Having a good credit score is crucial for obtaining a favorable mortgage rate. Be sure to check your credit score, and if needed, work on improving your credit before you start the home buying process. Traditionally, your credit score should be at least 620, but ideally to get the best interest rate, your score should be 740 or above. Some mortgage companies might have a specific minimum credit score requirement but the higher your credit score is, the better interest rate you will receive.
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# Top 10 Tips for First-Time Homebuyers

Buying your first home is an exciting life event, but starting the process can feel overwhelming without proper guidance. From determining a realistic budget, house hunting, and making the offer, to the final walkthrough, there are many steps involved in ensuring your first real estate transaction is a success. It is best to work with an experienced real estate attorney to help you through the process, but below, you will find 10 tips to help first-time buyers prepare for and navigate the homebuying process.

## 1. Determine your budget

Determining what you can afford and setting a realistic budget should be the first step in your home buying process. Consider your yearly income and expenses, and how a mortgage will impact these expenses. If you have a fixed income, calculate a reasonable monthly mortgage payment and factor in all the additional expenses that come with being a homeowner like property taxes, insurance, and repairs. If you have a commission-based position or if your income fluctuates, it will be essential to determine what your baseline monthly income is before calculating what you can afford. Online calculators are a helpful tool to estimate mortgage payments, though we always recommend budgeting conservatively because of the associated expenses in buying a home.

It is important to note that you should factor the expense of a down payment into your budget. The standard used to be that your down payment should total 20% of the home’s value, but, according to The Boston Business Journal, Massachusetts homebuyers are only putting 13% of the home’s value on a down payment on average. There are many variables that impact how much you should put down on a house, like first-time homebuyer programs which are explained in tip #4.

## 2. Credit score

Having a good credit score is crucial for obtaining a favorable mortgage rate. Be sure to check your credit score, and if needed, work on improving your credit before you start the home buying process. Traditionally, your credit score should be at least 620, but ideally to get the best interest rate, your score should be 740 or above. Some mortgage companies might have a specific minimum credit score requirement but the higher your credit score is, the better interest rate you will receive.

## 3. Get pre-approved for a mortgage

Getting pre-approved is often overlooked, and homebuyers will sometimes start attending open houses without knowing their budget. Potential buyers should take the time to compare and shop around for mortgage lenders and rates to ensure they find a rate and lender they are most comfortable with. Keep in mind there are different types of mortgages, such as fixed-rates or an adjustable-rate mortgage. Before committing to a mortgage, take the time to understand the terms of your agreement with the bank as well as the associated costs. Obtaining a pre-approval letter prior to house hunting will give you a clearer sense of your budget and also communicates that you are a serious buyer to sellers.

## 4. Research first-time home buyer programs

Many governments and organizations offer assistance programs for first-time homebuyers. In Massachusetts, first-time homebuyers are only required to put down 3% to buy a condo, single-family home, or two-family home instead of the more substantial 20% down payment. Research what programs are available to you in your region and see if you can qualify for any discounted rates or lowered payments to support the buying process.

## 5. Consider additional costs

Once you have budgeted for your down payment and mortgage rate, the next step is to prepare for the additional costs that will arise during the closing. Closing costs on a mortgage loan can be anywhere from 3%-6% of your loan balance. This covers agent fees, attorney fees, title searches, appraisals, legal fees, insurance, and taxes.

Other additional costs that may be relevant during your transaction are monthly homeowner association (HOA) fees, and repairs and maintenance your new home might need. A good rule of thumb is to save 1% of your home’s value for any repairs or maintenance.

## 6. Location

Research your neighborhood to find a location that fits best with your lifestyle, commute, and any future plans. It is possible that your dream home is located in a great school district, but isn’t very walkable or accessible to public transportation. You need to determine your priorities as a homeowner to see what you may or may not be willing to compromise on. We recommend considering things like local amenities, crime, school districts, curb appeal, and transportation.

## 7. Seek legal expertise

Retaining a seasoned real estate attorney is critical as a first-time homebuyer because they will protect your interests, guide you through the process, and provide peace of mind during the biggest purchase of your life. An attorney will help you identify potential risks and take the necessary steps to mitigate them. By leveraging expert guidance, you will have an added layer of protection against unforeseen legal complications or disputes.

## 8. Use a qualified real estate agent

Hiring a real estate agent who is familiar with your target neighborhood is essential in helping you find your dream home. Real estate agents can properly advocate for you and negotiate on your behalf while guiding you through the home buying process as a third party. A quality real estate agent understands the local housing market and can provide insights you may not otherwise have, potentially saving you from buyer’s remorse.

## 9. Hire a certified home inspector

A home inspection is one of the final steps in the home buying process, and hiring a qualified home inspector to assess the property’s condition is paramount. Massachusetts is a non-disclosure state and there are no legal requirements to provide a disclosure form to prospective buyers. Home inspectors will look for any prior damage including water damage, roof cracks or leaks, pests, and lead paint. The home inspection ensures that you have a complete picture of the property’s issues so that you can make an informed decision about the purchase and negotiate the transaction.

## 10. Long-term planning

When purchasing your first home, it’s wise to not only consider if it’s the right fit for your life now, but also if it will meet some of your long-term needs for a home. Think about resale values on the property and how this home may, or may not, work for your future. For example, if you plan to have children, are the school districts good? If you have older parents, is the home accessible to them? It is worth considering these different chapters of your life before making this major financial investment.

Remember, the home buying process involves many steps, and it is crucial to work with professionals such as a real estate agent, mortgage broker, and real estate attorney to guide you through the process. If you are thinking about buying your first home, contact experienced real estate attorney Matthew Arakelian at Ligris + Associates.

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