Financial Tips For First-Time Home Buyers

If you are planning to purchase your first home in the next few months, then there are some very specific things you should, and should not, do with your finances. Since home buying typically involves a large mortgage loan from a bank, it is vital you take the necessary steps to get approved for your loan and avoid the common pitfalls that come with securing financing on a first home.

Here are some first-time home buyer tips to get you started on the process:

Tip: Get Pre-Approved for Your Future Mortgage Loan

While it is a relatively simple process to obtain a new car loan or other types of credit, getting a mortgage loan can be a lot more complicated and time consuming. Rather than finding your dream home and then discovering you can't get a loan quickly enough to close escrow, it is always better to get pre-approved for the loan. You can work with a mortgage broker or your local bank to navigate the mortgage application process. Once you have been pre-approved, then you can include a copy of your pre-approval letter with your purchase offer. Having guaranteed financing may help your offer be accepted over other buyers who have not yet secured their financing.

Tip: Don't Forget to Budget the Other Costs of Home Ownership

As a first-time home buyer, it is easy to budget for your new mortgage and forget about all of the other monthly costs associated with owning a home. When you are setting the budget for your purchase price, make sure you also take each of these costs into consideration:

  • property taxes

  • homeowner's insurance

  • private mortgage insurance

  • homeowner's association dues

  • routine maintenance

If you put down less than twenty percent of the purchase price of your home, then you will be required to pay private mortgage insurance. Since this can be a fair amount of money each month, make sure you investigate this cost before making your purchasing decision.

Tip: Foregoing Professional Inspections is Not a Reasonable Way to Save Money

Finally, it is important to note that once you have found the home you want to purchase, then you need to have the cash available to have it, its septic system, and its water well inspected. While these inspections will add up to a decent chunk of money, they are vital to ensure you don't purchase a home with major defects. You can save money in many other ways when you are buying a house, but foregoing inspections is not a reasonable choice. 

For more home-buying tips, speak with a real estate agent.