Here's what first-time homebuyers need to know in Dallas | Ft. Worth!
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Homes in Dallas - Ft. Worth have been in tight supply over recent months, and this has left many first-time homebuyers on the sidelines. In a recent report, first-time homebuyers were responsible for just 29% of all sales. Historically, they have made up 40% of all buyers.
In order to get into a home, some buyers are blowing their budget. In 2021, 28% of first-time homebuyers purchased homes above their initial estimate.
Yet creating a budget is very important before you decide to buy a home. Here’s what you need to know.
Your down payment
A down payment of 20% of the home’s cost may get you a more favorable interest rate and help you avoid paying for primary mortgage insurance or PMI.
Typically, PMI premiums range from $30 to $70 per month for every $100,000 borrowed. That said, you don’t need to come up with such a large amount of money for a down payment.
Typical first-time homebuyers put down 7%, according to the National Association of Realtors. Some loans allow you to go down to 3% or 3.5%. You don’t have to put anything down, or pay PMI, if you get a loan through the Department of Veterans Affairs (VA Loan).
There is also assistance available to those who qualify, including grants and forgivable loans. Check with your state and lender to see what is available in your area. Our experienced agents can also guide you if you believe you may qualify for assistance.
Figure out your monthly payments
Just because you get approved for a certain mortgage amount doesn’t mean you should spend that much.
First, look at your monthly expenses, such as car loans, phones and daycare. Then, figure out what you can afford to spend each month on a mortgage payment, and make a decision from there. Remember, you’ll also be paying property taxes to local taxing authorities, which is based on the assessed value of your property and your city's tax rate. On top of that, you’ll have to pay homeowners insurance.
You can also look to make cuts in other areas of your budget in order to afford a higher payment, as well as looking into locations that may be less expensive. As people are deciding not to return to the office five days a week, they are moving farther away, said Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors.
“Younger buyers are moving to small towns and suburban areas,” she said.
Account for other expenses
It's wise to have at least a few months of mortgage payments saved before you buy a home. This way you are protected if you have any disruption in income.
Also, have some money in reserves for the unexpected. Something may break once you are in the home or you may want to decorate it or change the finishes within the home.
There are also regular costs to homeownership, such as potential homeowners association fees or or lawn equipment to maintain the property, as well as utilities such as heat and hot water.
There are a number of fees involved in the home-buying process, wrapped up into what is generally referred to as closing costs.
They include things like an application fee, lender appraisal of the home’s value, escrow fees, homeowners insurance, title insurance, credit report, loan origination fees, title search fees and recording fees.
Closing costs typically add up to between 2% and 5% of the home price and is due at the time you close on the house.
Don’t waive home inspection
In this competitive market, some buyers are waiving home inspections, which look at things like the electrical system, roof and condition of the plumbing, heating and air conditioning systems.
About 23% of buyers bypassed inspections in August, according to the National Association of Realtors.
This can be very dangerous, as there are things we don’t notice and we don’t have the experience to determine if a small issue can become a larger problem. If something goes wrong, it could end up costing you a lot of money.
Searching for your dream home can be a time-consuming and stressful experience if you are not prepared, or if you don't have an agent with the right expertise. When the time comes that you are considering buying your first home, don't let these things cause more of a headache than they need to.
Working with our professional team will make the process much more efficient!
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