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5 Tips to Buy Your First Home

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buy a home

So you’re interested in buying a home? Fantastic! Owning your home is infinitely better than renting due to the housing market’s ability to appreciate over time.

Taking advantage of your home appreciation can help you build wealth over time, so why doesn’t everyone do it? 

Well….right now, in order to buy a home, it’s a pretty comprehensive program. You need to have a good credit score, make stable money, and you have to find professionals that will educate you about the process.

So if you don’t know where to start, start with some of our tips!

Let’s get into it!

Tip #1: Figure out what you can afford

Seems pretty obvious, but it’s not as clear as you might think. If you want to buy a home, you need to have a clear budget in mind. 

One of the most important budgets is your monthly payment – but how do you find out what you can afford, on a monthly bases? You’re responsible for more costs as a homeowner, than as a renter. 

Well – you’ll need to consider the actual mortgage itself, escrow costs (tax + insurance), possibly PMI, and then putting away money for potential maintenance on the home. 

A good way to keep yourself financially stable, after buying a home. is to use the 50/30/20 rule: 50% of your income should be for necessary expenses, 30% for discretionary spending (wants), and 20% for saving and investing. 

So just do the math: What’s 50% of your current take-home income? 

Now subtract all of your bills: cell phone, internet, utilities, car insurance, subscriptions etc….all of it.

That final number, at maximum, should be your monthly housing budget – typically shooting for 30% of your take-home income. 

Now don’t freak out if that number seems too small – remember that your first home doesn’t need to be your forever home. 

Townhouses, Condos, or even fixer-uppers can all be suitable options to start with. You can always make due with what you have, then move and rent out the initial home you bought – increasing your income and wealth progression along the way. 

If it’s still too small, then maybe it’s time to look at better income sources, or to cut back on unnecessary spending. Remember, the ultimate goal is to buy a home – not go out every night with your friends or spending money on things you may not even use in a week.

We recently wrote our ultimate guide to budgeting, which you can read by clicking here

That article will help you find a good footing with your budget. 

Tip #2: Review your credit reports

Your budget is a great place to start, but unless you have enormous amounts of funds set aside – you’ll need to take out a mortgage in order to own your first home. 

Without a good credit score you won’t be making much headway, so it’s important to know what your current FICO Score is, and what negative and positive items are on your report. 

So before you download CreditKarma, or a similar credit tracking app – you should request a copy of your actual credit reports from AnnualCreditReport.com 

Many people don’t know that CreditKarma, NerdWallet, and similar “credit tracking apps” are actually educational scores based on the models that banks may use. 

Key words: may and educational

You need to see the real deal, your actual reports. 

First thing you should do is check for inaccuracies. Inaccurate data needs to be disputed to the credit bureaus, and removed from your credit.

If your credit is in bad shape, head over to our guide about improving your credit. 

5 Tips to Improve your Credit Score

This guide will help you understand all the different aspects, and provide you the opportunity to improve your credit. 

Buying a home with poor credit is feasible, but it’ll cost more in the long run and be much more difficult to get approved for a mortgage.

Tip #3: Work with Professionals

After you’ve figured out your budget, and reviewed your credit – it’s important to assemble the right team.

Bottom line, if you’re looking to buy a home, you need these professionals:

Loan Officer – a licensed individual that generates loans and assists customers with the paperwork needed to complete a loan application. 

Real Estate Agent – a individual who represents buyers (or sellers) in a real estate transaction

Closing Attorney – an individual who represents the lender, and someone who ensures documents are understood and completely filled out.

Risk Advisor – More commonly known as an insurance broker, this individual will help you obtain home insurance, and a home warranty

I would highly recommend checking reviews, licensing, and overall feedback from your community – in order to choose the right professionals to form a long term relationship with. 

Having this team of professionals will make the home buying process much easier, and likely a lot quicker.

Uplift Insurance Group is actually an insurance broker, so if you want to shop your policies – you can call us or submit this form

Get a Quote


Tip #4: Consider House Hacking

So what do you do if you don’t earn enough money to cover the entire monthly mortgage payment?

Well maybe you can consider house hacking.

House Hacking is a strategy in which the individual purchases a 2-4 unit multi-family property, moves into one unit, and collects rent from the rest. 

You’ll want to consult with a licensed loan officer first, but in some cases you can use the projected or current income from the other units, to help qualify for the home. 

This is an extremely useful strategy, and many self-made millionaires claim to have started in real estate, by house hacking. 

Sure, it can be nerve racking to become someone’s landlord – but you live next to them, what could go wrong?

Just remember that nobody is a natural at anything. Everyone has a learning curve, and if someone else can do it – so can you.

Tip #5: Consider Down Payment Assistance

Maybe you have the income, and the credit – but you haven’t saved enough for the down payment? Down payment assistance can be an option. 

However, it’s important to understand how down payment assistance works. 

It’s essentially a small loan, that you pay off alongside your mortgage payment. Down payment assistance programs will finance the down payment, typically like any other secured loan. 

So it’s important to make sure you make enough to cover the mortgage AND the down payment. Both payments will have their own principal and interest. 

If you can wait, and save on your own schedule – you’ll save money in the long run, due to the interest you’ll be charged for the assistance. 

So unless you have extremely high income – it’s better to just get your monthly budget together, and start saving in preparation. 

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