4 Important Tips for Future Homebuyers

You’ve saved up for years, you found an experienced buyers agent in inner west Sydney and now you’re hoping to finally take the plunge into the housing market.  You’re ready to look up real estate listings, go to open houses and enter some bidding wars, all in the hopes of getting your very first house.  

Before you make any big decisions, read this list of important tips for future homebuyers.

1. Determine Your Down Payment 

Before you make an offer on a house, determine what your down payment will be. The size of the down payment will influence certain factors in your mortgage. For instance, putting a smaller down payment could lead to a longer term, a higher interest rate and a requirement to apply for mortgage insurance. Mortgage insurance is meant to protect your lender in case you default on your mortgage payments. 

What is the standard for a down payment? It all depends on the price of the property, your personal budget and your state of residence. When you look at mortgage downpayments by state, you can see a huge range between downpayment sizes. For California and Hawaii, the median down payment is $100,000. For West Virginia, the median is only $11,000.

2. Learn Your Mortgage Terms

Before you sign the dotted line, you need to learn certain terms. These will help you make the right decision for your budget so that you don’t put yourself in a tricky financial spot months down the line. 

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These are some terms you should know:

  • Fixed-rate mortgage means that the mortgage rate (interest) will not change until the contract is renewed or refinanced. 
  • Variable rate mortgage means that the mortgage rate (interest) varies over time. It follows the fluctuations of the market interest rate (aka. the prime rate). If the prime rate is high, your mortgage payments will go more toward the interest than the principal, making your amortization period longer. 
  • Open mortgages allow owners to make early or additional mortgage payments.
  • Closed mortgages do not allow early or additional payments.

If there are terms that your lender uses that you don’t understand, ask them to clarify. You’ll want to make an informed decision. 

3. Don’t Forget About Closing Costs

A simple mistake that a lot of homebuyers make is that they focus so much on saving up for the down payment that they forget about the closing costs. The closing costs for a house can be quite significant — they typically range from 2%-6% of the home’s purchase price. 

The National Association of Realtors found that the median US house price is approximately $400,000 this year. So, if you were planning to buy a home at $400,000, your closing costs could potentially range from $8,000 to $24,000.

Talk to your lender to see exactly how much you should set aside for the occasion. As a precaution, always try to save up a little more, just in case. You can always use the leftover savings for another purpose, like an emergency fund.

4. Build an Emergency Fund 

Homeowners have to deal with emergency repairs and replacements at a moment’s notice. Without an emergency fund, it will be difficult to manage these urgent expenses out of pocket. You might not have enough in your monthly budget to resolve these emergencies — at least, not without impacting your ability to cover your usual essentials like mortgage payments and utility bills. 

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What can you do? In that case, you could go to a website like CreditFresh and see whether you’re qualified for a personal line of credit loan in your state. With all of the qualifications, you can apply online. 

An approved personal line of credit loan could help you cover the emergency expense in a short amount of time. Once the expense is dealt with, you can focus on repaying the line of credit loan through a simple billing cycle. 

You should only use line of credit loans for emergencies. They are not meant for non-emergency expenses, like groceries, mortgage payments or home improvements. 

You should be ready to go house-hunting now. Follow these tips and find the property of your dreams!



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