The Essential Things to Tick off Your Checklist as a First-Time Homebuyer

The more you pay upfront, the lower your mortgage will be.

Image courtesy: Kindel Media

(SALEM, Ore.) - It’s difficult to describe everything that goes on in your head when you’re buying your first-ever home.

You likely feel stressed yet simultaneously excited. You’re worried, hopeful, anxious, and inspired. Above all else, you’re probably confused.

Even when the real estate market isn’t as dynamic and volatile as it currently is, buying a new home can quickly leave your head spinning.

There are countless things you need to keep in mind and millions of pages of paperwork to go through. It’s easy to overlook something of importance and make a mistake.

To avoid costly errors, take a look at this complete checklist for first-time homebuyers that will help you stay organized and efficient.

Make sure you have enough for a down payment

In all likelihood, you won’t be able to pay for your house out of pocket – you’ll need a mortgage. However, even with a mortgage, you’ll need to provide a down payment up front.

Depending on your credit score, you’ll need to have at least 20% to 25% of the entire value of the home. In some instances, 15% would be enough if you have an excellent credit score that’s over 740.

Still, even if a lender accepts just 15%, it’s better to save up more for your down payment. After all, the more you pay upfront, the lower your mortgage will be and, thus, the lower your interest rates.

Assess your debt-to-income ratio (DTI)

So, it’s always a good idea to calculate your DTI beforehand.

In a nutshell, DTI is your monthly income that goes toward paying off your debt – this includes credit card payments, student loan payments, child support, and more. Most commonly, mortgage lenders will not consider your living expenses, groceries, utilities, and similar when calculating your DTI.

As a general rule of thumb, most lenders will consider you a risky borrower if your DTI is above 43%, and they might refuse to approve you for a mortgage.

Get pre-approval from a mortgage lender

Primarily, you’ll want to research the best lenders in your area and familiarize yourself with their terms and conditions. Then, you’ll select the best option for your needs and start the pre-approval process.

Here, the lender will look into your credit history, perform a financial check, and determine whether you meet the general eligibility criteria, specifying the mortgage amount you could qualify for. This information can help you find a home that suits your budget more easily.

More importantly, the information will show the sellers that you are a serious buyer who won’t waste their time. Keep in mind, however, that even with the pre-approval, you could still be denied a mortgage.

Avoid novice mistakes

You need to carefully inspect the condition, location, features, and amenities. Above all else, you need to consider how all of those will affect you later on.

An affordable home with an outdoor pool might seem appealing initially, but you’ll have to cover the expenses of the pool’s upkeep for as long as the property is in your name.

So, the biggest mistake you must avoid is taking any property you come across at face value and making an emotional purchase. Consider everything that comes with the property – the condition of the yard, the neighborhood, how busy the street is, and more. Then, consider how it will affect you down the line.

Go through the inspection and appraisal process

During the inspection, you’ll learn about all the big and small issues that the property may have.

A new paint job might fool you into thinking that a home is in excellent condition, but only an inspection can reveal whether the paint covers rotting walls, excess moisture, and mold.

On the other hand, you might believe a house is not worth investing in because it looks old or worn down, but an inspection might prove to you that it’s a worthwhile investment, requiring only minor cosmetic upgrades.

During the appraisal, you’ll learn a home’s actual fair market value, ensuring that you don’t offer more than it’s worth.

Final thoughts

Go slow and steady, and don’t rush to make a purchase as quickly as possible – make an informed decision and heed the advice of your real estate agent.

Source: Salem-News.com Special Features Dept.