Your first home is an exciting step in adult hood. However, the path to home ownership includes sound decision making and preparation. From saving for a down payment, to understanding interest rates and choosing the right neighborhood, there is much that goes into buying a property. With millennial home buyers on the rise, we have curated a list of tips for first time home buyers.

Save for the Down Payment and Closing Costs

Traditionally, lenders prefer a down payment of 20%. However, there are low down-payment options, especially for first time buyers. An FHA loan, for example, allows down payments as low as 3.5%. However, know that a down payment less than 20% will typically trigger additional expenses, like Mortgage Insurance. It is important to weigh the pros and cons of all of your down payment options before moving further into your home search. Knowing what you are prepared to put down will help you stay focused when it is time to make a decision.

When you are saving for the down payment, be sure to save for closing costs as well. These costs are paid in addition to the down payment and the rates vary by area. Our Rate Calculator can help you get an idea about what all may be included in your closing costs. You can also consult your trusted real estate professional to understand what closing costs to expect.

Know your Credit Score and Get Pre Approved for a Mortgage

Have you missed payments on a loan or racked up credit card debt? If so, these activities will negatively effect your credit score. Alternatively, if you show consistent, on-time payments on loans or credit cards, your credit score should inspire confidence to a lender who can then approve you for a mortgage with a better interest rate. Websites like Credit Karma, make checking and understanding your credit score effortless. You can log in to view your detailed report on your computer or download the app to view on your phone.

If a lender denies you approval for a loan, know that you do have options. Consider pausing your home search to work on improving your credit. You can set up auto payments to ensure payments are made on time. You may also consider having someone with established credit cosign the application. If you do have a cosigner, make sure all parties understand the terms of the contract. If you default on the loan payments, the cosigner is responsible for paying the remaining debt.

Have a Budget in Mind and Stick to It

Decide what you are comfortable spending on your monthly mortgage and home expenses BEFORE you begin your home search. Nothing is worse than falling in love with a house or property, only to find out it is outside of your budget. Things to consider in your monthly payment: mortgage, taxes, HOA fees (if any).

Shop Interest Rates

Interest rates are the lowest they have been in years, making this a great time to purchase for home buyers. Shopping interest rates can save you thousands, so always check with multiple lenders before committing to one.

Get to Know the Area You Are Looking to Purchase In

You want to be happy in the neighborhood you are purchasing your home in. Are you looking to live in the city, suburb or rural area? Make a list of what is important to you and get to know the areas you are looking in. Familiarize yourself with nearby schools, grocery stores and entertainment. If you will commute to work, consider travel times and routes. Do you plan to live in the home with children now or in the future? If so, consider if the neighborhood is kid friendly. If there is an HOA, understand what that includes, perhaps they have amenities available to the community like a pool or playground. All are great things to consider when deciding on where to purchase.

Work With A Real Estate Professional You Trust

Working with a real estate professional offers so many advantages to first time home buyers. A great Realtor will help you find the property that best suits what you are looking for. They can guide you through every step of the home buying process, from home touring, to signing on closing day. With their knowledge of the industry, your agent will help you stay focused through all of the decision making and will help you to make the very best decision.

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This content provided by Chris Harris & Associates, P.C., Fee Attorney for Alamo Title Company