Buying a home is an exciting time, but also one where you have to tread with caution. After all, even a seemingly inconsequential oversight can come with significant consequences. Ensuring that you have a smooth sailing homebuying experience requires you to learn how to spot and avoid potential real estate red flags. Fortunately, doing this is not as hard as it might seem.

Beware of Fraud

Numbers released by CertifID in the 2024 State of Wire Fraud Report indicate that over one in 20 consumers involved in real estate deals became victims of fraud in 2023. Median consumer losses were in excess of $70,000 per incident, which came in the form of down payments from buyers and sellers’ net proceeds. Further, more than 50% of consumers did not have enough information about wire fraud before they got to closing.

While the real estate and banking industries are committed to combating fraud, nefarious elements continue to look for new and innovative ways to circumvent existing safety measures. In recent years, the U.S. has witnessed a rise in the number of non-owner-occupied fraud cases. This is when fraudsters turn to public records to find rental or vacant land properties with no attached mortgages or liens.

When it comes to avoiding real estate fraud, here are the warning signs to look for before making an offer on a property.

• Free and clear property
• Seller in a hurry to sell
• Seller willing to accept a low offer
• Seller unwilling to meet in person
• Signatures in documents don’t match
• Grammatical and typographical errors in documents
• Seller’s location is unclear
• Seller wants the money wired to a foreign bank account
• Seller wishes to use his/her/their own notary

Why the High Vacancy Rates?

Denoted in percentage, vacancy rates indicate how many properties are available for rent within a specific area. When this number is high, it can indicate a decline in property values as well as unfavorable market conditions for buying a home. Other factors that may lead to a high vacancy rate include:

• Increase in crime
• Unpopular developments
• Economic slowdown
• Fewer opportunities for employment
• Decline in the quality of schools

Keep in mind that high vacancy rates can be misleading in some scenarios. For example, non-local buyers tend to buy property in popular tourist places and leave them vacant. While this results in new buildings that sell out, they do not add to the rental inventory. Given that these owners don’t live in the homes and don’t rent them out by choice, they work in artificially inflating vacancy rates.

A Shaky Foundation

If you ask professional home inspectors, “What is the biggest red flag in a home inspection?” many will go with foundation issues. This is because the foundation serves as the core of a home, and if you spot any signs of trouble here, you might have to deal with considerable structural problems later. Cracks can appear in a foundation for different reasons, which include:

• Poor construction
• Poor drainage
• Plumbing leaks
• Expansive soil
• Soil not compacted suitably prior to construction (soil creep)
• Natural disasters

Signs to watch out for when looking for foundation problems include:

• Cracks in ceilings and/or walls
• Cracks in drywall
• Cracks in concrete
• Exterior wall cracks
• Uneven floors
• Sinking ground
• Sagging ceilings
• Bowed walls
• Cabinets separating from walls
• Difficult-to-open and close windows and doors
• Gaps around windows and doors
• Tilted chimneys
• Dampness in crawlspaces

If you notice foundation issues in a home you wish to purchase, make sure you get a professional home inspector to give it a good look. This is because foundation problems can become serious when left unchecked, causing a house to tilt/lean, and carrying out repairs can become rather expensive.

Nobody Likes Pest Infestation

Of all the red flags to look for when buying a house, this one is particularly important, not only because no one wants to live with mice, termites, or roaches, but also because of the health hazard pest infestation presents. Signs to look for when you carry out a DIY home inspection include:

• Unusual odors
• Droppings
• Nests/hives
• Scratching, scurrying, squeaking, or whining sounds from the walls or basement
• Holes in wooden surfaces
• Discolored wood or paint
• Mud tubes underneath paint layers or wood
• Chewed wires/cables
• Buildup of dirt and grease
• Erosion of soil
• Discarded wings of insects

When you approach a home, check how much distance separates the soil from the home’s bottom lap. Ideally, this should be six inches or more, because any lesser can increase the risk of termite infestation.

Even if you don’t see signs of infestation, you should consider getting a pest infestation inspection before closing. In this case, adding a home inspection contingency clause in your offer is ideal. Depending on the outcome of the inspection, you may decide how best to proceed. For example, if the inspection reveals rodent infestation, you may ask the seller to fix the problem or lower the selling price.

Water Flows Where It Can

Water can cut through most materials, be it wood, stone, or metal, which is why one of the key problems to look for when buying a house is water damage. If the weather permits, try inspecting the house on or soon after a rainy day because this is the perfect time to spot leaks and build-ups. If you ignore water damage, the consequences you’ll have to face in the future include the growth of mold, health-related issues, and structural damage.

If you notice water stains on the walls or ceiling, know that they might indicate leaking pipes or a leaky roof. Other signs to look out for include:

• Paint discoloration
• Peeling paint
• Peeling wallpaper
• Musty odors
• Mold
• Dampness
• Wet spots
• Pooling/flooding
• Bubbling underneath surfaces
• Imperfections in surfaces
• Buckled or warped floors
• Swollen drywalls

It is important to check the attic and basement, and look for signs of leaks under all sinks. You should also make sure that the home’s drainage flows away from the foundation. If in doubt, seek assistance from a professional home inspector.

Plumbing Goes a Long Way

Plumbing tends to run throughout a house, including within walls, under floors, and, at times, even through ceilings. After all, it needs to reach every fixture like faucets, sinks, showers, and washing machines; and it also needs to carry wastewater away. Faulty plumbing can lead to water damage and mold, and carrying out repairs can burn a hole in your pocket.

On your own, make sure you look around toilets and under sinks to check for leaks. However, a professional plumber is in a better position to look at the plumbing’s overall condition. Signs you may look for include:

• Leaking pipes/faucets
• Low water pressure
• Slow drainage
• Foul smelling drains
• Gurgling sounds from pipes
• Water stains
• Damp spots
• Cracks in pipes
• Running toilets

Is the Vinyl Hiding Damage?

You need to be particularly careful with homes that have vinyl siding because it could be an attempt to hide damage. This is because vinyl works particularly well in hiding imperfections like unevenness, small cracks, and rot owing to its texture. While there’s no way of telling what’s underneath without taking the vinyl off, signs of damage or rot in the basement or attic increase the likelihood of damage under the siding. Keep in mind, though, that vinyl typically fails to hide large cracks, structural problems, and water damage.

Why Is the Roof Wavy?

Among other hidden things to look for when buying a house comes a wavy roof. One of the most common reasons for this is improper installation, where the alignment between tiles or shingles is incorrect. Alternatively, it might be because of poor-quality decking that has warped with time, inclement weather conditions, or the roofing material’s natural aging process, as is the case with asphalt shingles.

A slightly wavy roof can also indicate two layers of shingles. While the best method of reroofing homes is to remove the old shingles and replace them with new ones, building codes in some areas permit two layers of shingles, as is the case in New York. While doing this adds unnecessary weight to a structure, it might also void the new shingles’ warranty. Besides, a second layer might be an indication of an unrepaired first layer.

Is the Heating and Cooling in Order?

When you’re buying an old home with a heating, ventilation, and air conditioning (HVAC) system, make sure you check its date of installation because most such units come with a lifespan of 15 to 20 years, after which they typically require extensive repairs or replacement. A faulty HVAC system counts among the top real estate red flags not only because it can lead to steep energy bills and uncomfortable living conditions, but also because it can serve as an indication of how the existing owner maintained the property.

Signs to look for in a faulty HVAC system include:

• Poor airflow
• Grinding, rattling, or loud humming sounds
• Inconsistent temperature control
• Frequent on-and-off cycles
• Foul smells
• High energy bills
• Water leaks

Going through an HVAC system’s maintenance records can give you an indication of its current condition. However, a trained HVAC technician can perform a thorough inspection and identify all existing and potential problems.

The Presence of Environmental Hazards

Depending on where and how old a home you plan to purchase, one of the key problems to look for when buying a house is its exposure to environmental hazards like asbestos, radon, lead, mold, moisture, radiation, water pollution, and sound pollution. Signs to look for include:

• Date of construction because pre-1978 homes might have lead-based paint.
• Inadequate ventilation in basements and ground floors because it can lead to concentration of radon.
• Use of asbestos in roofing and insulation.
• Presence of mold and moisture.
• Water contamination.
• Proximity to continual loud sounds.
• Proximity to nuclear facilities.

