Buying your first home can be an incredibly rewarding experience, but it can also be a little scary if you don't know much about the home buying process and mortgage loans. If you're a first-time home buyer and you're unfamiliar with the real estate industry, check out these tips that can help you better prepare yourself for what's to come.
Keep Track of Your Credit Score
The most important tip that a first-time home buyer can receive is to keep close track of their credit score in the months leading up to the transaction. This is because the amount you can borrow and the interest rate mostly depends on your credit history. You'll want to make sure that everything on your credit report is accurate and quickly address any issues that may arise in order to solve the problem before submitting your application for a mortgage loan.
Appraisals and Home Inspections
Before you obtain a loan from a mortgage company, you may be required by them to have the home you want to purchase appraised and inspected. The majority of first-time home buyers have the misconception that appraisals and inspections are the same thing. In all actuality, this is far from true. As a matter of fact, an appraisal is performed by an appraiser who only looks at the overall structure of the home, the location of it and other recently sold homes in the area to determine an estimated market value. On the contrary, a home inspection is performed by a state licensed inspector who looks into the internal systems of the home such as the HVAC system, water heater, sewer system and electrical system in order to determine risk of problems.
Pre-Approval vs Pre-Qualification
When applying for a mortgage loan, a good deal of first-time home buyers can easily get a pre-qualification and a pre-approval confused with one another. The biggest difference between these two terms is that a pre-qualification is based solely on the information you provide the lender while a pre-approval is a more accurate estimate because it's also based on your credit score. This is yet another reason why it's important that you are always aware of what your credit score is.
Budget for Hidden Costs
Many first-time home buyers think they can budget based solely on the price of the house and their monthly mortgage payments. These same inexperienced home buyers also get into a bit of trouble when they don't bother to account for hidden fees and closing costs. This is why you should make room in your budget for other recurring fees such as homeowner's insurance, title insurance, home warranties, appraisals and much more.
So many first-time home buyers wish that they could better inform themselves on the home buying process before beginning their hunt for the perfect piece of property. If you're planning on purchasing your first house sometime in the near future, hopefully these tips can better prepare you for the responsibility of home ownership.