First home buying is always overwhelming. Thinking about buying your first home can be a little scary. Even when you decide to buy your first home you might not be sure where to begin. These tips for first-time home buyers will help you navigate the process from start to finish.
For first-time buyers the process of getting through the property ladder feels overwhelming and out of reach. First home buying might feel out of reach, but you need to start with it taking smaller steps at first. Here we simplify the essential first steps and set out what you need to do and what help you can access in your first home buying.
Get financially stable for your first home buying
Before planning for your first home buying it is important to look at your financial health. Conduct a serious audit of your finances. You must be prepared for both the current expenses as well as the purchase. The auditing of your finances will make you familiar with your finances, whether you can proceed with your first home buying or not.
It is not a good choice to proceed with the first home buying before you create an emergency fund. First home buying comes with considerable expenses. These payments include the closing costs and the down payment. Apart from these expenses you also require money for emergency funds.
Keeping your savings accessible is no doubt one of the biggest challenges in your journey of first home buying. In order to keep up with your finances, here are some tips you can follow:
- Keep a check on your credit score and manage it.
- Audit your finances and look at whether you can afford a home or not.
- Debt-to-income ratio (DTI) must be understood.
- Plan to save for down payments.
- List things for your first home buying.
- Look whether you qualify for first home buying or not.
Recognise who you are
Nothing like a citizenship, green card, or any visa is required for your first home buying. But what is required is:
- A valid foreign passport, and current photo identifications, can be a driver’s license, to prove who you are.
- An Individual Taxpayer Identification Number is assigned by the Internal Revenue Service to foreign nationals who need to file income tax returns.
Property ownership is not determined based on immigration or visa status, but there are rules about how long you can stay, so in case you are not a citizen, you can check out U.S. visa requirements before you purchase.
Plan to get a mortgage
If you cannot save money for your first home buying, this way you can become a homeowner and start building equity. The U.S. loan market offers many safe, affordable mortgages also including the ones that allow Muslims to buy a home without violating Islamic laws against paying interest.
For this, you must learn to establish a good credit score:
- Open U.S. bank and credit card accounts.
- Report all your income on your tax returns. Lenders make use of these tax returns to verify your income and make a decision on how much you can afford to borrow to buy a home.
While applying for mortgages, you will come across major banks with global operations that have prior experience working with foreign buyers and tend to have a process for verifying credit established in other countries.
Work with a Certified International Property Specialist
Make sure to choose a realtor who is certified by an International Property Specialist (CIPS) and has prior experience, training, and education to help you in your first home buying. These specialists can help you protect your interests as well.
Make your specialists familiar with the process of first home buying in your country.
Tell your real estate agent how the first home buying process works in your native country, and ask if there are any differences from the native countries. The differences can even be seen within the U.S. in different localities. The customs followed for buying and selling a home can vary from area to area.
Knowing first home buying in your place, the costs that come with it, the negotiation processes etc. can help you relieve some stress that might build up in your first home buying journey.
Stick to your budget
First home buying can lead to a lot of financial stress throughout the journey. Based on your budget, set a price range and then stick to it. If you borrow from someone, the lender might probably offer more than what is required or affordable. You might come under pressure to move outside of your comfort zone just to beat another buyer’s offer in the bidding war.
There is a lot of competition in the market, consider properties below your price range that you have set so that there is a space for bidding. In a buyer’s market, you may come across homes that are above your expectations. In such cases, your real estate agent can help you suggest a range for your offering price.
Don’t skip the home inspections
A thorough inspection of the structure and mechanical systems of your home is important. Professionals look for problems that are actually serious, so to them, you can make an informed decision related to your first home buying.
Consult your real estate agent regarding the type of inspections you need in your first home buying. Ensure that the inspectors get access to every part of the house including the rooftop and other crawl spaces.
However, you don’t need to attend the inspection, but it will be great if you are present there. This way you can simultaneously put up questions regarding the property. In case you are unable to attend the inspections, the reports can help you with everything that you are unclear about.