While real estate agents are typically aware of local environmental hazards, you can also ask for an environmental search report that highlights any given area’s environmental risks.

What About Real Estate Agent Red Flags?

Moving from the red flags to look for when buying a house to the red flags you need to avoid when selecting a realtor or real estate agent, the one that tops the list is poor communication skills. After all, a real estate agent with poor communication skills might not fully comprehend your needs and might fail to pass on information clearly. It is also important that you ask the right questions. Other signs you need to look for include:

• Poor knowledge of the area. If it seems like you know more about the area in which you wish to buy a home than your real estate agent, you might want to move to your next option. After all, part of your agent’s role is to offer insights into the desired neighborhood.
• Lack of knowledge. Real estate agents need to have in-depth knowledge about the areas they serve and the home-buying process, failing which they might not be able to provide the guidance or information you need.
• If a real estate agent brushes away your concerns, you might have reason to be wary. This is also the case if an agent is being pushy about you exceeding your budget or pressuring you to make a decision.
• Few clients. It’s typically best to avoid part-time real estate agents because they have other avenues to pursue as well. Ideally, you should partner with someone who has extensive experience and a long list of clients. This demonstrates that the agent in question has what it takes to crack deals.

Conclusion

Now that you know how to spot common real estate red flags, make sure you approach the home-buying process in the right manner. In addition, consider contacting a mortgage provider and getting pre-approved for a loan before you begin your search for homes. This way, you’ll know how much a lender is willing to lend to you and you can carry out your search accordingly.

House flipping is when someone buys a house, typically at an auction, intending to fix it and sell it at a profit somewhere down the road. While you can make a tidy sum by doing this, a bad decision may lead to unrecoverable losses. As a result, first-time flippers must know how the process works before jumping on this bandwagon.

According to data released by ATTOM Data Solutions, house flippers in the United States flipped 79,540 single-family homes and condominiums in the second quarter of 2024, generating an average gross profit of around $73,500 per home. A fairly steady upward trend has been in place since 2011.

How Do I Start Fixing and Flipping?

If you’re wondering how to flip a house for the first time, you need to pay attention to three crucial aspects. These include comparables, numbers, and speed. Do you need a license to flip houses? The answer is no.

Comparables

Taking a close look at the prices of recently sold comparable homes in the area is important when arriving at a suitable selling price. While there could be a wide range of comparables, you might be better off looking at the lower end of the spectrum. This is because when you budget for the lower side of selling prices, you get more leeway in budgeting for renovations.

 It’s important to determine how much time homes tend to remain unsold in any given area. You also need to find out if flipping houses for profit in the area is possible in the first place.

Numbers

You need to create a detailed renovation budget and add at least a few thousand dollars more to cover unexpected expenses. Your house-flipping business plan should also account for maintenance, closing costs, property tax, property insurance, interest, and agent commission. In some cases, the added costs exceed the actual cost of renovation.

Speed

The job schedule of a renovation determines just how quickly you may get a house back on the market. It makes sense to keep a backup list of contractors, in case the one you hire decides not to show up. Keep in mind that even slight delays in getting houses on the market can lead to significant losses.

What First-Time Flippers Can Do

Just about everyone who offers advice for first-time flippers stresses the importance of getting as much information about the process as possible. While online research is valuable, it might also be worth your while to learn from people who have already mastered the craft.

Real estate events give you a great opportunity to see how other people have gone about their home-flipping businesses. Seminars give you easy access to hands-on training as well as a variety of resources. You also need to develop and polish various skills needed to flip houses.

Polish Your Communication Skills

You will need to interact with people at every stage of the fixing and flipping process, which means you need to develop great communication skills. You need to be respectful toward everyone you interact with, be it sellers, property managers, loan officers, contractors, or construction workers. A friendly and positive approach can make all the difference between a successful fix and flip and one that is not.

Get Organized

If you hope to find success as a fix and flipper, take time to improve your management skills. Try to make your day as productive as possible, even it if means carrying out online research while watching a game on TV. Create a schedule that includes tasks you need to complete every day, as well as throughout the week. Once you create and stick to a schedule, working on increasing your return on investment (ROI) becomes simpler.

Know Your Finances

Ensure that you have enough money to take you through the carrying costs for the entire duration of your being a homeowner. Arrive at a drop-dead rate at which you need to sell the house, and work on creating a realistic deadline surrounding the completion of all work. Taking longer than previously planned might eat into your profits. Also, if you don’t have enough money at hand, hanging on to the house for longer than expected can make matters worse.

The costs you need to account for include:

• Down payment of around 20% to 45% of the home’s selling price.
• Holding costs such as HOA fees and insurance payments.
• Renovation costs.
• Closing and realtor costs.

When borrowing money to buy and renovate a home, there are multiple options from which to choose. First-time fix and flip loans can come in the form of:

• Loans for investment properties
• Home renovation financing
• Lines of credit or home equity loans
• Personal loans
• Business lines of credit
• 401 (K) financing
• Seller financing
• Hard money loans
• Loans from family members or friends

Learn About the Area

Take adequate time to learn about the neighborhood and its vicinity. Find out if there are good schools and hospitals in the area, as these are right up there when it comes to what buyers are after. Think twice about buying in areas that have upcoming industrial parks or highways, as these might affect home prices adversely. No matter how much time and effort you put into a fix and flip, selecting the wrong neighborhood might lead to disappointment and losses.

Find Motivated Sellers

If you’re thinking about making money by flipping and fixing a house, focus on finding short sales or foreclosures. These present great opportunities when buying a home for cash, and this keeps you away from the open market. Motivated sellers can also come in the form of owners of dilapidated homes, couples who are getting divorced, and families looking for larger homes. If you manage to find a motivated seller, you get to close on your investment quickly and minimize your initial expenses.

Determine Your Renovation Goals

Not doing enough to fix a house before you put it on the market might be just as bad as doing too much. Cutting corners when renovating a home is not the way to go because potential buyers can see through your efforts. In such a scenario, expecting someone to pay the market price would be foolhardy. Going overboard with your improvements, on the other hand, can cut into your profits. As a result, you need to determine just what’s required as well as what’s not.

Don’t forget to take care of easy fixes such as changing worn-out switchboards or light fixtures. Make sure you do away with any big-ticket plans you might have.

Pay Attention to Curb Appeal

When it comes to selling a home, first impressions matter. What potential buyers see at the curb can work in making or breaking a deal. The home you wish to sell should look good at first glance. Make sure the landscape looks appealing and not unkempt. Invest in a paint job and get new curtains or blinds.

Data suggests that curb appeal can add up to 10% to your home’s after-repair value (ARV). You don’t need to build a gazebo or install a fountain as these expenses may eat into your profit, and probably limit your audience. What you need, on the other hand, is a cleanup and a well-maintained garden.

Know What Buyers Want

Sure, fixing and flipping a home allows you to get your creative juices flowing. However, you must not let your whims and fancies get in the way of creating a home that finds appeal with potential buyers. If you follow a very specific design and want to make the home trendy, you might limit the number of people interested in the property. This is because most buyers want to do up their homes in their own way. The best way forward is to play safe and try to create a home that is as neutral as possible.

Learn About Taxes and Fees

Depending on the location of the house you wish to fix and flip, property taxes can be a major burden or a minor inconvenience. If the property tax is very high, it might serve as a deterrent for potential buyers. Besides, you will need to keep paying the property tax for as long as the house does not sell. How much you might need to pay as homeowners association fees also requires your attention, because this may put a dent in your budget.

Use Professional Help

Before buying your first flip house, get a professional home inspector to give you a clear picture of what you might be up against. While this requires that you spend some money, it’s better than getting nasty surprises down the road. When fixing a house, don’t attempt to carry out tasks that are beyond your expertise. Remember that errors in plumbing and electrical work can lead to major damage. Installing new flooring is also best left to the experts.

Mistakes Fix and Flippers Need to Avoid

Not all people who attempt to fix and flip homes for profit find success. This is because they tend to make mistakes along the way. To maximize the possibility of succeeding, you need to steer clear of certain mistakes, which include ones you might make when buying a home.

Overlooking the Neighbors

Fix and flippers usually like buying homes that are not much to look at, and more importantly, ones that sell underpriced. However, are other homes in the vicinity also in similar condition? If so, the other homes will probably remain the same, even when your house is all spruced up and ready to be sold. From a buyer’s perspective, other eyesores in the neighborhood can make your house less desirable.

