5 Tips for First-Time Homebuyers

1. Determine how much you can spend and stick to it. 

Let’s say you’ve found a great-looking home. You tour it –you see the interior, the yard, the garage, and you’ve fallen in love with the location. You’re definitely interested, but you’re not sure it’s in your price range. Before you even start browsing, it’s crucial that you determine what you can afford. Also, consider what your ideal price range is. To help you get started, you can use the BECU Mortgage Calculator. It can help you determine the maximum monthly payment you can afford based on the price of the home after you make a down payment.

Make sure your monthly budget considers the total mortgage, interest, taxes, and insurance. You can enlist the help of your BECU Mortgage Advisor to help you arrive at that figure: ask what BECU may be able to lend you and at what interest rate (the amounts can change). Once you add estimated property taxes and insurance, you’ll have a guestimate at your monthly payment. Can you afford to pay that figure every month? Will you be able to pay that plus your existing expenses? What if property taxes go up – can you stretch your budget to accommodate increasing taxes over the years?

Answering these questions honestly will help you determine what you can afford and how expensive of a house you should seek. In fact, arming yourself with this ultimate affordability number is the best thing you can do before you shop. If you fall in love with a house but the monthly payment ends up being more than you can afford when including all your other fixed expenses, don’t try to rationalize – it’s time to move on.

2. Make a short list of your non-negotiable. 

Before you start seriously shopping, consider your lifestyle and values. What features would enhance your well-being? And what would make you miserable? From there, make a list of non-negotiables, says Roberto Manalo, Executive Vice President of Prime Alliance Real Estate Services* – from location, to square footage, to amenities – that you must have in your future home. This will also help guide your realtor.

“The best way to gauge your options is to visit open houses in the area and get acquainted with the local market,” Manalo says. “Visit homes that are both above and below your budget to see how values differ with features and location.”

Periodically reevaluate your list as you gain a better sense of what's out there, and compare it to what you want. 

3. Use an experienced realtor who knows the area and the market. 

Your realtor can make or break your home buying experience. If you know where you want to live, try to get a realtor referral. Start by asking friends, family or friends of friends who live in your area of interest for recommendations. You can also ask BECU about Real Estate Services, which pairs you with a vetted agent who knows the area best. Plus, the service may result in cash back after closing on your home.

“A good realtor has knowledge of the area – a great time saver – and more important is his or her ability to listen and execute what you are looking for,” Manalo says. “A good realtor will be in your corner until the closing, and in many cases, beyond."

4. Stay informed and educated 

Be vigilant in staying informed on your own during the home-buying process. Always be educated enough to know what to expect, because the unexpected is commonplace. Here’s a quick list of some things you can do before and during your search that will not only give you some peace of mind, but keep you in the running for the house you really want:

Make sure you have earnest money.

Earnest money is what you’ll pay when you make an offer on a house. It usually ends up being 1 to 5% of the total purchase price, and is held in escrow while the terms of the offer are being negotiated. If the offer is accepted, the earnest money is applied as part of the down payment you’ll make. 

Some things to remember about earnest money:

• It can be refunded if purchase negotiations fail or if an inspection results in some deal-breakers. 

• It can be forfeited if you, the buyer, retract the offer, or if you default on an agreement. 

Be wise with your credit score

Your credit score has a huge role in the amount of money you can be approved to borrow for a home loan. To make sure you keep your credit score as high as it can be, don’t open any new lines of credit during the application process – no credit cards, loans, etc. Doing so can have a negative effect on your score, which can also affect your eligibility for a home loan. This is particularly important in competitive markets, with sellers reviewing multiple offers. Also, keep balances as low as possible, and set up auto-payments to make sure you don’t miss any payments. 

Want to know some good ways of building your credit score before buying a home? Check this out.  

Be prepared to show documentation and records

Lenders will want to see a lot of your personal financial records before they approve your loan. Depending on circumstances, lenders could ask for a multitude of documents, including but not limited to:

• W2s or tax returns from the previous two years

• Proof of employment/income

• Recent paystubs

• Current homeowner’s insurance policy (if applicable)

• Bank statements

The better prepared you are, the smoother your experience will be!

5. Ask Your mortgage advisor about expected closing costs 

Closing costs, which don’t include your personal packing and moving costs, can vary widely. Typically, they include the cost of hiring a home inspector to make sure the home is functional and has no mechanical or structural issues. Also, you may have to pay for a home appraisal to evaluate the home before the sale. You will also have to factor in other costs, such as title insurance and escrow fees when you close your loan. As for the realtor’s commission, that’s paid by the seller, not the buyer. Lenders offer different rates and fees to complete the loan, so shop around and consider the annual percentage rate for the loan.  

BECU offers competitive rates on a variety of loans, and a knowledgeable staff with decades of experience in the mortgage and real estate industry. Check out our loans and rates, or get in touch with a mortgage advisor today at 800-233-2328 ext. 5722

*Real Estate Services is a program provided by Prime Alliance Real Estate Services, LLC and is not affiliated with BECU. OneSource Solutions, INC is not affiliated with BECU. Certain restrictions apply. Offers subject to change without notice.

Additional Resources: 

As a credit union, BECU is rooted in the principle of people helping people. To that end, BECU provides plenty of free financial education to aid members’ financial journeys. Start with this handy guide here!

You can also sign up for an in-person seminar, at-home webinar or even take a self-guided course on purchasing a home. Whatever the learning you continue to do, be confident that a knowledgeable buyer is often a successful buyer!