Affordable housing and a good economy in Central Indiana are some major factors inspiring first-time home buyers to take the leap into home ownership. But many in this group, particularly millennials, want to make sure they’re doing everything right to take advantage of this opportunity. At F.C. Tucker, we believe every potential home buyer deserves accurate information and the expertise of agents backed up by a real estate firm with a stellar reputation. We’re offering some tips to get first-time homebuyers through this daunting, but exciting process stress -free:
1. Know when you’re ready
Many factors play in to that perfect moment to take the leap into home ownership, such as how much house you can afford based upon your current budget. It’s important to take all additional costs that you will encounter during the sale into account when making this calculation, such as insurance and taxes. Also consider extra expenses you will incur owning the home, such as upgrades, maintenance, landscaping, utilities, homeowner association dues, private schools and commuting.
2. Keep your search tools local
Just as you wouldn’t trust some big national retailer to tell you what’s available at any given moment in your local store, don’t put your faith in online services that are not affiliated with a local real estate company. Our Property Search online app and free Talk to Tucker mobile app have the most updated, accurate information for listings across the state of Indiana, because they’re updated in real time by our agents in the field.
3. Reduce debt and increase disposable income
To qualify for a conventional mortgage, your monthly debt-to-income ratio should be 43 percent, or lower if you have a low credit score and not much cash in the bank. Now is the time to reduce your debt and build up your savings. Put off opening any new lines of credit or making major purchases, that would increase your debt-to-income ratio. Pay down credit cards and pay off installment loans, such as your car payment, to reduce your overall debt obligation. Increasing the amount of your disposable income will signal to lenders that you likely will not have trouble making monthly payments.
4. Pay down, but don’t close, credit cards
Many first-time home buyers wonder whether they should get rid of unused or unwanted credit cards once they have paid off the balances. While it’s important to pay down balances to increase your credit utilization ratio, having cards with high credit limits and low balances can actually work in your favor. Revolving credit carries more weight than installment loans in calculating your credit score, and can indicate to lenders that you have been uber-responsible by not maxing out your available credit.
5. Don’t change your job or career
The best mortgage applicants are people whose employment is stable, so when you are looking to buy a home, don’t change jobs. Furthermore, don’t abandon one career path for another. If you’ve been a practicing attorney for the past five years, for example, now is not the time to pursue your dreams of starting a cat-sitting service. A mortgage loan is a long-term commitment, and lenders want to know you’re up for the task.
6. Spare yourself the heartache
If you’ve found the house of your dreams on a national real estate site, and then learned it’s no longer available or selling for thousands more than the price quoted on that site, you’re not alone. The information on these sites, which don’t follow accepted industry rules and practices, can be off by as much as 20%. Turn to local agents and local search engines for the most accurate and complete information.
7. Don’t just look for a home, find the perfect neighborhood
When searching for a home online, drill down into neighborhood information to pinpoint homes in your price range. We all want different amenities in our community to enhance our quality of life. For some home buyers, schools are very important. For others, it’s access to restaurants or commercial districts, or streets that are walkable and bicycle-friendly. Use our online search tools to find the neighborhoods that best suit your needs, then take time to visit those neighborhoods at various times of the day to see if they’re a good fit for you and your family.
8. Create that tried-and-true list of ‘needs vs. wants’
Having a list of needs vs. wants on-hand when searching for a home helps you avoid any ill-fated decision based on emotion. The “need” column can be pretty basic, such as the number of bedrooms and bathrooms, a fenced-in yard for the dogs, hardwood floors for family members who have allergies and the school district of your choice. The “want” column might include a hot tub or pool, a skylight in the family room and a built-in, dual-zone thermoelectric wine cooler. Whatever your list of needs and wants, the simple act of creating one can help you make good decisions when shopping for your first home.
9. Ask good questions of your real estate agent
Beyond knowing that your agent is ethical and trustworthy, you’ll want to be sure they have the right experience and will devote their time to working with you. Ask if they specialize in assisting first-time home buyers, and if they will use their expertise to walk you through the process of buying a home. You might also ask them how familiar they are with neighborhoods you’ve identified as a good fit for your needs. An agent who knows the area will be able to locate homes coming on the market in that community more quickly.
10. Trust your agent
If you are buying for the first time, it’s good to acknowledge that you need help. An experienced agent with knowledge of the home buying process, neighborhoods and schools is the best partner for this exciting new step.