Ignoring the Bathroom

A shabby-looking, leaky, or damp bathroom is almost certainly a deal-breaker. If you can budget your way to give the bathroom a makeover, it might be well worth the effort and money. Several real estate experts suggest that kitchen and bathroom renovations provide similar ROIs.

Forgetting Building Permits

Even the slightest of unlicensed construction may lead to unwelcome consequences. If a potential buyer or a buyer’s lender discovers permit problems late in the sales process, you might have to face legal challenges. Before working on any aspect related to a home’s structure, as well as its electrical, gas, or plumbing system, make sure you get approval from the relevant local body.

Now Working With a Real Estate Pro

The internet serves as a treasure trove of resources, but you need to get some real-world exposure as well. Local real estate agents can provide help in various ways, from looking for suitable homes to determining a home’s ARV to putting it back on the market.

Staging on Your Own

As a first-time flipper, it makes sense to use the services of a home stager to prep a home for its open house. Follow what the stager does to increase the appeal of the house and present it in the best possible way. You can use this information to good effect in your subsequent efforts.

Setting Unrealistic Deadlines

There’s no point in giving more priority to speed instead of doing a good job. Potential buyers, and the inspectors they bring with them, can easily tell the difference between a job well done and one that simply tries to cut corners. Making a couple of extra mortgage payments might be a better idea than trying to rush through renovations, especially when they don’t account for much.

Taking on Multiple Projects

The last thing you need on your plate as a first-time flipper is too much. The only way to make sure you do a great job is to give your first project your undivided attention. Remember that while you might be able to delegate much of what needs to be done, your continued presence at the site is crucial if you want things to go exactly as planned.

Conclusion

Now that you know how to flip a house for the first time and plan to move forward with the process, contact a mortgage provider to determine how much you can borrow. This gives you a clear picture of the kind of homes you can afford, while also taking into account money you might need to spend on the renovation.

Once you fix and flip a house, keep in mind that the market will dictate its selling price. If you end up overpricing the home, buyers’ agents will tell their clients that, and your home will remain unsold. As a result, spend no more than you need to make the house look and feel presentable.

 

Disclaimer:

30-Year Fixed-Rate Mortgage: The payment on a $200,000 30-year Fixed-Rate Loan at 3.875% and 80% loan-to-value (LTV) is $940.14 with 0 % points due at closing. The Annual Percentage Rate (APR) is 4.026%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.

If you apply for a mortgage, you may expect a lender to consider different aspects when evaluating your application. Two very important factors include your employment and income, given that both play crucial roles in your ability to repay the money you borrow. From a lender’s perspective, it is important to establish that you have a steady source of adequate income. So, can you get a mortgage after a new job, and if so, how do you go about the process?

Can I Get a Mortgage if I Just Started a New Job?

The short answer to whether you can get a mortgage if you’ve just started a new job is yes, although this depends on the type of job change. For example, if a lender finds your job change acceptable for qualification, you might not face any problems with your application. However, getting approved for a mortgage can be challenging if a lender feels your job change is not acceptable.

Acceptable Changes

If your overall work history is over two years and you’ve maintained a steady career before your last switch to a higher-paying job in the same industry, you should be good to go. The added income might even work as a benefit. Lenders also view promotions within the same company or a move to a higher position in a new company in positive light.

Inappropriate Changes

Moving from a salaried job to a bonus- or commission-based structure, even if it means earning more money, might not hold much ground at an underwriter’s table. You may expect the same if you break your work history’s paper trail in any other way, like switching from being a W-2 employee to a self-employed individual.

A lender might view a preset termination date in your new job’s contract as a red flag, especially if it does not extend beyond five years. Other inappropriate job changes that can hamper your chances of qualifying for a mortgage include moving to a lower position or a different industry, or switching to a job that does not come with a hike in pay or a higher position.

Prepare to Explain the Change

If you’re wondering how to get a mortgage after a new job, remember that you need to be ready to explain the change to your lender. This is because your lender will want to know how your decision will affect your ability to make your mortgage payments.

• Changing industries. While lenders typically view job switches across industries as a risk factor, it does not have a negative effect in all instances. For example, if you worked in the construction industry for several years and earned a degree from a culinary institute at the same time, then transitioned to being a chef at least 12 months ago, and now make more considerably money than before with consistent hours/pay, your application may well stand a chance.
• Salary to commission. When lenders look at employment and income, they’re essentially looking for consistency and stability. Given that a salary pretty much translates into predictability, shifting from a salaried job to commission-based income causes lenders to be wary. Justifying this switch will require demonstrating that you stand to earn more money and have better career prospects, while also showing a history of commissions for at least 12 months.

How Long Do You Have to Be at a Job to Get a Mortgage?

Underwriters verify your income and employment by looking at documents related to your work history for the preceding two years. These include recent pay stubs, tax returns, and W-2s or 1099s, and sometimes, tax returns and verification of employment (VOE) from your employer. Typically, applicants who have worked for the same employer for at least two years find it easier to get past this hurdle.

So, how long do you have to be at a job to get a mortgage? The answer depends on different factors and can vary from 12 months to two years. If your job or industry has remained unchanged for the last two years, you should not face any problems on this front. However, if this is not the case, your lender might seek additional explanation and documentation surrounding:

• Reasons for the latest switch.
• Reasons for previous breaks in employment.
• Recent hikes in pay.
• The performance of your employer and the industry it belongs to.
• Your educational qualifications.

Can You Use a Job Offer as Proof of Income for a Mortgage?

Does a job offer count as proof of income? Yes. However, it needs to meet different conditions so you may use it to qualify for a mortgage. When people who apply for home loans use job offers as proof of income, underwriters rely on them to determine future earnings, while also looking at past earnings and education qualifications (when applicable).

If you plan to qualify for a mortgage based on your job offer, it should ideally demonstrate long-term earning potential and job security. You may think about using a job offer in your mortgage applications if:

• You have moved to a better position in the same industry.
• You move to a lateral role in the same company.
• Your job offer is the result of a recent promotion.
• You are a recent graduate with a job offer that can support your application.

For a lender to consider your job offer as proof of income, it needs to meet these conditions.

• It should be a signed contract.
• It should include a start date.
• Must begin the job and get a regular paycheck prior to loan closing
• It should mention your salary.
• It should not depend on any contingency.

In addition, while a job offer can count as proof of income, you still need to meet other criteria of the underwriting process.

How Lenders View Different Types of Income

The duration of employment notwithstanding, lenders also look at the type of qualifying income you earn, and they break it down into four basic categories.

• Salary: An annual salary lets lenders calculate your qualifying income easily; all they have to do is divide your gross annual salary by 12.
• Hourly: Calculating qualifying income under this bracket can get tricky, especially when it comes to non-guaranteed work hours. In this case, lenders typically rely on two-year averages based on the preceding two tax returns. With guaranteed work hours, the typical method to follow is to multiply the work hours by the hourly rate and then annualize.
• Variable: Income from commissions, bonuses, and overtime falls under this bracket. While most lenders rely on two-year averages based on previous tax returns, some accept 12-month averages too.
• Fixed: Payments from Social Security, VA disability, pensions, and annuities classify as fixed qualifying income provided they continue for at least three years from the date of your first mortgage payment.
• Year to date income is verified to make sure it is in line as well.

Keep an Eye on Your Credit Score and DTI

While your employment and income are big factors in which way your application for a mortgage goes, so are your credit score and debt-to-income ratio (DTI). This is because even if you’ve been at the same job for several years but falter on these counts, the chances of your application’s approval remain slim.

Remember that most lenders look for credit scores ranging from good to excellent, and depending on the type of mortgage you seek, you might need a minimum credit score of 620 or 640. It changes with FHA loans, where the requirement drops to 500 or 580 depending on the down payment amount. However, if you plan to get a mortgage after a new job, the higher your credit score, the better the odds of your application’s approval. Higher credit scores also usually mean lower interest rates and vice versa

Similarly, mortgage providers also look at your debt-to-income (DTI) ratio when making lending decisions. This number indicates how much of your monthly income goes toward servicing your existing debt, and helps lenders determine your ability to repay. Typically, you should have a DTI ratio of 36% or lower. When it comes to getting a mortgage after a new job, the lower this number, the better it is for you.

