Buying a home for the first time can be a daunting task. Between dealing with realtors, banks, and credit agencies, the process can feel overwhelming. Homebuyers are at risk to make financial mistakes with dire consequences, and can be easily taken advantage of. But fear not, we’re here to help. To make sure your first time buying experience goes smoothly, we’ve compiled a list of tips to put your mind at ease.

Make a Realistic Budget

The first step to buying a house is making sure you can afford one. Before even looking at the market, it’s wise to sit down with a financial professional to budget how much available funds you really have. Annual income will be reviewed when determining a mortgage, and debt is accounted for, too. Ascertain your debt to income ratio, your salary minus all of your debt, to find out your real maximum home price. Using a mortgage calculator can help you obtain a good idea of how much a down payment will be, as well as your subsequent monthly mortgage.

Understand Mortgages

Applying for and understanding a mortgage is one of the most important aspects of the home buying process. Like taking out any other loan, potential home buyers will need to prove their ability to pay back what they’ve borrowed, plus interest. The process involves several components, broken down below:

Choosing Between a Broker and a Bank:

Many first time homebuyers don’t know they have a choice when shopping around for a mortgage. Two main types of lenders exist: brokers and banks. A typical buyer often works with their primary bank to secure a home loan. Working with a bank you know provides a sense of security, and this same familiarity can sometimes lead to favorable loan terms.

Brokers provide buyers with the ability to shop around multiple financial institutions for the best interest rates. Often having contacts with 20 plus lenders, they make it both easier and faster to compare offers from multiple sources. If a potential homeowner has an inconsistent income, or has less than stellar credit, a broker might be able to secure a favorable loan due to his or her connections.

Choose a Mortgage Type

There are two main types of mortgages in the lending world: fixed-rated, and adjustable fixed rate, or ARM. A fixed rate is just as it seems, a mortgage where the interest rate does not fluctuate but instead is determine at the time of signing, based on the current market. These mortgages are valuable in that your rate never changes, making it easy to work into a monthly budget.

Adjustable fixed rate mortgages do the exact opposite. They are set below the average interest rate price at the time of signing, and later vary depending on market fluctuations. During a predetermined fixed period the interest rate will hold steady, but after this, it will fluctuate depending on the interest index. The changes applied to your rate will come at intervals agreed upon in your mortgage. ARMs are useful for those looking to stretch their money, as lower initial payments can help them qualify for a larger loan. However, be mindful that interest rates can rise at anytime, causing monthly payments to potentially skyrocket.

Get a Home Inspection

It could be argued that obtaining a thorough home inspection is just as important as settling on a quality mortgage. Buying a home without knowing its integrity can turn a great purchase into a money pit.

Ask your realtor for advice, and make sure to hire a reputable home inspector. Paying an extra few hundred dollars to check the entirety of the basement, or go over the electrical work and plumbing, can make or break even the soundest budget. Fixing unknown problems can quickly lead to unintended spending, leaving a new homeowner struggling to pay their bills.

Home buying isn’t easy, but if done right, the rewards are tremendous. First time homebuyers need direction, and that’s ok. No one learns the housing market over night. If you’re interested in buying your first home, contact our team. We’ll do our best to provide excellent advice and guide you in the right direction to ensure a successful and stress-free experience.