There are probably so many questions running through your head when you’ve made the decision to stop renting and buy a house. But, where do you start? When is the perfect window to contact a realtor? How do I apply for a mortgage? How much money do I really need to save?
Before you get too overwhelmed, take the time to read through these ten tips for saving for your first house.
1. Stay calm
Okay, the top agent insights indicate that there’s an inventory shortage in many markets, don’t panic! There will be houses out there for you to consider. If you can’t find a detached home, perhaps consider a condo or townhouse.
2. Pros and cons
Ask yourself if you really want to be a homeowner. There are a lot of things that come along with homeownership that you don’t have as a renter. For example, you have to worry about property taxes, sewer, trash, and maintenance. We recommend making a list of pros and cons then really think about whether this is the right move for you.
3. Save money NOW
If you’re buying a house, you should strive to have a decent down payment (20% is ideal). If you don’t have that much saved, you can apply to programs that offer down payment assistance or little to no down payment at all. No matter what, save as much as you can as soon as you can. The more money you have, the better you’ll be. Remember that you will need money even after purchasing a house to make it more livable. Who knows, you might have to renovate the kitchen or bathroom by hiring the services of firms like FSBD (you can learn more here about them). And for that, you would need money. So, start saving as soon as possible!
4. How much house can you realistically afford?
When we look at our finances, we like to think we can afford a certain amount, but when it comes time to apply for a loan, it can be a huge shock when you get the real figure. You can use a home affordability calculator and that’ll be a good estimate to go off of.
5. Budget like you already own a house
If you want to see how well you can manage your finances as a homeowner, try budgeting like you already own a home. For example, if your rent is $1,200 a month and your mortgage will be $1,600, that extra $400 in savings. The same can be said for your other bills, which may be higher in a house! For example, you should keep in mind that once you move in, you may need to do some renovations before it is livable. For example, if your sewer pipes are broken, you may need to look into sewer repair service systems (in which case trenchless sewer repair works better), kitchen slab repair, or lighting, among other things.
6. Be aware of your credit and any changes
Your credit is your gateway to being approved for a mortgage – so keep a close eye on it! Don’t make any large purchases prior to applying for a loan and monitor your credit report for any discrepancies. If you have to, seek help from a credit repair company if your score needs help.
7. Familiarize yourself with mortgage options
There are a few mortgage options out there and you’ll want to find a lender that will work with you. We recommend doing a little bit of research and checking eligibility requirements before speaking to a lender. You don’t want to get our hopes up that you’ll qualify for one loan but you get the news that you, in fact, do not.
8. Don’t forget to save for closing costs
Not only do you need to save for a down payment, you need to save for closing costs as well. Closing costs are usually between 2% to 5% of the purchase price. Fortunately, you can negotiate with the seller to see if they’ll pay part or all of the closing costs. You may even qualify for down payment assistance.
9. Find a top rated real estate agent
You don’t want to choose just any old real estate agent – you want a top rated agent who knows their stuff! Ask friends or family if they have any recommendations and if they don’t, you can check out online reviews or even interview a few agents.
10. It’s okay to not spend the entire loan
You may be approved for x-amount of money, that doesn’t mean you have to spend all of it. We recommend spending 80% or so. That will give you a bit of wiggle room in case you want to do some renovations or just have a bit of a cushion.
It’s understandable that you’d feel overwhelmed when you’re trying to save for your first home – there’s just so much to think about! These tips are just a jumping-off point. Your real estate agent will be there for you if you have any questions along the way, so don’t hesitate to ask them for help!