The Effect of the Down Payment

If you’re wondering how to get a mortgage after a new job, know that making a large down payment can work in your favor. This is because the main reason lenders shy away from providing mortgages to people in new jobs is the perceived risk. If you make a large down payment, you can assuage their fears by reducing the risk they face.

While making a large down payment brings down the principal amount, it also increases the equity you hold in the house. In addition, making a down payment of 20% or more eliminates the need to pay extra for private mortgage insurance (PMI).

But reserves are also a factor. The more assets your have after closing also lowers your risk. Don’t use all your money on the down payment.

Checklist to Increase the Odds of Success

Do you have to be at the same job for two years to buy a house? Not necessarily. While working with the same employer for two or more years indicates to lenders that you have a predictable and stable income, what’s more important is your ability to demonstrate that you will be able to make your monthly payments without any problems.

When you apply for a mortgage after a new job, keep these points in mind.

• Prepare to explain why you switched jobs.
• Your new job offer is valid, with a date and signature.
• There is no contingency clause in the job offer.
• You will start your new job prior to closing and receive a paycheck evidencing income.
• You have adequate savings to cover all your expenses until you receive your first paycheck.
• Your new employer is not a family member or a party linked to your intended purchase.
• Don’t add future performance-linked bonuses in your application until they come with an established history.

Recent graduates may use their degrees/transcripts to demonstrate they have the knowledge/skills to perform in their new roles. Veterans applying for VA loans can show how their military service aligns with their new jobs. If you have recently completed advanced certification or training from a trade school, you may mention the same as it can demonstrate a higher earning potential.

Remember that the answer to, “How long after starting a new job can I get a mortgage?” is “almost immediately.” However, you will need to provide the reassurance that a lender needs to approve your application. It is possible that you might face stricter guidelines, given that the lender would want to verify various details.

Consider Getting Pre-Approved

Given that the mortgage application process – from start to finish – can take some time, it’s good to know where to stand in advance, and you may do this by applying for a pre-approval. This is particularly important if you’re starting a new job because you will find out if a lender is willing to consider your application for any given type of mortgage.

If a lender’s answer is in the affirmative, you get to know how much money you qualify to borrow. This allows you to base your search for homes on a predetermined budget. Getting pre-approved can also help at the negotiation table in competitive markets because it indicates that you are serious about making the purchase.

The pre-approval stage is not as intensive as the underwriting process, but it still involves going through your employment history, income, and credit reports, as well as your existing debt and assets.

Conclusion

You probably know by now that the answer to, “How long should you be at a new job before getting a mortgage?” can vary based on different factors. For example, if you have a consistent work history and have moved to a better-paying job in the same industry, you should not face any problems on this front. However, if your new job involves switching industries, you might have some explaining to do or even wait for a few months.

Remember that getting a mortgage after a new job is possible in several scenarios, and if you convince a lender that you’ll be able to make your monthly payments on time, the odds of approval can work in your favor. If you’re unsure about whether you might qualify or need information about the types of mortgages for which you can apply, getting in touch with a reliable mortgage provider might be in your best interest.

Once you decide you wish to buy a house, you need to determine what type of mortgage might work best for you. For instance, you may benefit by applying for a USDA loan or a VA loan, provided you meet the required eligibility criteria. Two aspects that remain common no matter what type of loan you get include interest rates and loan terms. So, what are the different types of loans and what are the different types of interest rates in loans?

Fixed-Rate Mortgages

A fixed-rate mortgage is a loan in which the interest rate is determined beforehand, and remains constant with on-time payments. The interest rate depends on the market rate at the time of your loan’s origination, to which your lender might add a spread or margin. Changing market interest rates have no impact on the interest you need to pay through a fixed-rate loan. This ensures that your monthly repayments remain the same for the entire loan term.

Adjustable-Rate Mortgages

An adjustable-rate mortgage (ARM) is a loan in which the interest rate can change, based on the prime rate or index rate, over the course of the loan. After the fixed-rate period, the interest rate of an ARM may change monthly or annually, depending on the market index. A mortgage provider might also place a cap on the maximum interest you’ll need to pay.

With an ARM, part of the interest rate risk shifts from the lender to the borrower. As a result, borrowers commonly use ARMs in situations where fixed-rate alternatives are prohibitively expensive or difficult to obtain.

While a majority of lenders in the U.S. use the United States Treasury rate as a basis to determine the interest rates of most ARMs, some rely on the London Interbank Offered Rate (LIBOR).

Different Types of Adjustable Rate Mortgages

Adjustable mortgages for home purchase come in three basic forms that include conventional variable rate mortgages, hybrid ARMs, and option ARMs.

Conventional Variable Rate Mortgages

Getting a typical ARM requires that you prepare yourself for adjusting rates for as long as you do not repay or refinance the mortgage. The rate usually reflects a third-party index, and includes the margin a mortgage provider applies. Rates adjust based on a predetermined schedule, which can be monthly, every six months, or every year.

Hybrid ARMs

Hybrid ARMs, also referred to as fixed-period ARMs, come with a fixed rate for a specific period of time, and an adjustable rate follows. The fixed-rate periods may vary from three (3/1) to five (5/1) to seven (7/1) to even 10 (10/1) years. When the initial fixed-rate period is long, the difference between the interest rate of an ARM and that of a fixed-rate mortgage is small. The converse holds true as well.

The date when the switch takes place is the reset date. Then, the interest rate is assessed and recalculated every year. Some ARMs, such as 3/3 and 5/5 ARMs, come with more than one interest rate adjustment per year. However, these are not easy to find.

Option ARMs

If you go the option ARM way, you get to choose from four monthly payment alternatives. These include a predetermined minimum payment, a 15-year amortizing payment, a 30-year amortizing payment, or an interest-only payment.

What Attracts Borrowers to Adjustable Rate Mortgages?

Most people who benefit from getting ARMs plan to sell their homes in a few years or ones who plan to refinance their mortgages down the line. This is because the longer you plan to draw out an ARM, the riskier it can get. After all, while the interest rate is typically low when you start, it can get noticeably higher once rate adjustments begin. An example in case is the period during the subprime crisis. After rates began to adjust, several borrowers with ARMs found that their monthly payments increased drastically.

How Do Cap Limit Adjustments Work?

Several ARMs come with cap limits on adjustments. This ensures that the interest you need to pay through the course of the loan will not exceed a predetermined mark. For example, if your mortgage comes with a two percent cap, and market rates increase by three percent, the interest rate on your mortgage will increase only by two percent. ARMs can come with caps for the first few years, periodic caps, as well as lifetime caps.

Consider a 3/1 ARM that comes with a cap limit structure of 2-3-7. What this basically means is the interest rate can increase by a maximum of 2% after the initial three-year fixed-rate period. In subsequent years, the rate may increase by a further 3% every year. The maximum interest rate hike that a loan may attract during the entire loan term, in this case, limits to 7%.

In case you start with an initial interest rate of 4.1% for the first three years, the interest rate in the fourth year can increase to a maximum of 6.1%. In the fifth year, it may increase by up to 3%, getting to no more than 9.1%. Going forward, the interest cannot increase to more than 11.1%, which is 7% more than the loan’s original interest rate.

The cap works in reducing your risk slightly. However, the difference in monthly payments can be noticeable in some instances. For example, if you take a $200,000 ARM at 4%, and the interest rate increases to 10%, your monthly mortgage payment would increase by around $800. Just how much the rate adjusts depends on the ARM’s index rate.

Should You Get a Fixed- or Adjustable-Rate Mortgage?

Various aspects require your attention when determining if a fixed or adjustable-rate mortgage might work better for you.

Interest Rate Prediction

Since the 1990s, interest rates have decreased gradually, although there have been periods of movement in both directions. However, one should not take historical trends for granted when it comes to predicting future performance. Besides, predicting the timing, direction, and speed of adjustments is not easy, especially when it comes to getting all three right.

When existing interest rates are low and there is speculation about a hike, opting for a fixed-rate mortgage might be the way to go. This is because the low interest rate will stay in place even if the market rate climbs to a higher level. However, if there are predictions that interest rates might fall, you may want to consider getting a mortgage with an interest rate that fluctuates over time as market rates change.

