How To Buy Your First Home

9 Basics Steps To Finding and Purchasing Your First Home

Buying your first home is considered one of the biggest milestones, both in life and in regard to your finances. It’s a big commitment, and there’s a good chance this will be the largest purchase you’ve made to date.

As you prepare, here are the steps to follow as you purchase your first home.

Key Takeaways

  • Make sure your finances are in order before you take the first step toward buying your first home, which means paying off debt and establishing emergency savings.
  • Do your homework to learn about all the available loan types, then compare their terms to determine which is best for you.
  • Get preapproved for a bank loan so you have a good idea going in as to just how much you can spend to buy a home.
  • Find a good real estate agent who can guide you through the homebuying process and the details of closing on the deal.

Determine Whether You Are Ready to Buy a Home

First, you should determine whether you are ready to buy a home. Homeownership can be more expensive than renting, since you’re ultimately responsible for added costs like home repairs, utility costs, garbage pickup, water, and electricity.

You also need to pay for taxes and insurance related to your home. These costs add up quickly, and if you are not financially prepared, you could end up in a bad position—especially if you only have one income.

In addition to establishing an emergency fund, consider getting out of debt (or at least reducing your debt) before applying for a mortgage. While having debt is not a deal breaker, lenders will use your debt-to-income ratio which shows how much of your income goes toward debt repayment each. This ratio helps lenders determine how mortgage you can handle, mathematically.

Note

If you’re not sure you can afford a home, try sticking to a budget with what you expect your home payment will be, and put the extra money in savings. This can build your confidence and your savings strategy so you can move forward with the home purchase.

While you may be under pressure from friends or family to buy a home, it might make sense financially to wait until you’re truly ready.

Start Shopping for a Loan

Most people need a loan to make a home purchase. In many cases, it makes sense to get preapproved for a loan before you begin shopping for a home. Your preapproval can provide you with an idea of how much you can afford.

If you want more options, consider using a loan agency. With a loan agency broker, you have access to several different loan companies and programs, which can help you find the best rates. However, your small local bank or credit union may have options that will save you money as well.

Find the Best Payment Options and Loan Types

When it comes to your mortgage, you may be surprised at the different loan types and payment options available. Looking at terms of ageement can become overwhelming, but a little research can help you move forward.

Some buyers choose a 15- or 20-year loan, because the term is shorter, and they might be able to lock in a low rate. On the other hand, one reason 30-year loans are so popular is that a longer-term usually means a lower monthly payment. In this case, you might have a slightly higher interest rate, but the payments are usually more manageable.

Preferential interest rate and floating interest rate

Currently, banks are quite cautious in providing credit to buy real estate, because the credit room for real estate is not much. Along with that, the interest rate on home loans is very high. However, if you have a good opportunity to buy a home, it is well worth it while home prices are very low compare to in the past.

Banks apply two methods of calculating interest: calculated on the reducing balance and the initial outstanding balance. Accordingly, the interest rate on the initial loan balance is usually lower than the declining balance. However, if we consider the total interest payable by customers according to the method of calculating the initial balance, sometimes it is more than the method of calculating the decreasing balance. Therefore, when taking out a loan, customers should ask the bank staff to clearly advise which method of interest calculation should be applied to get the most benefit.

In addition, preferential interest rates are also a factor that needs to be focused. Borrowers should pay attention to the term of preferential interest rates to be more active in finance. Because after the preferential period, the loan interest rate is usually floating according to the market.

Note

Watch out for hybrid loan products that offer a low, fixed rate for the first few years but then switch to a higher variable rate. You could end up with a larger payment than you expected.

Below is the Table of Interest Rates for Home Loans in February 2023:

SIR:  Saving interest rate             BIR: Basic interest rate          CE: Capital expenditures

