FLORIDA TITLE INSURANCE
Top tips for first-time homebuyers SOURCES: https://artesiantitle.com/ https://www.bankrate.com
Buying a house for the first time might seem like an unattainable goal as U.S. home prices soar and affordable homes are in short supply. With planning and discipline, though, that goal might not be as unreachable as you think. First-time homebuyers who need to whip their finances into shape may have more success if they start planning early. Here are some smart money moves you can make today to get on track. First-time homebuyer tips Check your credit (and work on it). Determine a budget. Get your assets in place. Shop multiple lenders. Hire a real estate agent. Put contingencies in writing. Keep the status quo in your finances. 12+ months out Check your credit (and work on it) The first thing potential first-time homebuyers should do is pull their credit report and scores to see where they stand, says Ralph DiBugnara, president of Home Qualified Lending in New York City. As you check your credit scores and reports, look for any errors or past-due accounts that might have gone to collections. These liabilities can create roadblocks when you apply for a home loan. If anything is amiss, contact the creditor to see if you can sort it out, DiBugnara says. Use myBankrate to keep tabs on your credit for free. You can get a free copy of your credit report each year by visiting annualcreditreport.com. Don’t just check one credit bureau’s report; you could get a false sense of confidence. Instead, get information from all three agencies, and keep periodic tabs on your activity, DiBugnara advises. “If you’re not already signed up for a credit monitoring service, this is a good time to do it,” DiBugnara says. “You’ll get notified if your credit score changes, or if there’s suspicious activity on your report.”
6 to 8 months out Determine a budget When you’re buying a home for the first time, setting a budget is key, says Lauren Lindsay, director of financial planning with Personal Financial Advisers in Covington, Louisiana. “Look at your monthly spending to see what you can afford for principal, interest, taxes and insurance,” says Lindsay. Factor in maintenance and emergency savings for repairs, too. “One lesson from the [housing] crash: Just because the bank approves you for a certain amount it doesn’t mean you can afford it.” In addition to household expenses, consider other financial obligations that lenders won’t see on your credit report. Your cell phone, utility, daycare/tuition, grocery and car insurance bills are other fixed monthly expenses that factor into how much house you can afford. Don’t max out your monthly income on mortgage payments and wind up house poor, or you might regret it later, says Steve Sivak, a certified financial planner and managing partner of Innovate Wealth in Pittsburgh. Don’t forget that homeownership comes with unforeseen expenses. 3 to 4 months out Get your assets in place When you shop lenders soon, they’ll look at your bank statements from the last two months. If you plan to make any deposits into your checking or savings accounts from other assets, do it before that 60-day window. Otherwise, you’ll have to source where the money came from in detail, DiBugnara says. It’s best to avoid opening new credit accounts or loans, or racking up debt, from this point on, he adds. 2 months out Shop multiple lenders Things are getting real. At this point, you should know what monthly payment you’re comfortable with, what areas you can afford, and how much you can put down. Now it’s time to shop for a mortgage. Compare mortgage rates from different types of lenders and assess whether this is a good time to lock in your rate; look at loan fees and customer service. Preapprovals usually expire after 90 days, DiBugnara says. Keep in mind that you can shop around for some third-party services such as title and homeowner’s insurance. “In this market, you can find competitive rates and service, but you want to pay close attention to lenders’ responsiveness and communication,” DiBugnara says. If you’re a first-time homebuyer with significant debt or so-so credit, you may want to apply for a mortgage preapproval even earlier to zero in on issues to fix sooner rather than later.