First-time homebuyers in Newtown, PA should gather as much information as possible before making a commitment to buy a house. Just to qualify for a mortgage, craft a successful offer, and make a down payment can be a stressful and complicated process. Beyond a stable job and good credit, a good real estate agent can make a huge difference when trying to select your first home.
Before you select a Newtown Agent and begin touring homes, keep the following tips in mind.
1. Check your credit
To qualify for a conventional mortgage, you will need a credit score of at least 620. To get the best rates possible, first-time homebuyers in Newtown will need a score well into the 700s. One mistake a new homebuyer can make is not checking their credit score before applying for a loan. If you check your credit early in the process and find it requires improvement, you can up your score by paying off outstanding debt, making monthly payments on time, and not applying for any new loans or credit cards. Though there are loans you can get with lower credit scores, you may have to pay added fees and higher interest rates than you would with a higher score.
2. Start saving money
First-time home buyers tend to underestimate just how much money they need to save—and the dramatic increase in prices over the past few years has exacerbated this trend. To avoid paying for private mortgage insurance or other fees, it’s suggested you put down at least 20% on your new home. For example, if you’re buying a median-priced Newtown home for sale at $489,900, you would put down a 20% payment of $97,980. Add closing costs of between $9,000 and $24,500 and a possible earnest money deposit. You’re looking at a big stack of cash. The more you can save before you begin looking at homes, the less you’ll need to borrow and the better off you’ll be financial.
3. Know what you can spend
Too many first-time homebuyers rely on their mortgage company to tell them what they can afford. This is often a mistake, as a mortgage company will not take your entire financial portfolio into consideration when giving you a number. Mortgage companies base your approval amount on your credit, debt-to-income ratio, and salary. If you have high recurring expenses (including money you invest or save monthly), you could easily get in over your head if you stick to a budget set for you by a mortgage company. To better determine your budget, sit down and write out a detailed account of all your monthly expenses. Make sure you take into account the added costs of owning a home such as HOA fees, homeowners insurance, taxes, maintenance, and utilities.
4. Get pre-approved for a loan
Although you should have already determined your budget prior to visiting a mortgage loan officer, you should still get pre-approved for a loan before you begin looking at Newtown homes for sale. By getting pre-approved, you show sellers you’re a good faith buyer and are ready to place a credible offer. To get pre-approved, you’ll need proof of income and assets, verification of employment, a good credit score, and other documentation required by the lender (i.e. a driver’s license, Social Security number, etc.) Once approved, you’ll receive a letter of pre-approval that you can take with you when you start looking at houses. These letters will increase the likelihood of your offer being accepted.
5. Be aware of different loan types
As mentioned previously, a conventional, fixed-rate mortgage is usually the best deal for buyers who have a solid credit score and enough money for a good down payment. However, you can still get a loan otherwise. If you’re a veteran, active member of the military, or married to one, you can qualify for a VA loan that doesn’t require a down payment. If you’re buying in a rural area, you could get an FHA loan. First-time homebuyers with less strong credit can also look at FHA loans that have lower down payment options. Make sure you also check out state programs that can assist you with down payment and closing cost expenses.
6. Know your wants and needs
As a first-time buyer of Newtown homes for sale, it’s important to differentiate your wants from your needs. Based on your budget and the current real estate market, you may need to sacrifice some of your wish list items with the understanding you can add them down the road if you remodel. Differentiate between “needs” (such as the number of bedrooms or neighborhood) and “wants” (such as a spa-like master bath or home gym.) Communicate these with your Newtown Agent, so they can help connect you with only the homes that fit.
Work with an experienced Newton real estate agent
The most indispensable piece of advice for first-time buyers is to work with an experienced real estate agent who can help you through every step of the process. The best agent is one who can connect you with other trusted professionals, find the Newton homes that best match your needs, and help you craft a winning offer. Your agent will also walk you through the closing process to ensure everything goes smoothly.
With the right preparation, you can keep the process of buying a first home fun, exciting, and educational—without the stress. If you’re ready to start house hunting in Newton, reach out to local real estate experts Mark + Tina to begin your search.