Jumping into the real estate market for the first time can be a daunting task. Simply looking at the wide variety of available homes for sale shadows the process that goes into mortgaging a home. By making yourself aware of this process and carefully formulating a mortgage plan tailored to your unique situation, you stand to be advantaged among first-time home buyers in MD and will be able to better navigate the current competitive market.
Review Your Financial Situation
Before hopping on the real estate websites and seeing what is available, you need to review your financial situation. Assess your debt such as credit cards and loans. Paying off your debt will grant you a better interest rate and reduce the potential risk for the lender. Checking your credit also allows you to gain an idea of where you stand financially and what types of loans you may qualify for. Once you have gathered all of your necessary financial information, you can properly access all of it to determine your budget for your mortgage and down payment. When considering your budget be sure to include property taxes, homeowners insurance, regular maintenance, and a fund for emergency repairs.
Pre-Approval and Pre-Qualification
Gaining insight into what your home buying costs are going to be is extremely valuable to first-time home buyers in MD. Pre-Qualification allows you to find out how much you may qualify to borrow, what your spending budget is and what your monthly payment could end up being. The pre-qualification process will go over your debt-to-income ratio and your overall financial situation to understand your ability to pay back your mortgage loan. A majority of sellers will not consider an offer without pre-qualification. A pre-approval letter is from a lender which says how much of a mortgage you will qualify for. This will show the seller how much you will be able to offer on a home. A pre-approval works wonders in having a seller take you seriously as it shows your ability to make the purchase and adds a great deal to your appeal as a buyer. Both of these preliminary measures will greatly increase your chances of securing the home of your choice.
The down payment is a major factor in determining your mortgage costs. Generally, the higher downpayment you can afford, the better. Lenders prefer higher down payments as it reduces the risk that they take when lending you money. As a rule of thumb, a 20% down payment will result in lower interest rates and a shorter loan term. If you cannot afford 20%, fear not. Down payment assistance programs and first-time home buyer programs exist to assist buyers with down payments. Be sure to explore all of your options with your mortgage lender to find a program that applies to your situation.
Finding Your New Home
Once you have completed the preliminary steps previously mentioned, it is time to start searching for your new home. By understanding what you can afford and how much you qualified to get loaned, you can refine your choices and find homes that you can afford. First, you need to list your needs and wants. It is much more important for you to find a home that meets your needs rather than your wants. Next, find out what type of home you want. Single-family homes, duplexes, condominiums, and townhomes are available with varying specifications that should be selected based on your personal preference and budget. After the type of home is selected, pick a neighborhood that works for you and meets your criteria. Look for neighborhoods with good schools, low crime rates, low property taxes, and potential for growth and development. This is an important step as it will determine the future value of your home. When looking, be patient and don’t panic buy. Jumping the gun on a home purchase is a common mistake made by first-time home buyers in MD. The market is constantly fluctuating, meaning that the homes currently listed will be sold and replaced with newly listed homes every week.
Making an Offer
Before making an offer, shop around with different mortgage lenders to secure the best rates available. Consider closing costs, points, and lenders’ fees and weigh them against each other to find a mortgage plan that works best for you. Once you have selected a lender and are sure about a home that you have found, you are ready to formulate an offer. The stronger the offer you make, the better chance you have of securing the home. Making a strong offer includes making a larger down payment and limiting contingencies. Making a larger down payment shows the seller that you are ready and able to make the purchase. Limiting contingencies such as insurance, financing approval, and home inspection clears the path for a sale and makes it easier and more attractive for the seller. By making the best offer possible you separate yourself as a serious buyer which is highly important in a competitive market.
While we have gone through how to properly prepare to make a first-time home purchase, there still exist several strategies that should be implemented in order to gain an edge in the current competitive market. First comes bidding. In 2021, over half of the homes listed sold for higher than the asking price. If you intend on purchasing the home that you are bidding on, remember that you are bidding against other buyers and not trying to secure a bargain. Next comes cash offers. If you can afford it, nothing beats the attractiveness of a cash offer. This appeals to the seller due to its relative simplicity and quick transaction speed. Letters of intent are away to ensure the seller that you are determined and committed to making the purchase as well as establishing a personal connection with the seller. Gaining a competitive edge over other buyers through these strategies is the best way for first-time home buyers in MD to secure the home that they aspire on living in.
Expert Brokers for First-Time Home Buyers in MD
The current competitive market has put a strain on first-time home buyers in MD, however, by following the aforementioned steps, you greatly increase your chances of securing the home you want for a price you can afford. Even with all of this beneficial information, having a professional mortgage team in your corner is the best thing you can do to increase your likelihood of success. Federal Hill Mortgage’s team of experts is ready to work with you from start to finish to find the perfect mortgage plan that fits your specific needs. Contact us today to get started!