Currently, the front door is wide open for first-time homebuyers! As rents rise faster than incomes, millennials are now entering the market, and on a buying spree. Since purchasing a home is a significant, life-impacting investment we outlined 10 money saving tips for 1st-time homebuyers below. You are more than welcome to share these tips with others who you may know are 1st-time home buyers. Everyone enjoys saving money!
Money Saving Tips For First-Time Home Buyers
- Know Your Contingency Time Periods: A mortgage financing contingency clause protects you. For example, if you were to become unemployed, and the loans fall through or the appraisal prices comes in over the purchase. If either of these scenarios occurs, the buyer gets the money back he/she used to secure the property (aka, “earnest money”). If you don’t have this clause you can potentially lose the money, and still be held accountable for purchasing the house.
- Pay for an Inspection: Did you know that 8 out of 10 buyers get an inspection prior to closing? Always check the age and condition of the premium items with a home you are interested in. Such as the furnace, roof, windows, and appliances. Typical repairs for these premium items could cost you between $5-15k a piece.
- Closing Costs: A lot of first-time homebuyers forget about the closing costs that are involved in purchasing your new home. The amount of closing costs can range depending on the loan and purchase price. It may come as a sticker shock upwards of bringing in an additional $5k-$10k. We can strategically write in an offer to request a closing credit that the seller will credit through escrow. This way we can keep some extra funds in your pocket!
- Review All Expenses: You want to factor the following expenses before you sign on the dotted line:
- Purchase Expenses
- Down Payment
- Closing Costs
- Appraisal Fee
- Home Inspection
- Annual Expenses
- Mortgage Payment
- Homeowners Insurance
- Private Mortgage Insurance
- Purchase Expenses
- Inquire about HOA Fees & Rules: The range for such fees can vary from $0 to 400 per month, if not more. Ask about what is included in the HOA fees. Often times trash, water, and insurance could be included in your HOA monthly dues. Inquire on how often they raise the specific communities HOA and if there are any litigations or lawsuits in the community. If you have a pet make sure your particular type of animal will be able to reside in your new home. Don’t worry though, that is what I am here for. We will review all these items together in what is called the HOA CC&R’s.
- PMI (Private Mortgage Insurance): If your down payment is less than 20%, you may have PMI. The average amount is .85% of your loan amount. Unfortunately, PMI isn’t tax deductible. However, there may be other loan products that could eliminate PMI. Such as a 3% down conventional loan with no PMI. Talk with a local Lender to discuss your best options for your goals. Remember it is always FREE and under no obligation to talk to a local reliable Lender to qualify for a pre-approval.
- Apply Conservative Income Estimates: When determining the mortgage amount you’re able to afford, base it without bonuses or expected salary raises. “You want to own the house, don’t let the house own you.”
- Apply the 30% Rule: Don’t spend more than 30% of your monthly income on your mortgage payment. 1st-time homebuyers fall into this trap. They fall in love with their dream home and exceed their budget. This results with minimal if not zero dollars to allocate toward any home improvements, unexpected car maintenance, and emergency medical bills.
- Select the Right Mortgage Term: This comes down to deciding on a 30-yr vs. 15-yr mortgage, fixed rate vs. adjustable. It is a good idea when considering this decision, to not only factor the cost, but be honest with yourself about your short-term, and long-term goals. A good place to help you assess the terms is right here and to talk with a qualified reputable lender.
- Grants and First-Time Homebuyer Programs: If you need down payment assistance or help with closing costs there may be a solution for you. Read the various programs to see if you may qualify for any of the first-time homebuyer programs. If you do let’s get you in touch with a lender to walk you through the pre-approval process.
Homebuying can be an exciting life’s moment for the first-time homebuyer, but it can also be nerve-wracking, and costly. So please make sure you take into consideration the tips listed above so the experience can be enjoyable, and not financially painful. If you are a 1st-time homebuyer and need any help with buying your first home, please contact me. Also, learn more tips, not mentioned here in our previous posts.