Negotiate with the seller
Considering the condition of the house, you can ask the seller to make the payment for the repairs before you buy the property. If not the whole amount you can negotiate and convince him to at least lower the cost of repairs. This way you can save a lot of money which you may require in future.
The negotiation will only work as per the local market. It is a bit difficult to bargain when there are more buyers than homes for sale. Your real estate agent can help you develop an understanding of the local market and strategize accordingly.
Buy adequate home insurance
Before closing the deal, your lender will require you to buy homeowners insurance. This insurance saves costs for your repairs or replaces your home and belongings in case they are damaged by an accident that is covered in the policy.
Homeowners insurance also provides liability if you are held responsible for any sort of injury or accident. You must buy enough home insurance to cover the costs of rebuilding the home if it is destroyed.
An umbrella policy is an insurance you can look up to. It covers your home, cars, and other major assets.
Consider shared ownership
First home buying becomes easier when you only buy a part of it. Hii=ousing associations and private developers offer shared ownership schemes that permit you to buy a proportion of a property and then rent the rest remaining. Later, when you feel like affording the property you can purchase it.
Shared ownership, however, must be carefully done. Do your research and then make a decision. Shared ownership properties are usually on lease for which you have to pay a monthly service charge as well as contribute to the major maintenance works. Understanding is really important because the process of buying more shares can be quite complicated.
Main Costs of First Home Buying
Conveyancing fees
You will normally need a solicitor or conveyancer to help you buy the property.
Expect to pay between £500 and £1,500.
Land Registry fee
Your solicitor might include this fee as part of your conveyancing package but it’s worth checking.
Fees will vary depending on the purchase price between £90 and £140.
Stamp duty
Stamp duty is what everyone has to pay when they buy a home above a certain price or threshold. You pay extra depending on how expensive the property you want to buy is.
This stamp duty calculator tells you how much you have to pay. First-time buyers usually have a higher stamp duty.
Mortgage fee
Sometimes also known as an arrangement fee. This is the cost the lender will charge you for setting up the loan.
This fee is usually between £1,000 and £2,000, though you might be able to add this to the cost of the mortgage.
Government schemes for first-time buyers
Government-backed home loans and mortgage assistance
A government-backed home loan or a mortgage assistance program could help if it’s your first home buying.
FHA loans
The Federal Housing Administration (FHA) manages the FHA loan program. It helps buyers by insuring their loans so lenders can give them lower down payments and closing costs.
State home buyer assistance programs
Find and contact your state housing finance agency for advice and information about special programs in your state.
You can also read: https://moneyjax.com/rent-to-own-home/
Frequently Asked Questions
How much deposit do I need for a mortgage?
5% of a property’s value is the minimum deposit you could have but there are very few lenders open to such a low amount. The bigger the deposit, the better rates and mortgage deals you’ll be able to find as more lenders will be willing to consider your application.
How old are most first-time home buyers?
In 2022, the average age of first-time homebuyers was 36, according to the National Association of Realtors (NAR). This is up from 33 in 2021.
Can I afford to buy a home?
To know if you can buy a home for yourself, check your financial status. Look down upon your financial health. Check your credit score. If it is not up to the mark look for ways you can improve it. Consult professionals and work on their advice to proceed with your first home buying.
How to improve your chances of getting a mortgage
1. Ensure You Have A Good Credit Score.
2. Reduce Your Monthly Outgoings.
3. Don’t Take On New Debts Before Mortgage Completion.
4. Avoid Going Into Unarranged Overdrafts.
5. Work With Local Mortgage Advisors.
How Long Does It Take to Buy a House?
It could take anywhere from 6 months to a year depending on the current real estate market and what kind of home you’re looking for. If you’re planning on buying and selling at the same time, make sure you have a place to stay if you happen to have trouble finding and buying a new home.
What does earnest money mean?
Earnest money, or good faith deposit, is a sum you put down to demonstrate your seriousness about buying a home. In most cases, earnest money is a deposit on the property you want to buy. You deliver the amount when signing the purchase agreement or the sales contract.
