Buying a house for the first time can be such a happy experience. However, it can also be a very confusing experience. There are many things you need to understand before even trying to find your new home. Once you learn these important steps you will come closer to your dream of owning your first home.
One of the first things you need to do is understand your credit. We all get credit scores that tell banks how good our credit is. The better your credit score is the more willing a bank is to lend you money. You can usually request a free copy of your credit score by contacting the three main credit reporting agencies, Experian, Equifax, and Trans Union.
If you have a low credit score there are things you can do to improve it. First check your credit report thoroughly. Sometimes there are mistakes, and you can write to those company’s to get your negative credit removed. Other times, you may just need to open up more accounts or close some. The thing about a credit score is that it is always changing. Make sure you try to buy your home when you credit score is on the higher end.
Finding a good lender is key to getting a good loan. Compare at least six different lenders. Find out the total cost of each lender because each one will be different. Each bank will tell you how much it will be willing to lend you based on your credit score and your income. Understand what your principal is. The principal is the amount that you are borrowing to buy your house. Make sure before you pick your final lender that you have compared all the rates, points, and fees. Use the one that seems right for you and your situation.
The best thing to do before looking at houses to buy is to get pre-qualified. That term means that you already have your banks okay for you to buy a house in a certain amount. This will make you a more attractive buyer to the homeowner you are buying from. Plus, it helps you to know what your realistic price range is when trying to buy a house. Understanding how much you can afford is really important. Make sure you write down for yourself all your expenses, and see if even buying a house is a smart choice for you.
When you are filling out your application to buy a house make sure you understand what it is asking of you. One of the things you really need to understand is what type of mortgage you are getting. Fixed rate mortgages are a fixed dollar amount that you have to pay the bank each month for your entire loan. Your monthly payment will never go up. Adjustable rate mortgages (ARMS) will give you a low initial interest rate at first, which will mean a lower dollar monthly payment of the beginning of your loan. However, the rate of your mortgage depends on the market which usually means that your dollar monthly payments to the bank will increase through the years. Sometimes that can be a huge jump, and you may suddenly find yourself not being able to pay your monthly mortgage payment anymore. Try to stay with a fixed rate mortgage if you can.
See how much of a down payment you will need. Most houses require closing costs of some sort either from yourself, from a builder, or even the person you are buying from. There are lots of help from the government that you can get if you are having trouble with coming up with the down payment and closing costs. Make sure your lender tells you what your options are.
Do your research before you try to buy your first house. Make sure you understand all the information. Sometimes in the excitement of buying a house a person does not understand exactly what they are getting into. That is a mistake. Make sure you understand everything clearly before signing on the dotted line in buying your house. The main goal is to buy your first home, and to stay happily in it until you are ready for your next home.