You don’t know what to expect as a first time home buyer when you are about to buy your primary residence. We understand that buying your first home is an exciting journey and you want to know everything about house buying, mortgages, financial information, and programs you can use to assist you in buying your first home in Texas. Whether you dream of buying your Texas suburban house or a condo in Austin, we are here to guide you throughout the home buying process.
We have distilled top insights and a few of our own tips that you can use to develop your confidence in house hunting and buying your perfect house for the first time. So, let’s get into it.
Budgeting Tips for a First Time Home Buyer
Before you get to your home search and touring open houses, it is very important that you take your time and know whether you can afford the property or not.
You must apply for mortgage preapproval before applying for mortgage options. Why? It not only gives you a realistic price range but also shows sellers that you’re a serious buyer. Mortgage approval can help you have an edge in the competitive real estate market and find the right home.
What to include in your budget?
- Monthly mortgage payment
- Property taxes
- HOA fees (If applicable)
- Maintenance
- Utilities
- Closing costs (2-5% of home purchase price)
Avoid Draining Your Savings
It might be tempting for you to spend every dollar you have in your account to pay your house’s down payment to avoid home insurance or PMI (Private Mortgage Insurance), however, it is not the best idea. You must keep a financial cushion, just in case.
After finalizing your mortgage, you as a first-time home buyers may neglect the costs after moving in. For instance, repairing costs, furnishing, emergency fixes, renovation, and more that can lead to a lot of stress and may be debt.
Tip for first-time home buyer: Ideally, you have three to six months of cost of living in your account after you close your deal and move into your new home.
Best Mortgage Options for First-Time HomeBuyer
It is very crucial that you should know about all kinds of loan types. Not all mortgages are alike and offer the same to first-time or repeat buyers. You must know that as a first-time buyer, you have access to and can qualify for a number of programs to get a 30-year mortgage loan that can make home-buying a lot more affordable and easier.
Common Types of Home Loans
- Conventional Loans: You can pay as little as a 3% down payment as first time home buyers.
- FHA Loans: Backed by the government of each state, Federal Housing Authority loans facilitate many first-time buyers with a low down payment of 3.5%. You will easily be able to qualify for it even with a lower credit score.
- VA Loans: Veteran Affairs loans offer zero 0% payment to eligible veterans, military service members, teachers, and more.
- USDA Loans: These loans provide zero down payments for eligible rural area residences.
Mortgage lenders that deal with first-time home buying know about the assistance programs in your state. In Texas, you get programs like My First Texas Home that provide down payment and closing costs assistance.
Credit Scores Impact Your Purchase
You might think that your credit score is just a number, and don’t know what to expect as a first time home buyer, especially when it comes to buying a house. No, it is a ticket to hunt the best mortgage deals down when it is time to get a mortgage rate that your home is worth.
A high credit score means:
- Low Interest Rates
- More loan options.
- Low PMI Premiums.
For conventional loans, you’ll need to have a minimum credit score of 620, but if you want to have the best rates, you need to achieve 740 or higher.
If you currently don’t have an attractive credit score and want to boost it, you can do it by:
- Paying down your debts and bills on time.
- Avoid a new credit line up before closing.
- Dispute any errors on your credit report.
First-time home buyer tip: If you want to purchase a home anytime soon, avoid other big purchases (like cars). It is because your lender pulls up your credit scores in the initial stage first and then before closing the deal.
Find the Right Real Estate Agent
If you have a great real estate agent, they will not only open doors for you but will also provide you with a homebuyer guide. A great real estate agent like Nitin Kumar is:
- Excellent Negotiator: They can help you land amazing opportunities and deals, and negotiate repairs like no other.
- Knowledge: They have every local knowledge that is a must to have in unique markets like Dallas, Houston, or Austin.
- Resources: A great real estate agent can refer you to multiple trusted inspectors, lenders, and more.
Before you hire a real estate agent, make sure you interview three of the best and hire the agent who checks the most boxes on your ideal real estate agent.
Make A Smart Purchase
You are not just buying a house, but you are buying a lifestyle, peace of mind, and making a long-term investment. It is easy to fall in love with a house, but making a smart decision is that you look deeper than the looks.
Key points to consider while buying a house:
- Neighborhood: You must look at the quality of the neighborhood, the school ratings, the crime rates, and the development plans.
- Commute: Calculate commute times and see if the driving time is more than you expected, because longer drive times can wear you out over time.