The Certainty Factor

If you are already on a tight budget, you don’t want to worry about unfavorable changes in interest rates denting your ability to make timely repayments. In such a scenario, while a fixed-rate mortgage would come with higher monthly payments initially, it would offer peace of mind down the road, with you knowing that your repayments will not change through the loan term.

Making Prepayments

If you plan to make aggressive prepayments to try and pay your mortgage off ahead of time, you can benefit by getting an ARM. This is because if you manage to pay a significant portion of the loan during the fixed-rate period, interest rate hikes in the later stage might not have too much of a negative effect on an already reduced loan balance.

Time Period

People who plan to repay or refinance their mortgages in short timeframes tend to favor ARMs over fixed-rate alternatives. For instance, a borrower who intends to keep a loan for around six to eight years might be comfortable taking an ARM that is set to adjust in five or seven years.

Amortization Period

Your amortization schedule will give you a clear indication of your periodic loan payments. In it, you get to see just how much of the payment you make each month goes toward reducing the principal amount and paying off the interest. With a long amortization period linked to an ARM, changing interest rates can have a considerable impact on your monthly payments. This is not the case with fixed-rate mortgages, where your payments remain the same throughout.

The bottom line is that getting an adjustable-rate mortgage might work well for you in a decreasing interest rate environment. However, the flip side is that any rise in interest rates will translate into higher monthly repayments. Keep in mind that many borrowers could not keep up with their rising payments because of steep interest rate resets during the 2007-2009 Great Recession.

What’s an Interest-Only Mortgage?

An interest-only mortgage gives you the option of making considerably low monthly payments for a predetermined time period, where the payments you make only go toward the interest that your loan attracts. Once the introductory period ends, you will need to start making payments toward the principal, which would be more than it would through a conventional fixed-rate mortgage.

In the long run, interest-only mortgages turn out to be more expensive. However, such mortgages might work well for first-time homebuyers who expect their careers to improve soon as well as for individuals who have limited resources at first.

What Is a Loan’s Term?

A loan’s term refers to the time you get to repay the loan in full, including the principal amount and the interest it attracts. Loan terms are typically easy to identify. For example, a fixed-rate 30-year loan requires that you repay it completely within 30 years.

The term of a loan has a bearing on how much it ends up costing, because it affects the interest you pay directly. The relationship is simple; the longer the loan term, the more you pay as interest. So, while a longer loan term might seem tempting because it comes with lower monthly payments, you’ll end up paying more in the form of interest. The reverse holds true as well.

As a result, you’ll end up paying considerably more through a 30-year mortgage when compared to a 15-year mortgage. The question is – how much can you afford to repay each month?

Common Loan Terms

• 30-year mortgages. A large majority of borrowers opt for 30-year mortgages, making it the most common loan term. This is probably because long loan terms reduce the financial burden of home ownership, and it also gives borrowers the ability to buy more expensive homes.
• 20-year mortgages. If you get a 20-year mortgage, not only do you pay your loan off sooner, but you end up saving a tidy sum in the form of interest. The interest rate you get will also be slightly lower than that of a 30-year mortgage.
• 15-year mortgages. These mortgages come with the most competitive interest rates. This ensures that your repayments are not twice as much as they would be through a 30-year mortgage. In addition, the reduced loan term means you end up paying considerably lesser as interest in dollar value.

What Are Combination Mortgages?

If you cannot make a 20% down payment and want to avoid paying private mortgage insurance (PMI), consider taking a look at how combination mortgages work. Typically, you would take one loan to cover 80% of the home’s value, and another to cover the remaining 20%. The mortgage industry refers to this as an 80/20 combination loan.

In such a scenario, the first loan for the higher amount usually has a lower fixed rate, whereas the second loan comes with a higher and/or variable rate. Depending on how quickly you expect to repay the second loan, you might be better off getting a combination loan instead of PMI. However, you must do your math in advance.

 

Conclusion

The interest rate attached to your mortgage and the loan’s term can have a telling effect on how much you end up paying over time. If you get an ARM, in which the interest rate may fluctuate up or down during the term of the loan, a hike in rates may affect your ability to make timely repayments. Fixed-rate mortgages, on the other hand, are the safer approach to home ownership. To determine which type of interest and what loan term might work well for you, take your existing and predicted financial situation into account while talking to your loan officer, and don’t forget to factor in contingencies.

It’s no surprise that purchasing a home is a massive financial decision. While the investment is incredibly rewarding, saving up enough to become a homeowner can be challenging. However, certain options you can consider throughout the process of buying a home that can remove the burden of these costs. In this blog post, we’re explaining discount points, lender credits, and seller concessions and how you may be able to benefit.

What Are Discount Points on a Mortgage?

Discount points or mortgage points give you the ability to lower the interest rate on your mortgage. You may view discount points on a mortgage as a trade-off, where you pay more money at the closing and the lender lowers the interest rate.

Data collated by the Consumer Financial Protection Bureau indicates that discount points were rather popular with homebuyers in 2023’s first three quarters. During this period, 58.7% of buyers with home purchase loans used discount points. This number stood at 56.2% for buyers with non-cash-out refinance loans and a staggering 88.5% for borrowers who opted for cash-out refinances.

How Discount Points Work

Each discount point costs around 1% of the mortgage amount and brings the interest rate down byan average of 25 basis points (0.25%), although it may vary from 0.125% to 0.375%. Keep in mind that the interest rate reduction can vary from one mortgage provider to the next. When you get discount points, your lender charges a one-time fee that you need to pay at the time of closing.

If you’re thinking about refinancing your existing mortgage, you might not have to pay for discount points at the closing because some lenders roll these costs and other closing costs into the new loan. In this case, while you need to pay less at the closing table, it affects the equity you have in the home.

Are Discount Points Worth It?

The answer to “Is it worth it to pay points for a lower interest rate?” is that they make sense if you plan to stay in the home you purchase for a few years. Referred to as the break-even period, this is the time it takes for the gains from the lower monthly payments to equal the initial cost of purchasing the points.

If you intend to keep living in the home beyond the break-even period, paying for discount points might work well for you. This is because once you cross this stage the lower interest rate will lead to savings for the remainder of the loan term.

Discount points might not be worth it if you sell or refinance your home before crossing the break-even period. If you foresee this happening, you might be better off putting the money toward your down payment and increasing your equity in the home.

How Many Discount Points Can I Buy?

The Lender determines the maximum number of discount points you may buy. Most lenders let borrowers buy up to four discount points. This, on average, can bring your interest rate down by 1%. Data released by Freddie Mac indicates that a typical 30-year fixed-rate mortgage comes with 0.5 to 0.7 discount points, and the number is lower with adjustable-rate mortgages (ARMs) because these borrowers tend to refinance or sell sooner.

What Is a Lender Credit on a Mortgage?

While discount points help lower the interest rate on a mortgage and require you to pay an upfront cost, lender credits can work well for borrowers who wish to reduce the burden of closing costs. So, what are lender credits and how do they work?

Lender credits give you the means to bring down your closing costs in exchange for a higher interest rate. This allows you to lower your upfront expenses and spread them over a prolonged period. However, you can use lender credits only to cover closing costs and for no other purpose.

Are Lender Credits Worth It?

Getting lender credits might work well for you if your main aim is to get some financial assistance or flexibility at the closing table and don’t mind paying a slightly higher interest rate. Given that closing costs can go up to 6% of a home’s selling price and that you also need to account for the down payment, lender credits can help bring down your initial expenses.

Oftentimes, assistance with closing costs helps borrowers come up with the down payment they need to buy a home, allowing them to get on the path to homeownership sooner. In addition, if you plan to refinance or sell in the near future, the shorter timeframe can help override the effect of the higher interest rate.

One potential drawback of getting lender credits is that the higher fixed interest rate will stay in place for the entire loan term, and you might end up paying significantly more than the original amount. This can be a problem if you’re already stretching your budget, because a higher interest rate translates into higher monthly payments. In addition, the higher interest rate might put you at a disadvantage if you plan to refinance at a later stage.

How Much Lender Credit Can I Get?

How much lender credit you can get depends on the type of mortgage you select, the amount you wish to borrow, and your lender. (Lender credits are not always available. Please check with your lender for details). Factors that can work in your favor include a good credit score, a large down payment (20% or more), and a low debt-to-income ratio.

What Are Seller Concessions?

