It feels like yesterday that I sent my husband an email with a Zillow link saying, “this house is huge but hideous.” Truth is, that was nine years ago! Time flies when you’re doing remodel projects and living life. My husband bought the first home we lived in but the second was a joint decision and the first home I had ever had a part in purchasing. It was a great deal on a fixer upper and while it’s still not perfect by any means, I love it to pieces. If you’re thinking of buying a new home, here are a few tips to help you know where to begin.
1. Start saving right away.
When calculating how much money you need to buy a house you’ll want to consider the expenses like the down payment, closing costs, and also moving expenses. I didn’t realize the budget for a local move would be so much. It was probably $1,000 just for the boxes, wrapping paper and plastic wrap, tape, moving truck, and other items needed. We had a lot of friends volunteer and help us move and without that it would be even more expensive. Cross state moves would be even more expensive. You’ll also want to plan ahead for any home repairs you’ll want to do right away or any furniture you’ll need to buy. Of course, some items can wait but if they’re essential, you’ll want to add them to your list of expenses.
2. Decide how much home you can afford.
This is a hard one to judge by yourself so a house affordability calculator might come in handy. They will help you settle on a price range based on your income, debt, down payment, credit score, and where you plan to live. I remember when we were doing this and we had to be honest about what we could pay monthly. It’s easy to plan to scrimp and save to have the house of your dreams and that may be feasible for a few months but it would get old quickly. It’s good to have some buffer room when it comes to finances, at least that’s my opinion anyway. I’m not a financial expert, just a mom sharing her experience.
3. Check your credit and brush it up if necessary.
Mortgage lenders will use your credit score to base what interest rates they’ll offer you. The higher the score, the lower the interest rate. People have written extensively about how to raise your credit score so I won’t elaborate on that here. I will link here to a quick overview on how to raise your credit score.
4. Explore mortgage options.
A variety of mortgages are available with different eligibility requirements.
- Conventional mortgages are the most common type of home loan and are not guaranteed by the government. Some conventional loans targeted at first-time buyers require as little as 3% down.
- FHA loans are insured by the Federal Housing Administration and allow down payments as low as 3.5%.
- USDA loans are guaranteed by the U.S. Department of Agriculture. These are for suburban and rural home buyers and usually require no down payment.
- VA loans are guaranteed by the Department of Veterans Affairs. These are for current military service members and veterans and usually require no down payment.
You can also choose to get a 30 year term or 15 year term mortgage. Most home buyers opt for a 30-year fixed-rate mortgage. This means that they have 30 years to pay it off and the interest rate stays the same. A 15- year loan typically has a lower interest rate than the 30-year one but the monthly payments are larger. When you can, always opt for the 15 year.
I hope you’ll come back for the rest of this series to learn more about mortgage selection tips, what to have your home inspected for, and other home shopping tips to consider before making an offer.