less money upfront, such as having to pay for private mortgage insurance and having a more substantial monthly payment. Wyndham can work with you to help you stick to a budget, but having a larger down payment gives you more options.
Think of creative ways to save money over the course of a year before you start the home buying process. Set aside your tax refund, bonuses at work, or overtime pay. Create an automatic savings plan with your bank. Go through your budget and see if you can find unnecessary recurring expenses, and it’s a good excuse to go through your old stuff and see if there’s anything of value that you no longer need.
3. Check Your Credit Score
The better your credit score, the better the rate you can get on a mortgage. Check your report for free with websites like Credit Karma or Credit Sesame, and many credit card companies offer for the service free of charge as well. If you notice any problems, get them corrected before you start the home buying process. Pay any past-due accounts or bills that have gone to collections.
4. Get Pre-Approved for a Mortgage
It’s a good idea for first-time buyers to get pre-approved for a mortgage before shopping around. It will give you the peace of mind that you’re in the right ballpark when it comes to housing prices. Wyndham Capital’s Priority Purchase Program gets you fully underwritten and fully approved, so you don’t miss out on that home you love. But just because you’ve been pre-approved for a certain amount, that shouldn’t necessarily be your ceiling. Go back to your budget and see how that fits into your plans.
5. See if You Qualify for First-Time Home Buyer Programs
One advantage of being a first-time home buyer is that programs are set up by the government to help you get a reasonable first mortgage, which Wyndham can set you up with. Buyers who meet specific income criteria can get lower-interest loans and even down-payment assistance options. The Federal Housing Administration provides loans with smaller down payments and lower interest rates for those without perfect credit; loans for veterans sometimes can be obtained without a down payment.
6. Hire an Agent
It’s a good idea to have someone looking out for your interests, and an agent does just that. In most cases, the seller has negotiated the commission that is paid for the property. If you don’t have an agent, that means the listing agent can keep the entire commission. Your agent will help you find a home and walk you through every step of the process. They also have access to listings before the general public and the experience to understand what prices you can expect in various neighborhoods.
7. Be Realistic
Perhaps we can blame HGTV on this one, but too many first-time home buyers go into the process expecting to find their dream home. If you can afford that, great, but for most people, a first home comes with some compromises. Decide what’s most important to you in advance, and stick to your guns on those things. Remember, you can put in a lot of sweat equity on your own to make cosmetic changes. If you’re too rigid, you may spend months looking for something that will never be there.
8. Don’t Fall in Love With a House
This is easier said than done, but remember that lots of things can go wrong in the home buying process. You can be far apart from the seller on price, the house could be taken off the market, or a housing inspection can find dangers that make the property unaffordable. You may think you’ve found the perfect house, but don’t go all-in until you get all the details.
9. Budget for Closing Costs and Moving
Yes, you’re committing to hundreds of thousands of dollars when you buy a house, but you also need to remember that the there are additional costs that are coming when you actually make the purchase. Closing costs are what you pay for the services that are necessary to make the final sale, including taxes, insurance requirements, and fees. You can shop around for some things, and if you’re lucky, you can negotiate that the seller pay some of these costs for you. But make sure you have some cash when you close on your home—as you’ll also have moving expenses to cover as well. There are other expenses as a first time home buyer that might shock you.
10. Do a Home Inspection
While not always legally required, a home inspection is always a good idea, and most mortgage companies require it before moving ahead with the loan. The home inspector will look at all the mechanical systems of the house, as well as making sure it’s structurally sound. If it needs a new roof or furnace, you want to know before signing on the dotted line.
Not all home inspections are the same, and here’s where it helps to have a good real estate agent. He or she can recommend what services are necessary for the area: Do you need to do a radon test? Does the property have its own well and septic system, and are they in working order? Is there a history of flooding in the area? Additional tests can mean added costs, but the seller will often cover them to get the deal done.