Buying your first home is never easy, but it’s especially tough in 2018. The inventory of homes for sale has been steadily dropping for the last two years straight, the longest streak in more than two decades. Prices continue to rise, and competition over lower-priced homes is fiercer than ever. To get the best shot at buying your first home in 2018, follow these five tips.
1. Save Up for Your Down Payment, Starting Now
As soon as you decide to buy a home, start saving for your down payment. Set aside every spare dollar you can, especially large sums such as holiday bonuses and tax refunds. The standard first time home buyer down payment is 20%. But even if you can’t save up that amount, some first time home buyer programs will allow a payment as small as 3%.
2. Estimate Your Mortgage Payment
Before you start shopping for a home, find out exactly how much home you can safely afford to buy. Check online home affordability calculators to help you determine how much you can spend. Also, compare rates from several lenders to get the best terms.
3. Check Your Credit Reports
The heyday of subprime mortgages is far behind us. Now, in order to qualify for a mortgage, you need solid credit. But knowing your credit score isn’t enough. You also need to check your credit reports. If you find any discrepancies, dispute them. To help improve your score, hold off on opening any new accounts, and pay off as many debts as possible.
4. Think About What Type of Home Suits You Best
Although most buyers shop for single-family homes, it pays to look at other options, too. Condos and townhomes have less square footage, but also require less maintenance. Some attached homes also offer extra amenities unavailable to the typical homeowner. Before making an offer on a condo or townhome, be sure to check HOA rules, especially if you have children or pets.
5. Don’t Forget About Insurance and Closing Costs
When you buy a home, you’ll pay more than just the purchase price. Closing costs can include property taxes, title insurance, transfer taxes, HOA fees, escrow fee, legal fees, and other expenses. They typically run 2 percent to 5 percent of the sale price. On a median $275,000 home, closing costs could be as much as $13,000. Remember to set aside extra money for these additional costs.
Now Is the Time to Buy Your First Home
As a first time home buyer in 2018, you face an uphill challenge. Affordable homes are few and far between, prices are rising, and properties are selling faster than ever. But if there’s a bright side, now is the best time to buy, before the housing market grows any tighter. Follow these five tips this year, and you’ll be able to find the right first home for you.