- Resale Value: You must keep in mind its resale value, even if you are planning to stay there for decades.
You must avoid buying the best house on the block as it appreciates very slowly. We recommend that you buy modest homes that have more appreciation opportunities.
Home Inspection is Important
You must plan a home inspection, even if the house on the market is a hot item.
A thorough inspection will:
- Reveal the hidden problems, like foundation issues, that can cost you thousands of dollars in the future.
- Gives you negotiating power. You can ask for repair charges or a price reduction.
- Allows you to walk away if the house has some serious issues.
Attend a number of inspections to learn more about the condition of the home, what to look for and what problems are negotiated in the cost, and which should be a deal breaker.
Buying a House Can Be an Emotional Roller Coaster
When you are roaming around the market and you think about buying your first dream home, you can face a number of challenges that can, in the end, drain you emotionally. The emotional highs and lows can be due to:
- Losing your dream house or the house you loved.
- Negotiating which can stress you out.
- Inspections, as they might reveal costly problems.
If you stay patient and deal with it smartly and flexibly, you can find a home that you will be grateful for your whole life.
What Happens After Your Offer is Accepted?
It is not over for you when the lender or the seller accepts your offer. There is a timeline that you need to follow until your deal is closed. The timeline mostly goes as follows:
- Escrow: You deposit your earnest money.
- Inspection: Confirm the condition of the house and whether it matches the value.
- Loan Underwriting: The lender will verify all of the details of the deal.
- Final Walkthrough: You must make sure that the condition of the house hasn’t changed after your first inspection.
- Closing: On the closing day, sign the paperwork, pay closing costs, and get your home keys.
After offer acceptance to the closing day, it might take 30 to 45 days for the overall paperwork to be completed, and you can finally move into your safe haven.
Long-Term Approach
After you are a homeowner, your journey doesn’t end there. You are going to have an ongoing responsibility on your shoulders after owning a home. For instance:
- Maintenance and Repairs: You need to set aside funds for your monthly maintenance and repairs, which can be ideally 1% annually of your house value.
- Home Warranty: You must consider a home warranty for burglary or disasters for your own peace of mind.
- Insurance Coverage Review: You need to review and update your insurance coverage yearly.
- Property Tax: The budget for property tax increases, especially in fast-growing Texas cities.
Conclusion
So, what to expect as a first time home buyer? You are buying a home for the first time and it is a big deal, and you must prepare for it like no other. It is a very serious financial move, and your whole life may depend on it at some point in time. It requires patience, preparation, and the right people by your side who are experts in this field.
You must make smart decisions and avoid costly mistakes as a first-time house buyer. You must take note of below home buyer tips:
- Your real budget.
- Protecting your savings.
- Choosing a strong agent and lender.
- Staying patient.
- Thinking of the long-term goals.
Whether you’re a first-time home buyer searching for the right home or you are buying a dream home at the suburban oasis of Frisco, you must know that you are not just buying a home, but building your future there.
If you want expert guidance from a professional realtor, we are here to help you find a home of your dreams.
Frequently Asked Questions
Q. What do first-time home buyers need to know?
A: Before taking the first step to buy your first house, you must know your real budget, get preapproved for a loan, have a strong credit score, have saving for a down payment, have an expert real estate agent, have patience, and know the post-acceptance and closing responsibilities to buy the home of your dreams and have a smooth move-in and living experience in your residence.
Q. What do most first-time home buyers get approved for?
A: Most first-time home buyers get approved for options with different loan terms like conventional loans, FHA loans (but you will need to pay for private mortgage insurance), VA loans (if you are in the military or a teacher), and USDA loans. If you have a lower credit score, you are still eligible for FHA loans, but for better rates, you must have a 700+ credit score.
Q. How much deposit does a first-time buyer need?
A: It depends on the program you are selected for. For conventional loans, you need a 3% to 20% of your home price as down payment. For FHA loans, you can put as little as 3.5%. Some Texas housing programs offer down payment assistance programs to help you lower your upfront cost. Putting 20% down payment will help you avoid PMI costs, saving you a lot of money on your monthly payments.
Q. What are the hidden costs when buying a house?
A: Aside from the down payment, you you closing costs (2%-5% of the purchase price), home inspection costs, property taxes, homeowner insurance, moving expenses, and HOA fees if applicable. After moving, you might face repair and maintenance charges, upgrades for which you will need a financial cushion.
