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Top 5 Tips for First Time Homeowners

Buying your very first home can be a daunting task, but it doesn't have to be. In fact, despite what a lot of people might say, it can still be a very enjoyable and rewarding process.
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Buying your very first home can be a daunting task, but it doesn't have to be. In fact, despite what a lot of people might say, it can still be a very enjoyable and rewarding process.

The earlier you start the home buying process the better, and the first step should always be to get pre-approved. In order to get pre-approved it is extremely important to find the right Loan Officer (LO) to help you navigate the mortgage process. I strongly recommend getting a referral from someone who has had a positive experience with the LO. There are a lot of fly by night shops out there and it is extremely important to get an experienced LO to help you through this process.

Here are the 5 most important things to know when starting the home buying process:

  1. Start Early - When it comes to saving money and improving your credit score, nothing helps more than time. Starting early will allow you to work with your LO and make sure your credit is where it needs to be in order to secure the lowest possible interest. The more money you have for a down payment, the more options you have. Once home buyers start the home buying process it becomes a little easier to save money now that they have a goal to reach. For many clients family members are more than happy to help out and give gift money. Starting early allows family members to get their finances in order so they are able to assist.
  2. Down Payment - Don't listen to the pundits out there that say you need 20% in order to buy a home. There are many programs out there with down payment options below 5%. FHA requires 3.5% down, Conventional requires 3% down and VA requires 0% down. There are even some conventional loan programs available for 1% down with the lender covering the other required 2%. Don't be fooled by the 1% down payment program as your interest will increase substantially to do the 1% down program. In addition, for FHA loans Mortgage Insurance is always required and for VA loans mortgage insurance is never required. For Conventional loans mortgage insurance is required for loans with a down payment less than 20%.
  3. Credit Score - A good credit score is essential in getting the best available interest rates. If your credit score isn't perfect, there are a lot of techniques that can raise your credit score. There is no magic button to do this, so don't fall for any gimmicks out there for increasing your score, but there are things that can be done to help. All of these things need a little time, some more than others. If you are looking to buy a house tomorrow, it's too late to start working on your credit score. If you are looking in a few months, now we're talking. Some of the easiest ways to bring up your score are paying down balances to revolving credit accounts to
When choosing a LO ask them why you should use them. Ask them about their experience and access to various programs. Most LOs get paid on commission so it is important to wade through the sales pitch and make sure you choose someone that takes the time to answer your questions. I have always found the best LOs are the ones that take the time to educate their clients about the products and process. If they seem pushy, run the other direction. If they don't answer calls/e-mails in a timely fashion, run the other direction. More than anything, find someone you can relate to and someone that wants to take the time to answer all of your questions in a way you can understand the answers. You'll be spending a lot of time asking questions to your LO, so make sure it's someone you communicate well with.

This blogger graduated from Goldman Sachs' 10,000 Small Businesses program. Goldman Sachs is a partner of the What Is Working: Small Businesses section.

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