As the name implies, seller concessions refer to concessions the seller of a home offers to a potential buyer. In this case, a seller might offer to cover one or more costs associated with buying a home to reduce a buyer’s upfront expenses.

If you look at seller concession examples, you’ll notice they come in different forms. One of the most common types of seller concessions is a seller agreeing to cover all or part of the closing costs. If, during an inspection, you find a problem that needs fixing, you may ask for a concession to cover the cost of repairs. In some instances, sellers agree to cover appraisal fees, loan origination fees, and attorney fees.

Keep in mind that while you may request seller concessions, whether or not sellers agree is their prerogative. In addition, remember that these concessions don’t come in the form of hard cash and typically find their way into bringing down your closing costs.

Who Benefits?

When offered, seller concessions tend to benefit buyers and sellers alike. While the buyer enjoys a discount, the seller manages to make the sale. However, where and when you wish to purchase a house might have an effect on whether you might get a seller concession.

Asking for seller concessions makes sense in a buyer’s market where the supply of homes for sale exceeds the demand. In this scenario, given the low demand, a seller might be more inclined to offer a concession and offload a property faster. However, the situation tends to reverse in a seller’s market, where a seller might have no inclination to offer concessions because of the high demand.

Pros and Cons

The biggest advantage of a seller concession is that it brings down the closing costs and makes the home you purchase more affordable. While this can help you make a larger down payment than you initially planned, it can also leave you with more savings in your bank account.

One potential drawback of asking for a seller concession is that it might make your offer seem less appealing, especially in a seller’s market. Besides, when it comes to homes that receive multiple bids, sellers may choose to disregard offers that come with requests for concessions. In this case, you might be better off making a lower offer and covering the closing costs on your own.

Seller Concession Limits

Regulatory bodies like the U.S. Department of Housing and Urban Development (HUD) and Fannie Mae have set seller concession limits to prevent housing market inflation and ensure stability in prices. These limits vary based on different types of loans.

Conventional Loans

Seller concession limits for conventional loans depend on the down payment amount for primary residences and second homes. Investment properties are 2% max on all combined loan-to-value (CLTV) ratios.

• Less than 10% down payment – Seller concession of up to 3%
• Down payment of 10% to 25% – Seller concession of up to 6%
• Down payment of over 25% – Seller concession of up to 9%

Remember, if you’re getting a conventional loan to purchase an investment property, the seller concession cannot exceed 2%.

USDA Loans

If you plan to get a U.S. Department of Agriculture (USDA) loan, the seller may contribute up to 6% of the loan amount. The home’s selling price or the down payment you make does not have an effect on the seller concession limit in this case.

VA Loans

Getting a Department of Veterans Affairs (VA) loan qualifies you to get a seller concession of up to 4% of the home’s selling price. Other than for closing costs, you may use these concessions for paying VA funding fees as well as to pay existing debts and judgments.

FHA Loans

The seller concession limit for Federal Housing Administration (FHA) loans stands at 6% of a home’s selling price. While you may use these concessions to cover closing costs, you can also use them to pay for appraisal fees and other home purchase-related expenses.

Seller Concession vs. Price Reduction

While a seller concession is usually specific to a buyer’s request, a price reduction typically applies to all potential buyers. Both are fairly common in buyer’s markets, where sellers either want to attract attention to their properties or speed up the sale.

Although a seller concession and a price reduction might seem the same from the cost perspective, know that they work differently, especially if you’re getting a mortgage. Consider an example where a buyer plans to purchase a house for $100,000 and make a 10% down payment of $10,000. Closing costs stand at 6% or $6,000.

With a 6% seller concession, the closing costs are covered. However, in case of a 6% price reduction, the overall cost of the house reduces to $94,000. To cover the closing costs, the buyer still needs to pay $5,640. In this scenario, if you wish to bring down your upfront costs, a seller concession works better.

Which Should You Get?

If you think you may need some assistance to cover the closing costs of your mortgage, find out if you can get a seller concession to pay for the same. Alternatively, you may also request a seller concession if you find a problem during a home’s inspection and will need to spend money to fix it after the purchase.

If you’re unable to get a seller concession to cover the closing costs for any reason, you may consider requesting a lender credit. The former is a better option because it works more like a discount, whereas you have to pay for the latter. Besides, while seller concessions bring down the cost of homeownership, lender credits might have the opposite effect.

Prospective homebuyers who wish to lower their interest rates might benefit by buying discount points. While you’ll need to pay extra at the closing table, you stand to gain in the long run, provided you live in the house for a prolonged period.

Conclusion

When it comes to dealing with discount points, lender credits, or seller concessions, making an informed decision requires paying attention to different aspects. These include your existing financial situation, upfront costs, how long you plan to live in the home you purchase, and the potential for long-term savings. Discussing your requirements with your financial advisor and a reputable mortgage provider is ideal.

Home buying requirements often tend to vary, and finding a home that meets your needs to a tee can be quite challenging. However, most real estate experts and New York City homebuyers’ guides suggest that paying attention to the neighborhood is more important than narrowing down on a suitable home. After all, it’s possible to remodel and fix a home you purchase.

So, if you’re wondering, “What’s the best place to buy a house in New York?” these neighborhoods deserve your attention.

The Best Neighborhoods for Buying a Home in New York

New York, with its diversity, gives homebuyers several great neighborhoods from which to choose. Here are some that are well set or up and coming.

Manhattan

If you like the hustle and bustle typically associated with New York, you’ll feel right at home in Manhattan. Often referred to as The City, Manhattan is described as the financial, cultural, media, and entertainment capital of the world.

The average median home value in Manhattan is around $1,140,576, with there being a 3.5% year-on-year decline in home values.

Manhattan has over 350 primary and secondary schools. Public schools in the area fall under NYC Geog District # 2 – Manhattan or NYC Geog District # 3 – Manhattan. Residents may also choose from schools that are part of NYC Geog District # 4 – Manhattan and NYC Geog District # 5 – Manhattan.

As one of the best places to buy a house in New York City, Manhattan is home to several big hospitals, some of which include Bellevue Hospital, Lenox Hill Hospital, Lower Manhattan Hospital, and Metropolitan Hospital Center.

Chelsea

Predominantly residential, Chelsea offers a mix of townhouses, row houses, apartment blocks, city housing projects, and tenements. In addition, the area’s social and ethnic diversity is plain to see through its many retail businesses. Eighth Avenue boasts of a carnival-like atmosphere all through the year, which is great if you’re buying a house in New York for its vibrant culture.

The average median home value in Chelsea is $1,482,972. There has been a 6.9% decline in home values from August 2023 to August 2024.

With 19 primary and secondary schools, Chelsea gives its residents numerous education alternatives from which to choose. Public schools in Chelsea are part of NYC Geog District # 2 – Manhattan, although residents also get to choose from schools that are in the Hoboken Public School District and the Weehawken Board Of Education School District.

The nearest major hospitals include Bellevue Hospital Center and NYU Langone Medical Center in Kips Bay as well as the Beth Israel Medical Center in Stuyvesant Town.

Hell’s Kitchen

Hell’s Kitchen’s gritty reputation is long gone. It is now home to numerous entertainment and dining alternatives. It merges with the Theatre District, where Broadway and Off-Broadway shows are all too common. Long favored by many new actors, it has also started attracting young Wall Street financiers who are interested in buying a home in NYC.

The average median home value in hell’s Kitchen is around $934,000. There has been a 3.9% year-on-year decline in home values.

The New York City Department of Education operates three public elementary schools in Hell’s Kitchen as well as 10 high schools. The rate of student absenteeism in Hell’s Kitchen and Chelsea is lower than in other parts of NYC. In addition, more than 80% of the neighborhoods’ high school students graduate on time, which is over 5% more than the citywide average.

Major hospitals that are easy to access from Hell’s Kitchen include the Bellevue Hospital Center and NYU Langone Medical Center in Kips Bay along with the New York Presbyterian Hospital in Upper East Side.

West Village

In 2017, West Village earned the distinction of having the most expensive residential property sale prices in the U.S., with prices typically exceeding $2,100 per square foot. It is regarded as an important historical landmark linked to the American bohemian culture of the early and mid-20th century. The now-famous Stonewall Inn is located just off Seventh Avenue and Christopher Street.

The average median home value in West Village is around $1,541,874. There has been a 7.6% decline in home values from August 2023 to August 2024.

