First Time Homebuyer
Your trusted Financial Planners and Educators
Preparing to buy your first home requires careful financial planning and preparation. Please consider the steps below prior to making that commitment:
- Establish a budget: Determine how much you can afford to spend on a home by assessing your income, expenses, and savings. Consider your current and future financial goals and obligations to determine a realistic budget.
- Save for a down payment: Start saving for a down payment, which is typically a percentage of the home's purchase price. Aim for a down payment of at least 20% to avoid private mortgage insurance (PMI) and potentially secure better loan terms. Set up a separate savings account specifically for your down payment and automate regular contributions to build up your savings.
- Improve your credit score: A higher credit score can help you qualify for better mortgage rates. Review your credit report and address any errors. Pay off existing debts and make payments on time to improve your credit score. Avoid taking on new debt or applying for new credit shortly before applying for a mortgage.
- Research mortgage options: Explore different mortgage options and determine which one suits your financial situation. Consider factors such as interest rates, loan terms, and down payment requirements. Consult with mortgage lenders to get pre-approved for a loan, which will give you an idea of how much you can borrow and help you in negotiations.
- Plan for additional costs: In addition to the down payment and mortgage, there are other costs associated with buying a home. These can include closing costs, home inspection fees, property taxes, insurance, and ongoing maintenance expenses. Factor in these costs when determining your budget.
- Build an emergency fund: Owning a home comes with unexpected expenses. Start or build up an emergency fund to cover any unforeseen repairs or emergencies that may arise after purchasing a home. Aim to have three to six months' worth of living expenses saved in an easily accessible, liquid account.
- Research government programs and incentives: Check if there are any government programs or incentives available to first-time homebuyers in your area. These programs may offer down payment assistance, favorable loan terms, or tax benefits. Research and take advantage of any opportunities that can help you financially.
- Consult with professionals: Seek guidance from professionals such as real estate agents, mortgage brokers, and financial advisors. They can provide valuable insights, help you navigate the home-buying process, and ensure that you're making informed financial decisions.