By Catherine Way
In the world of adulting, nothing is more of a statement then buying your first home.
Even though the market has improved leaps and bounds since the recession our parents dealt with, buying a house has never been more complicated. Shaking our fists, and wishing they taught us how to do this in school is futile, so what can we do if we want to finally move out of our parents’ houses?
Buying a house doesn’t need to be complicated, and you might be ready if you know the following!
Real Estate Basics
Square footage? Comps? Cost of living, HOA, the world of real estate is chock full of confusing terms and slang. Before you start looking at homes know the basics of common real estate terms can help you navigate your housing options.
Anyone looking to purchase their first home needs to know the basics, and having this set of knowledge will lead you to make more informed decisions when looking at homes. Knowing the real estate basics will also help you find properties that better suit your needs, and spot red flags, when searching.
Here is a run down of some of the most common real estate terms you need to know.
HOA: Homeowners association, these groups are in place in high end areas that makes rules for the residents of neighborhoods, planned communities or condominiums. They enforce rules to keep residents safe, the neighborhood looking good, and more. Homes that are bought within an HOA’s jurisdiction automatically become members and are required to pay dues, which tend to be monthly fees.
Comps: Comparable Properties, these are used to help gauge the value of a home. Realtors and appraisers determine comps by comparing properties that possess the same characteristics, such as size, age, location, and other features or upgrades.
Closing costs: In addition to the final agreed price of a home, there are also closing costs, such as commission for the real estate agents, loan processing costs, title insurance, and more.
Mortgages: There are many different kinds of mortgages you can use for buying a home. A fixed-rate mortgage is your standard 30-year mortgages that have the same interest rate over time. Adjustable-rate mortgages are also available, but be wary as the interest rate can change over the course of the loan at five, seven, or ten-year intervals. Hard money loans are used by house flippers and real estate investors for short term investments. Hard money is used for buying a property, making repairs and then selling it for a profit.
You can learn more about the basic real estate terms here!
Have Good Job History
If you are looking at buying a home, chances are you are working a good job, in a good industry. Which is great, as a first-time buyer one of the biggest factors for getting approved for a mortgage will be your job history.
“Employment history is important to mortgage companies for first time buyers as they want to make sure that they can make the payments on a property. Banks and lenders don’t want to end up with a foreclosure on their hands. By seeing how long you have worked in an industry, the steadiness of your income, and employment background they can determine whether you are a dependable buyer.” Loren Howard, Prime Plus Mortgages – Hard Money Lender Arizona
Don’t be worried about the job you worked in college, lenders are primarily looking for buyers that have moved out of start jobs that we have all had to work. So if you moved from fast food to marketing then you are in good shape to get approved for a mortgage!
For those with student loan debt, don’t worry! Credit scores don’t get in the way of you buying your first home but if you having a good credit score makes it so you can pay less.
Before the market crash, subprime loans made it easy for buyer with extremely poor credit scores to get into a house. Nowadays the minimum credit score you need to qualify for a mortgage is a 580. (It is possible to get a loan with a lower score but it’s pretty difficult). If you are serious about buying a home, but have a bad credit score, raising your credit score will help get more options. The better your credit score is the more options for loans that you have.
FHA, Va Loans, and conventional loans are all available for those with varying scores. That comes with different requirements. If your credit score falls into the 620+ range, you are in great shape to buy a home.
Before you talk to a realtor, go and get pre-approved for a mortgage. If possible set up an appointment when you apply for your loan, so you can do a deep-dive into your finances. You can go over your goals with a mortgage officer who can give advice on what loan is best for you.
Whether it is how to keep your mortgage as low as possible, have the same monthly payment per month, or if you plan to move in the next few years. You should know your break-even point, how much you can afford, and what you can afford for your first home.
Once you are pre-approved you can see what works best for you, know what homes are in your price range, and start looking for homes!
Buying your first home shouldn’t be hard to do. With a good credit score, solid work history, and a little know-how you can start shopping for your first home sooner than you thought!
By having the following things, you can start shopping for your first dream home today!
- Real Estate Basics: know how homes are priced, hidden real estate fees, and what the best neighborhoods and the markets are available.
- Have a Solid Job History: Solid work history in safe industries is sure to help your house hunt, as it makes you a more dependable buyer in the eyes of lenders.
- Credit Scores: Your credit history can open (and close) a lot of potential doors on your search. Repair our credit if it is below 600, and learn what loans are available to you.
- Get Pre-approved: Sit down with a loan officer to see what homes you can afford, what the interest rates are, and see what loans work best with your home buying goals.
Catherine Way graduated from Michigan State University with her Bachelor’s of Advertising with a specialization in Graphic Design. She works as a freelance content creator for many facets of real estate, including commercial, residential, and mortgage industries. She spends her free time finding new ways to talk to people, through writing, designing, dancing, and more.