West Village is home to four schools. While the NYC Geog District # 2 – Manhattan operates public schools in West Village, residents also get to choose from options that are part of the nearby Hoboken Public School District and the Elysian Charter School.

Major hospitals that residents may turn to include Lenox Health Greenwich Village as well as the Bellevue Hospital Center and NYU Langone Medical Center in Kips Bay.

East Village

East Village has been home to free-thinkers and artists for a while. While corporate interests have made inroads into some parts of this neighborhood, just about every good NYC homebuyer guide highlights the fact that the area around the St. Mark’s Church on Second Avenue continues to support local art and artists.

The average median home value in East Village is around $1,141,152. There has been a 2.3% decline in home values from August 2023 to August 2024.

There are 23 primary and secondary schools in East Village. The public schools in East Village are part of NYC Geog District # 1 – Manhattan. The Northside Charter High School and NYC Geog District #14 – Brooklyn are in close proximity.

Major hospitals that are easily accessible include Beth Israel Medical Center in Stuyvesant Town, the New York Presbyterian Lower Manhattan Hospital in the Civic Center area, as well as NYU Langone Medical Center and the Bellevue Hospital Center in Kips Bay.

Williamsburg

Williamsburg, in Queens, on the other side of the water from the East Village, wins the popularity contest with visitors heading to this part of New York. This neighborhood boasts of great nightlife as well as numerous restaurants, vintage designer shops, and indie fashion alternatives.

The average median home value in Williamsburg is around $1,057,440. Of all the best neighborhoods to buy a house in New York, this is among the few where prices of homes have climbed in the last year, with a 2.3% August 2023 to August 2024.

Williamsburg’s public schools are part of NYC Geog District #14 – Brooklyn. The neighborhood has a total of 55 primary and secondary schools. Other alternatives include the Believe Northside Charter High School and the Bedford Stuyvesant New Beginnings Charter School.

Woodhull Medical Center is the nearest major hospital. In addition, the neighborhood has several medical clinics.

Park Slope

There’s good reason why many homebuyers feel Park Slope is the best place to buy a house in New York City and it definitely warrants your attention if you’re thinking about buying a home in Brooklyn. In 2010, the New York Magazine ranked it as the most desirable neighborhood in New York. The American Planning Association called it one of the “Greatest Neighborhoods in America” in 2007.

Fifth Avenue and Seventh Avenue are home to the area’s commercial interests such as shops, bars, and restaurants. The east-west side streets house lines of apartment buildings.

The average median home value in Park Slope is around $1,374,494. There has been a 2.8% decline in home values from August 2023 to August 2024.

Park Slope has as many as 22 primary and secondary schools. Public schools in the neighborhood belong either to NYC Geog District #15 – Brooklyn or NYC Geog District #13 – Brooklyn. The Bedford Stuyvesant New Beginnings Charter School and NYC Geog District #17 – Brooklyn are in close proximity.

The New York Presbyterian Brooklyn Methodist Hospital is a major hospital that is located in Park Slope.

Jackson Heights

Jackson Heights has found favor with middle-class homebuyers interested in buying a house in NYC since the early 2000s, primarily because of its cultural diversity and the unique architecture of buildings in the area. Street food from the world over is easy to find along Roosevelt Avenue from 74th to 108th Street. A stretch of Roosevelt Avenue that is home to several bars and clubs often makes for comparison with Christopher Street in the West Village.

The average median home value in Jackson Heights is around $456,807. There has been a 6.0% decline in home values from August 2023 to August 2024.

There are a total of eight schools in Jackson Heights. Public schools in this neighborhood belong to NYC Geog District #30 – Queens. Other school districts in the vicinity include NYC Geog District #32 – Brooklyn and NYC Geog District #25 – Queens.

The Elmhurst Hospital Center in Elmhurst is the nearest large hospital.

Other Popular Neighborhoods in NYC

Depending on which NYC homebuyers guide you go through, you’ll find different suggestions. Some of the other neighborhoods you may look at if you’re buying a house in New York include Gramercy Park, Harlem, Hudson Valley, the Hamptons, Windsor Terrace, East Williamsburg, Bushwick, Bedford–Stuyvesant, Melrose, Mott Haven, Fordham, Long Island City, and St. George.

Alternatively, if wish to move beyond the city and are looking for the best places to buy a house near NYC, you may check what the top neighborhoods in Long Island have to offer.

What You Need to Know About Buying a Home

Before you think about buying a home in New York or anywhere else, determine if you’re better off as a renter or a homeowner. Take your individual needs into account before narrowing down on any neighborhood. For instance, do not fail to account for the time you will need to spend commuting to and from your workplace. Other aspects that need your attention include:

• Affordability – after taking into account income and expenses
• The down payment and closing costs
• Selecting a mortgage lender
• Getting preapproved for a loan
• Comparing multiple listings and carrying out home visits
• Making an offer

Selecting a Mortgage Lender

The best place to buy a house in New York and the neighborhood you select notwithstanding, it is important that you work with a reliable mortgage provider. Finding a mortgage lender who might work well for you requires that you pay attention to different aspects.

The interest rate you get has a significant effect on the overall cost of your loan, and even a small difference in percentage can make a noticeable dollar-value difference. Take a close look at all the fees you might need to pay, which may come in the form of application fees, loan origination fees, document preparation fees, credit report fees, assumption fees, closing fees, and prepayment penalties.

When getting a loan to purchase a home, flexibility in terms and conditions might make the entire process more borrower-friendly. For example, several borrowers benefit by being able to choose from making weekly, biweekly, and monthly repayments. Some lenders provide home loans that come with fixed interest rates for the initial period of the loan, while moving to a variable rate at a later stage. Some borrowers also look for features such as redraw facilities and repayment pauses.

Since getting a mortgage involves a long-term association with a lender, do not forget to pay attention to customer service levels. An easy way to do this is to look for testimonials or reviews written by previous or existing borrowers.

Choosing the Right Type of Mortgage

When it comes to applying for a home loan, you get two basic alternatives from which to choose. In both cases, eligibility might involve meeting different criteria, including having good creditworthiness. Your credit score may also play a role in the interest that applies to your loan.

Government-Backed Loans

You may qualify for a government-backed home loan whether you’re a first-time homebuyer in NYC or not. The U.S. Department of Agriculture (USDA) provides USDA loans through private mortgage lenders. The Department of Veterans Affairs (VA) guarantees VA loans. Similarly, the Federal Housing Administration (FHA) insures FHA loans, but note that FHA-insured loans come with the additional cost of mortgage insurance regardless of the down payment amount.

The key benefit of most government-backed loans is that they require you to pay little to no down payment.

Conventional Home Loans

Conventional home loans are ones that you may get through banks, credit unions, mortgage lenders, and private lenders. With a typical conventional home loan, you may be able to pay as little as 3% of the home’s selling value as a down payment, but the average down payment can range anywhere from 5% to 20% of the home’s selling value based on your comfortability and various circumstances discussed with your loan officer.

Conclusion

It is only normal for people to want to buy homes in which they can lead safe and comfortable lives. Fortunately, there are a number of neighborhoods in NYC where people from different walks of life can feel right at home, and buying a house in New York can be simpler than you imagine. Once you narrow down on a suitable locality, think about approaching a reputable lender to get pre-approved. This way, you can limit your search to homes that fit your budget.

Homebuyers in the United States typically need to pay around 10% to 20% of a home’s selling price as down payment. This requirement serves as a safeguard for lenders, while also indicating to them that you are financially responsible. However, the down payment is often looked upon as a big obstacle to the path toward homeownership. Even in modestly priced neighborhoods, the down payment can amount to thousands of dollars, which then begs the question, “Can you buy a home without a down payment?”

Fortunately, there are different types of mortgage programs that require little to no down payment. Zero and low down payment home loans are made available to individuals who meet specific eligibility criteria, which include having good creditworthiness. So, what options might you have if you wish to buy a home with no down payment?