BankPreferential interest rates (%/year)Maximum Loan Rate (%)Maximum loan term (Year)Interest margin after incentivesPenalty fee for early repayment (%)
VIB99030SIR 12M + 3,9%2,5
BIDV7,710020SIR 24M+ 3,2%1
Techcombank10,59703510,50,5-1
Lienvietpostbank7,58020SIR 13M + 3,752
TPBank5,99030SIR 12M + 3,5%3
VPBank107525BIR + 4%4
Vietcombank7,57020SIR 24M + 3,5%1
Vietinbank7,78020SIR 36M + 3,5%2
Eximbank7,497020SIR 24M + 3,5%2
Sacombank8,510025SIR 13M + 4,7%2
Hong Leong Bank11,78025BIR + 1,5%3
Shinhan Bank10,87030CE 6M + 3,93
Standard Chartered6,197525CE – 1,5%6
OCB8,4910012SIR 13M + 4,4%1
Woori Bank108030SIR 12M + 2,3%1,5
Bắc Á Bank7,99025SIR 24M + 4%0
HSBC7,757025BIR + 0,75%3
PVcomBank58520BIR + 4%0
Maritime Bank4,999035BIR + 3,5%3
UOB10,77525BIR + 1,29%0,75
Agribank7,58515SIR 13M + 3%1

Have a Down Payment Ready

Your down payment can reduce what you owe and also reduce your costs. Realize, though, that if you put down less than 30% of the cost of your home, you could end up paying high interest. While you don’t need 30% down to be successful in homeownership, it might be a good idea to consider the montly interest when you buy.

You may be considering borrowing from other sources to cover your down payment, but you should be careful when making these choices. You want to build wealth with your home purchase. If you make the wrong choice, you could end up hurting yourself financially by defaulting on your debt, losing relationships with friends and family.

Be Honest About What You Can Afford

You also need to determine how much home you can really afford. One good rule of thumb is to keep your loan, along with your taxes and insurance, between 25% and 30% of your income. Other experts advise that your home cost no more than two and a half times your annual salary.

If you spend too much on your loan, you might not be able to meet your daily obligations, let alone save for retirement. A smaller house might be worth the peace of mind. If you are carrying debt (credit card or student loan debt), a smaller home payment can be an especially good idea.

Find a Good Real Estate Agent

Once you have determined how much you can really spend and are preapproved for a Home loan, it’s time to find a good real estate agent. This is one of the most important steps when preparing to buy a home.

Your agent should support you at every step of your homebuying process while carefully considering your wants and needs. They will be your go-to person for advice, recommendations, and explanations of market to help you find a home that suits your needs and that you can afford.

Once you make an offer, your real estate agent should work to negotiate terms that you are happy with. They can also guide you through the paperwork and the process needed to close successfully.

Request a Home Inspection

Once you’ve found the home for you, make sure to get a thorough home inspection. You should pay for the home inspection. When you do so, the home inspector will look for hidden problems with the home before you purchase it.

Note

Through the home inspection, you can learn about any issues that may prevent you from buying the home. These may include mold, termites, foundation problems, or a roof that needs to be replaced. The inspection can save you thousands in repairs later on.

You may be able to negotiate a lower price if you know that the home needs major repairs. Consider an independent home inspection, separate from the one the homeowners had done. In many cases, the results of a home inspection can be grounds for pulling out of a deal without losing your earnest money.

Be Patient During Deposit

Once you’ve finalized a price for your home and your offer is accepted, you’ll move on to a deposit. In this step, the landlord will ensure that all documents, money and other necessary information are fully prepared before you deposit. Deposits are set up to ensure buyers, sellers can go to the last step. You may lose your deposit if you change your mind and stop buying. So please discuss with your family and calculate carefully to come to the final decision, make sure to buy that house before you deposit money.

Close and Move-In

When the closing date arrives, you show up and sign the final papers.

Once you have closed on your home, it is time to move in. You can paint, unpack, and enjoy your new home.

Be sure that you change your address with your bank, and other accounts. You can set up your utilities and cancel your old ones as well.

Frequently Asked Questions (FAQs)

What kinds of questions should you ask your realtor when buying your first home?

You should ask your realtor questions about the technical and business aspects of homebuying. A realtor will have great insight into your negotiating options and what kinds of concessions or contingencies are appropriate for your situation. You can ask about the sales history, comparable sales in the area, and who to hire for the home inspection. Consider asking your realtor whether they would buy the home to learn what they see as the pros and cons of the home.

What things should you buy when moving into your first home?

Some important purchases that are sometimes overlooked by first-time homebuyers include cleaning supplies. For example, what types of floors does the home have, and do you have the proper tools to clean them? If you’re moving into a house from an apartment, you may also need to stock up on yard supplies like a lawnmower.

 

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