15 Things Every Homeowner Should Know About Their Home
Buying your first home and becoming a first-time homeowner is the dream. It can be an incredibly exciting time. According to the Local Records Office in Los Angeles, CA, this is also one of the main reasons it’s important to plan out the proper steps before you dive in headfirst.
When you’re buying your first home, it can be easy to get caught up in all the excitement and make some minor mistakes that may cost you in the long run. Since buying a house is a major investment, it’s essential to slow down and make sure you’re doing everything right before signing any papers. We’ll tell you the 10 things first-time homeowners need to know before jumping in.
While there is definitely excitement in the air when becoming first-time homeowners, it can also feel intimidating as well. Where do you start? What should you do and what should you avoid? Don’t worry.
1. Check Your Credit Score
Your credit is one of the major contributing factors in being approved for a mortgage and securing a good rate. That’s why it’s incredibly important that you are completely involved in everything to do with your credit.
You should get a credit monitoring app or at least request your free credit report from the three major credit-reporting bureaus (Equifax, Experian, and TransUnion). The first step is to make sure that everything is correct. If you find incorrect information, start work on disputing it.
2. Raise Your Credit
If everything looks good, then it’s time to work on your credit score. Having a credit score between 670 to 740 or higher is the place to be to get the best rates on your home loan. If it’s lower than that, then it’s a good idea to work on your credit score and bring it up to that level before moving on. You may still be able to get a mortgage with a lower score but the interest rates are likely to be much higher.
3. Start Saving for a Down Payment
A sizeable down payment on your new home can help lower mortgage payments significantly. While it’s important to make a good-sized down payment, it’s also critical not to go broke during the process. It’s recommended to not drain your entire savings to cover a down payment. While the traditional down payment has been 20% of the cost, most homeowners, especially first-time homeowners pay around 6%.
4. Check Your Outstanding Loans
If you can afford 20% along with closing costs and future moving costs without depleting your savings then that would be the recommendation. However, there are many conventional loans that match the requirement set by the government such as Fannie Mae and Freddie Mac. These types of loans usually offer down payments for as little as 3%.
5. Research Your Mortgage Options
Besides conventional loans as mentioned above, there are also government loan programs that can help. FHA loans are insured by the Federal Housing Administration. They offer loans with down payments as low as 3.5% and for people with lower credit scores (must have at least a 580 credit score).
6. Research VA Loans
Another option is a VA loan, which is guaranteed by the Department of Veterans Affairs. These loans are only for current and veteran service members and their eligible spouses. If you qualify, this type of loan usually requires no down payment.
7. Look for Local First-time Homeowner Programs
There are many state-run assistance programs for first-time homeowners. These programs can help with your down payments, closing costs, offer you tax credits, and discounted interest rates. You should also check with your county and city as well as many times they also offer their own set of perks for first-time homeowners.
8. Use a Broker to Find the Right Lender
Finding the right home loan lender can be a time-consuming and stressful process. You have to go through lender after lender to get a quote, keep them all in order, and try to find the best one if you even have time to look through all of them.
9. Research Lenders in Your Area
That’s why using a broker to help you find the right lender can be a huge time saver. It can also significantly reduce your amount of stress. A broker can take your information and then spend their time looking for the best rate and terms for your mortgage.
10. Get Pre-approved for a Mortgage
One mistake first-time homeowners often make is getting pre-qualified for a mortgage rather than pre-approved. It’s an honest mistake as they almost sound like the same thing but in fact, they are very different. Essentially, getting pre-qualified is a simple glance over your credit score and other items and they will tell you roughly how much you can expect to get as a loan. However, this amount is not guaranteed.
On the contrary, getting pre-approved for a home loan requires a much more in-depth look at your credit, job history, income, and more. Once this is done, you will get a letter of pre-approval with the amount you’ve been approved to take as a loan.
This letter is important as it allows you to not only know exactly what your budget is, but it also signals to sellers that you’re a serious buyer.
11. Consider Other Costs Beyond Mortgage Payments
Once you have your pre-approval letter and you’re ready to start shopping for your new home, it’s important to consider the overall costs you will encounter as a homeowner. Besides the monthly mortgage payment, you will have to think about if the home has homeowner’s association fees and then consider property taxes.
You should also think about the size of the home and the possible electricity costs as well as any upkeep that may need to be done such as landscaping large yards or taking care of a pool. Make sure costs like these are budgeted in along with your monthly mortgage payment.
12. Choosing the Right Length for Your Home Loan
There are different options available for the length of your mortgage. Most homeowners will choose between a 15-year and a 30-year option. There are pros and cons to both. For example, the 15-year mortgage will have a much lower interest rate.
This reduction in long-term interest will help you pay off your loan faster. However, the payments are much higher. A 30-year mortgage is usually the most popular option for first-time homeowners. While the interest is usually higher, the payments are much more affordable.
13. Make Sure to Have Enough for Closing & Moving Costs
When first-time homeowners were surveyed about surprises in the buying process, many mentioned that closing costs and moving costs caught them most off-guard. When you’re saving for your down payment, it’s also important to remember the closing costs associated with your mortgage.
This usually runs between 2% – 5% of your loan amount. Once that’s out of the way, you’ll need to consider any moving costs as well. If you’re moving within the area you’re already in, you may be able to get family and friends to help. However, if you’re moving a long distance, make sure to budget for moving vans or professional movers.
14. Get Your Property History by the Local Records Office
Local Records Office offers a great property history report, which, homeowners receive, and in the mail that includes foreclosure activity, demographics, student-to-teacher ratio, copy of the deed, and much more. The report is over 10 pages long with up-to-date data that homeowners can use to be more informed about his or her property.
15. Research How the Local Records Office Can Help
Local Records Office finds hidden property details that real estate brokers and real estate agents lack telling the homebuyer. Real estate brokers and agents fail to provide these details since he or she wants to hurry and close the deal to get the commission.