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Being a first-time home buyer can be scary. There’s a lot that goes into buying your first home, both emotionally and financially. But we’re here to help – here are a few things we think you should know/expect about buying your first home and taking a big step toward “adulting”!

Take it from us – we know that deciding to buy your first home is a big deal! It probably feels a little overwhelming, daunting, exciting, and nerve-wracking all at once. We get it! Though the process seems extensive, it’s easy to say that purchasing your first home is one of the best decisions and investments you’ll make in your lifetime. As with anything else, it’s good to know what to expect as you enter the process. We love helping set first-time buyers up for success when they start shopping for homes, so we’ve put together some thoughts on what you should expect as a first-time home buyer in 2021.

Today’s Trends – Where the Market Stands It’s no secret that the COVID-19 pandemic affected the housing market just like it affected almost every other aspect of our daily lives. However, as we approach the midway point of 2021, we see markets recovering and feel some sense of normalcy taking place again. At this time last year, home sales were at the lowest levels we have seen due to the stay-at-home mandate that most of the world experienced. Now, the housing market is so competitive some people are wishing they would have made their big purchase a year ago. Here are some market trends you should know in 2021:

  • Low Inventory, High Demand. This is the definition of a seller’s market. So many buyers are now looking to purchase homes that there aren’t enough houses to go around. This has led to a highly competitive market in which sellers are receiving dozens of offers, most of which are over asking price. Demand is high, which means home prices are the highest we have seen in quite awhile. However, that doesn’t mean now isn’t the right time to buy! Depending on your financial situation and your credit score, it’s worth putting your name in the hat for a home that you have fallen in love with.

  • Historically Low Interest Rates. Because of the economic decline due to COVID-19 in 2020, the federal reserve lowered interest rates to stimulate the recovery of the economy. This is good news for home buyers because it can save you a ton of money on both your house payments now but also on your long-term mortgage. If you can get a mortgage rate somewhere between 3%-5%, that’s a good interest rate for your purchase.

  • Housing Affordability is Declining. This trend might be here to stay for a while – so now might really be a good time to buy your first home, even if it is in the midst of a very competitive market. Eventually, the market will balance out and it will turn into a buyer’s market. But when? No one can be sure – so now might be the best time to go ahead and make your investment in a home.

Here’s What to Expect Financially It’s no joke that purchasing a home is a big investment financially… but how big? Here are some costs you should account for when you are considering buying your first home.

1. Down Payment. In a perfect world, everyone would be able to put 20% down on their first house. However, if you can’t swing 20%, there are other options. You can put less money down but you can probably expect a higher interest rate and monthly payment. Let’s do the math:

  • For example, if you are looking at a $300,000 home, a 20% down payment would be $60,000, 10% would be $30,000 and 5% would be $15,000. Always run the numbers first!

2. Closing Costs. These tend to be the second-largest expense for homebuyers when they actually seal the deal on a home. When considering what you can afford in a home, you need to know that closing costs don’t go into the home but cover lender and third-party fees.

  • Again, for a $300,000 home, you can expect closing costs to amount to between $6,000 and $15,000.

3. Property Taxes and Homeowners Insurance. These are pesky costs that add up over time, but they are important to consider when you’re thinking about how much in a monthly payment you can afford. Property taxes are usually bundled into your total monthly payment and you have plenty of options to choose from for homeowners insurance.

Now, of course, this isn’t an exhaustive list of all the costs you should expect when buying a home, but it’s a really good start. Do your research and understand what all you’ll need financially before you start the process. It will save you a lot of unnecessary stress down the road!

Credit Scores Matter – Here’s Why! As a credit software tech company, we understand how crucial it is in the home-buying process to maximize your credit profile in order to get financing. Here are two areas that credit scores can make a big difference in your home buying process:

  1. Loan Amounts. If you have a good credit profile, you are going to qualify for a higher loan amount – it’s as simple as that. So, before you fall in love with a house that might be on the upper end of your price range, make sure that your credit profile checks out and that you can actually qualify for that amount!

  2. Interest Rates. This is a biggie because it not only affects how much you’re paying right now, but it will also affect your monthly payments for up to 30 years. Having a good credit profile can save you half a percent (or more) on your interest rate, which could lead to tens of thousands of dollars saved over the long run. We help people maximize their credit profiles so that they can get these major savings in their home buying process.

All in all, deciding to buy your first home is one of the best decisions you’ll make in your life. It’s not only a great investment financially, but it will also be a central point in your life – whether it be enjoying it with great friends or family. Hopefully these tips help you to understand more of what to expect as you look at buying your first home. As always, we are here to help in any way that we can! With that said, happy home shopping!

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