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The housing market right now is WILD, but you still want to buy a house.
How do you navigate all this? What are some tips for first-time home buyers?
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How do you navigate all this? What are some tips for first-time home buyers?
// THREAD //
1. Don’t buy if you’re not going to be there long-term.
If it's not likely you'll stay in the house at least 5 years, renting might be a better choice.
Closing fees will generally eat up any profit you might see from an increase in the value of the house during that time.
If it's not likely you'll stay in the house at least 5 years, renting might be a better choice.
Closing fees will generally eat up any profit you might see from an increase in the value of the house during that time.
Also, renting is way less hassle and a lot more convenient in the short-term, in my opinion.
If you are curious what the renting vs. buying situation looks like in your area, check out a calculator like this one:
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator
If you are curious what the renting vs. buying situation looks like in your area, check out a calculator like this one:
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator
2. Clean up your Credit.
To qualify for the best mortgage rates, you—and your spouse or anyone who’s buying the house with you—should make sure your credit scores are at least 620, ideally higher.
If your credit score isn’t so hot, work on raising it. Lots of ways to do it.
To qualify for the best mortgage rates, you—and your spouse or anyone who’s buying the house with you—should make sure your credit scores are at least 620, ideally higher.
If your credit score isn’t so hot, work on raising it. Lots of ways to do it.
3. Work with a real estate agent.
Buying your first house is one of the biggest financial decisions of your life.
It pays to have someone in your corner who can walk you through the process, answer your questions, and help you negotiate.
Buying your first house is one of the biggest financial decisions of your life.
It pays to have someone in your corner who can walk you through the process, answer your questions, and help you negotiate.
4. Understand your down payment options.
Traditionally, down payments for homes have been 20% of the selling price.
Given that the median price for a home in the US right now is $340,000 dollars, that would be $68,000.
Yikes!
Traditionally, down payments for homes have been 20% of the selling price.
Given that the median price for a home in the US right now is $340,000 dollars, that would be $68,000.
Yikes!
If that seems crazy-impossible, don’t despair.
These days, the average homebuyer puts down closer to 6%.
They do is by paying private mortgage insurance (PMI) which will be rolled into your monthly payments until the amount you’ve paid on your loan is 20% of the home’s value.
These days, the average homebuyer puts down closer to 6%.
They do is by paying private mortgage insurance (PMI) which will be rolled into your monthly payments until the amount you’ve paid on your loan is 20% of the home’s value.
5. Check out programs for first-time homebuyers.
-FHA loans: Let you buy with a low down payment (even with a not great credit score)
-USDA loans for buying rural property
-VA loans for military veterans
-Fannie Mae/Freddie Mac: Allow first-time buyers to buy with only 3% down.
-FHA loans: Let you buy with a low down payment (even with a not great credit score)
-USDA loans for buying rural property
-VA loans for military veterans
-Fannie Mae/Freddie Mac: Allow first-time buyers to buy with only 3% down.
The catch with these programs is that since they require less/no down payment, they could end up costing you more over the life of your loan.
It is definitely worth checking them out. Just be sure to read the fine print and do the math to see what the long-range costs will be.
It is definitely worth checking them out. Just be sure to read the fine print and do the math to see what the long-range costs will be.
6. Shop around for mortgage rates.
Mortgages are created equal. Some lenders will offer you better rates/better terms than others.
Take the time to get quotes from at least three lenders, and be sure to price out how much each loan will cost you over the term of your mortgage.
Mortgages are created equal. Some lenders will offer you better rates/better terms than others.
Take the time to get quotes from at least three lenders, and be sure to price out how much each loan will cost you over the term of your mortgage.
7. Get preapproved.
Once you’ve found the best rate, get a letter of preapproval from your lender.
This way, if you find the house of your dreams tomorrow, you’ll be able to bid on it right away.
Once you’ve found the best rate, get a letter of preapproval from your lender.
This way, if you find the house of your dreams tomorrow, you’ll be able to bid on it right away.
8. Figure out how much you can REALLY afford.
Once you get pre-approved, you may find that they’re willing to lend you a whole lot of money! Usually WAY too much money.
A good rule of thumb is to keep your mortgage payments to about 25% of your monthly take-home pay or LESS.
Once you get pre-approved, you may find that they’re willing to lend you a whole lot of money! Usually WAY too much money.
A good rule of thumb is to keep your mortgage payments to about 25% of your monthly take-home pay or LESS.
9. Get a home inspection.
This is CRITICALLY important. Nothing sucks the fun out of your new house, like a main sewer line repair bill of $15,000.
Inspectors usually cost $400-500 but can end up saving you THOUSANDS.
This is CRITICALLY important. Nothing sucks the fun out of your new house, like a main sewer line repair bill of $15,000.
Inspectors usually cost $400-500 but can end up saving you THOUSANDS.
10. Budget for closing costs.
You’ll be responsible for a whole slew of expenses like:
- Attorney fees
- Pest inspection fees
- Appraisal fees
- Escrow fees
- Title insurance expenses
- Lender fees
You’ll pay between 2%–5% of the purchase price in closing costs.
You’ll be responsible for a whole slew of expenses like:
- Attorney fees
- Pest inspection fees
- Appraisal fees
- Escrow fees
- Title insurance expenses
- Lender fees
You’ll pay between 2%–5% of the purchase price in closing costs.
Final thoughts:
The market is wild right now, so it can feel like the pressure is on to buy a home quickly before they’re all gone.
But it pays to slow down, take your time to really understand your options, & lay the groundwork.
You want to enjoy your house without stress.
The market is wild right now, so it can feel like the pressure is on to buy a home quickly before they’re all gone.
But it pays to slow down, take your time to really understand your options, & lay the groundwork.
You want to enjoy your house without stress.
If you found this thread helpful, then please retweet the first tweet so more people will see it.
Also, you will probably enjoy my video on this topic on my YouTube channel. Go give it a watch:
Also, you will probably enjoy my video on this topic on my YouTube channel. Go give it a watch:
