Despite the economic downturn caused by the COVID-19 crisis, mortgage rates are at historic lows. There is also a good supply of houses for sale on the market. That is a combination that is creating a glut of first-time homebuyers. If you are a first-time homebuyer, here are three particularly important things the experts say you should be doing right now!
1. Work With a Lender
If you’re completely in the dark about whether you qualify for a mortgage—which is common if you are a first-time homebuyer — start by talking to a lender or a mortgage consultant. They’ll often start with basic financial questions about your income and assets. However, the real clarity comes when you apply for a loan.
Financial advisers say the most powerful tool you can have when shopping for a home is to be “Prequalified” by a lender or mortgage broker. A good lender can help you to get your finances in order and get you “prequalified” for a loan that makes sense for your budget and financial goals.
2. Compare Your Goals With Your Financial Potential
It might be frustrating to see friends and family become homeowners while you struggle to make rent. But keep in mind that motivated buyers are often willing to make serious sacrifices for homeownership. What may look to you like a simple transaction might really be the fruit of years of saving, working extra jobs, and living well below their means in order to access homeownership. Or they could have inherited money they used to make a big down payment.
Whatever the case, every situation is unique, so don’t compare yourself. Instead, look at your personal financial goals, and think about what you may be willing to do to achieve them. If homeownership is your ultimate goal, figure out how much more you need to earn to buy a home. Once you have that number, you can move onto step two: increase your income or decrease your spending.
Do you get another job? Cut back on expenses? Ask for a raise? Increase your skillset (and income bracket) by getting a specialized certification or going back to school? Obviously, this isn’t a quick-fix solution, but buying a home can take years. So don’t worry if you need more time.
3. Consider Buying a Home Somewhere Less Expensive
If homeownership is your dream, and you simply cannot afford to buy a home where you live now, consider moving to a less expensive city. It happens all the time for first-time homebuyers. People will move across the country to become homeowners—San Francisco to Austin, Los Angeles to Boise, Manhattan to Montclair.
This might seem extreme, especially if you have a strong network, family ties, or a job that requires your presence. But if you are a motivated first-time homebuyer, sometimes moving is just part of what you have to do if you happen to live in a pricey city.