Setting yourself up for successful homeownership begins long before closing day. From applying for a mortgage to saving for incidentals, there are multiple steps involved in preparation. Ensure you enter the real estate market on the right foot by following these three tips.  

3 Preparation Tips for First-Time Home Buyers

1. Pay Off Debts

There are multiple expenses involved with owning property. Along with the mortgage payment, you also need to carry insurance and cover the cost of maintenance and repairs. To ensure you can feasibly afford these expenses, it's best to enter into the contract when you're debt-free. 

Evaluate your current debts and create a plan to pay them off within a set timeframe, such as 12 to 36 months. Not all debts are going to fit into this plan, including student and auto loans. However, you can still work to eliminate all unsecured debt, like credit cards, to significantly reduce your overall financial obligations. 

2. Build a Savings

While a loan covers the bulk of the property cost, real estate transactions require most buyers to cover certain expenses out of pocket. For example, down payments of 5% to 20% of the purchase price are standard with conventional loans. FHA loans are lower, with 3.5% down. You also face closing costs, which end up being another 2% to 5% of the property price. 

Depending on the area and size of property you buy, you can easily end up facing upfront expenses of $10,000 or more. As such, it's essential to begin saving as soon as possible. Once you have the cash available, you can get serious about entering the market.

3. Evaluate Mortgage Options

There are multiple loan options on the market, including conventional, FHA, and VA. The type you choose can have a serious impact on your long-term costs as well as your financial comfort. For instance, a mortgage with a lower down payment requirement is easier to access in the short-term, but you end up paying more in interest over the life of the loan. 

You also need to consider the interest rate — fixed or adjustable — and the duration — 15- or 30-year repayment. To determine which one is right for you, research your options and use a mortgage calculator to help you estimate the costs. Then, determine which loan style works best with your financial circumstances. 

Are you ready to buy your first home? Enter the real estate market with leading Realtors® by your side from EXIT Realty Nexus in Coon Rapids, MN. The local agency takes pride in its personalized approach, providing exceptional service to buyers and sellers across Anoka county. Research local properties today on their website, and find the right agent for your needs at (763) 548-1400.