Buying a home is one of the biggest purchases you will ever make so it’s normal to be nervous. As a first time homebuyer, the home buying journey can be a little stressful so we have compiled 4 tips to help you understand the process better and make it as smooth as possible.
Check your credit and get pre-approved
Before you take out a mortgage loan, it’s smart to know your position. Your credit is a major factor in whether you are approved or not. If you come across any errors, dispute them now and consider making large payments on any debts to bring your score up. If all looks well, it is time to get your pre-approval letter from your chosen lender. This will show that you are serious about buying a home and can give you an upper hand over buyers who have yet to get pre-approved.
Set a budget
Before you start looking for your first home, determine how much you can afford to spend. This includes the amount you are able to put down as a deposit and the amount you are able to put toward a monthly payment. Remember, there is more to the monthly payment than the mortgage amount, there is often PMI (private mortgage insurance) depending on your down payment, taxes and interest, and homeowners insurance (see below). Beyond these costs, set aside cash for any expenses that may pop up after you purchase your home, such as general upkeep and an emergency fund in case you need to pay for a repair. You may find that you need this extra wiggle room sooner rather than later.
Decide what you want/need
It may seem unnecessary, but writing down your wants and needs for your first home really helps. Do you want a single family home or will a condo/town home do? Do you plan to have children soon? You may want to consider your near future when determining the size and the neighborhood you buy in. List out the things you really need, like a fenced-in back yard or garage, and the things that you would like, such as a second bathroom or shorter commute. With this list in mind, you still need to be prepared to compromise.
Purchase homeowners insurance
Before you will be able to close on your home, your lender will require that you purchase homeowners insurance. It doesn’t hurt to shop around to compare rates so you can ensure you get the best rate for you. When comparing rates, make sure you are also comparing coverages because not every homeowners insurance policy is the same. Another thing to consider is separate flood insurance if you live in a flood plain, as this is not usually part of your regular homeowners insurance policy. Hippo insurance provides smart home coverage for modern lifestyles, which is why we have teamed up to bring you Safe Auto Group Agency Homeowners Insurance from Hippo. Learn more about what sets them apart and get a free quote today.
Changes to your home and neighborhood can change your premium so it’s important to review your policy every year. For example, if you add on to your home, you will want to increase your coverage to adjust for the added risk of loss. On the reverse, if you have added a fence or alarm system, you may be eligible to decrease your premium due to a decreased risk.