Buying your first home can be a confusing process and seem overwhelming if you don’t know where to start. But don’t worry! First time home buyer education is key in understanding real estate jargon, mortgages, and things like closing costs. There are plenty of steps you can take that will help you relax as you make your final decision. Be sure to do your research from trusted sources and set yourself up for success financially before jumping into the process!
Save for a Down Payment
Typically, a down payment is 20% of the home’s cost. You can choose to put less money down, but your monthly mortgage payments will increase due to a higher interest rate. Many homebuyers recommend putting down 20% because it will lower your monthly mortgage payments. However, there are options such as mortgage gifts and Private Mortgage Insurance (discussed later in this post) that can help you if you do not have the full 20% saved.
Understand Your Credit Score
Having a high credit score is very important when it comes to buying a home. Your credit score helps determine if you qualify for a loan, what kind of loans are available to you, and your interest rate. When your credit score is high, your interest rate will typically be lower. In turn, having a lower interest rate can help you save money over the course of your mortgage.
Online Courses and eBooks
There are numerous free or low-cost first time home buyer education resources that can help you through the home buying process. These typically cover every aspect from interest rates to mortgages to things to look for in a home. eBooks are typically written by influencers and people in the industry who have years of experience. Be sure to check into the source of the eBook before downloading to ensure it is from a trusted source.
Prequalify for a Mortgage
If you don’t want to lose your dream home, you should secure your finances before placing an offer. Before you put in any offers on a house, you should get prequalified for a mortgage. Being a prequalified buyer makes you more appealing to sellers, especially when there are several offers on a house. Not only will sellers feel you are more trusting, they will also see that you are ready and able to buy a house.
Private Mortgage Insurance
Many home buyers find it difficult to save enough money for their down payment. Private Mortgage Insurance (PMI) helps you get a mortgage without saving the full 20% down payment. It also protects your lender from losing money, in the event that you cannot make your payments. Your PMI is added to your monthly mortgage payment, and you continue to pay it until you reach that magic 20%. PMI will increase the interest rates of your loans, but it makes getting your dream home easier. And once you reach your 20% down payment amount through PMI, it can be stopped and will be removed from your monthly payments.
Once you’ve increased your first time home buyer education and you understand some of the basics, you can prepare yourself, and plan for the future. By studying resources and taking the few first steps, you’ll buy your first home in no time. For more first time home buyer education, download our eBook now!