USDA Loans

Potential homebuyers with the question, “Can I buy a house without a down payment?” often end up turning to these loans. The United States Department of Agriculture (USDA) is responsible for issuing USDA loans through its Rural Development Guaranteed Housing Loan Program. You may think about applying for this zero down payment loan if you are an eligible rural or suburban home buyer. USDA loans come in three forms:

• Loan guarantees. In this scenario, USDA guarantees mortgages issued by participating local lenders. However, if you choose to pay little or nothing toward the down payment, you will need to get mortgage insurance.
• Direct loans. If you’re wondering how to buy a house with low income and no down payment, you may consider looking at how direct loans work. The USDA issues these loans for individuals who fall under the low and very low income brackets. Where you live might have a bearing on income thresholds. With the right types of subsidies in place, you may look forward to an interest rate as low as 1%.
• Home improvement loans/grants. While not quite a solution for homebuyers, these loans and grants work well for existing homeowners. These loans or monetary grants give homeowners the ability to upgrade or repair their homes. By combining a grant and a loan, you may get assistance of up to $27,500.

One of the benefits of getting a USDA home loan without down payment is the lower insurance premium when compared to other types of loans. In addition, if you take a look at the USDA loan eligibility maps based on the type of property you wish to purchase, you will notice that most areas outside of the country’s major cities also qualify as rural areas.

If you’re wondering what credit score is needed to buy a house with no money down through a USDA loan, know that these loans come without any minimum credit score requirement. However, you become ineligible if you have an existing delinquency of a nontax federal debt. Applicants without adequate credit history may consider applying, because other factors are then taken into account. If your credit score is lower than 640, your application goes through a more stringent underwriting process.

How much you may borrow through a USDA loan depends on the location of your desired home, and limits vary from one county to the next. Limits in most countries range between $120,000 and $250,000, although they can go up to around $570,000.

VA Loans

The answer to, “Can you buy a house with no down payment as a person who is on active duty is in the military?” is yes. This is thanks to the U.S. Department of Veteran Affairs which is responsible for providing VA loans.

People who may qualify include existing service members, veterans, as well as eligible surviving spouses. These home loans without down payment also take away the worry of making monthly mortgage insurance payments. However, you need to pay a funding fee that may vary depending on your military category and the type of loan you get. The offerings include:

• Purchase Loans and Cash-Out Refinance. You may apply for a purchase loan to buy a house. If you wish to borrow against the equity you have built in your existing home, you may go the cash-out refinancing way.
• Native American Direct Loan (NADL) Program. Meant specifically for eligible Native American Veterans, this program lets applicants purchase, construct, or improve their existing homes on Federal Trust Land. Applicants may even make use of this program to further reduce interest rates on VA loans.
• Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL is also referred to as the Streamline Refinance Loan. It gives existing VA loan holders the ability to get lower interest rates.
• Adapted Housing Grants. These grants are meant for veterans who suffer from permanent and total service-connected disability. Applicants may use the funds to build or buy adapted homes, or to modify existing homes to make them more suitable for living.

While the VA loan program does not have a minimum credit score requirement, it is not unusual for lenders who accept minimum down payment for home loans to have their own requirements. Most lenders look for credit scores between 620 and 640, although there are some that accept lower scores. You will also need a valid Certificate of Eligibility (COE).

There is no maximum limit surrounding how much you may borrow through a VA loan. However, there is a limit on the amount that the VA guarantees. For a single-unit property, this limit currently stands at $484,350 in most states across the country. If you are looking at buying a home in a high-cost market, the limit extends up to $726,525. 

FHA Loans

If minimum down payment for home loans is your main criterion in looking for a mortgage, you might benefit by taking a look at what the Federal Housing Administration (FHA) has to offer. FHA was founded in 1934, with the aim of reducing requirements to get a home loan and encouraging homeownership. FHA loans are issued by FHA-approved lenders, and they are insured by FHA.

While you cannot get a home loan without down payment through FHA, you might qualify to make a 3.5% or 10% down payment. What makes FHA loans particularly popular is that they offer increased flexibility through the eligibility criteria.

Since FHA works as a guarantor on your loan, you need to make mortgage insurance premium payments. This is because if you end up defaulting on the loan, FHA is responsible for repaying the lender the amount you owe toward the mortgage. How long you need to keep paying mortgage insurance premium depends on the loan-to-value ratio as well as the loan term.

Conventional 97 Loans

Fannie Mae provides these loans for first-time homebuyers who wish to purchase primary residences. According to Conventional 97 loan requirements, you need to pay at least 3% as down payment. Private mortgage insurance remains in place until you acquire at least 20% equity in your home. Most lenders who provide these loans require credit scores of 680 and above.

HomeReady Loans

Fannie Mae provides these loans for low and moderate income earners who wish to purchase primary residences as well as for those who want to refinance existing primary residence mortgages. These loans require 5% down payment. Until you get 20% equity in your house, you keep making payments toward private mortgage insurance. A credit score of 680 or above is typically required.

Home Possible Advantage Loans

Freddie Mac provides these purchase and refinance loans to applicants who do not own any other property, although it makes a few exceptions. You need to pay at least 5% as down payment, and private mortgage insurance is part of the parcel. Your credit score needs to be 660 or above.

Should You Buy a Home Without Down Payment?

You might benefit by getting a home loan with a low or no down payment if you want to buy a house quickly but do not have money to put toward the down payment. Given the existing market scenario and mortgage interest rates, this might be as good a time as any to consider going the homeownership way. Some people also get home loans with a low or no down payment so they may continue to have more cash on hand to take care of other expenses or to make investments.

Possible Drawbacks of Buying a Home Without Down Payment

The idea of paying zero or minimum down payment for home loans comes with its share of potential drawbacks. Even if you get a competitive interest rate, you will, in all likelihood, end up making a higher monthly repayment. Other drawbacks might include:

• Higher mortgage insurance. If you buy a home with no down payment, you typically need to make ongoing payments toward mortgage insurance. Besides, the less you pay as down payment, the more you pay toward mortgage insurance.
• Fees. Some home loans without down payment attract funding fees, which can be a tidy sum. Even if the fee is incorporated into the loan, the buyer is still responsible for paying it at some point.
• Financial risk. One of the drawbacks of buying a home without down payment is that you start by having absolutely no equity in the house you purchase. In such a scenario, if the market experiences a downturn, your exposure to financial risk might be significant. This is especially the case if you need to sell the house and end up getting less than what you paid. Even if you do not sell the house, you still end up owing more toward your mortgage than the actual worth of the house.

Conclusion

Can you get a home loan without a down payment? Well, when it comes to how much down payment you need, the fact remains that several homebuyers are eligible to pay zero or minimum down payment. Depending on factors such as your income, creditworthiness, and what you do for a living, you might qualify for a home loan without down payment or one that requires you to pay 3% to 10% as down payment.

However, the type of loan you get notwithstanding, it is important to determine if you can afford to make mortgage payments and keep up with other home ownership costs. Once you get that out of the way, all you need to do is contact a reliable lender.

So, you’re ready to buy a home! Congratulations, we’re here to help you every step of the way. One of the first steps is submitting your application for a mortgage. If you’re a first-time homebuyer or perhaps it’s been a while since you applied for a mortgage, you’ll need to know the documentation required to apply. In this blog post, we’re sharing a complete guide for the application process and what to expect along the way!

Check Your Credit Reports

When you apply for a mortgage, you may expect the lender to look at your credit score to determine the level of risk you pose as a borrower, wherein the higher your score, the lower the perceived risk. As a result, it’s ideal for you to know what lenders will see when they pull up your credit reports. If you feel your credit score is lower than you would like, you should consider improving it before applying for a mortgage.

There are instances when mistakes or erroneous entries make their way to people’s credit reports, causing their credit scores to drop. Going through your credit reports from the three major reporting bureaus -Equifax, Experian, and TransUnion – enables you to spot any inconsistencies, after which you may contact the bureaus in question and get them rectified.

Keep in mind that your credit score might play a role in the type of mortgage you apply for, especially if it falls below a particular limit. More often than not, you need a credit score of 620 or higher to qualify for a mortgage, but there are exceptions. Your credit score also may affect the interest rate that applies to your mortgage.

Getting a free copy of your credit report from the three major credit bureaus once a year is easy, and you may do so by visiting their websites.

• Equifax
• Experian
• TransUnion

Review Your Debt-to-Income (DTI) Ratio

While a lender looks at your credit score when reviewing your mortgage application, they also pay attention to other aspects of your financial profile. For example, you may expect a lender to check your debt-to-income (DTI) ratio to determine how much of your monthly income goes toward servicing your existing debt.

Calculating your DTI ratio requires adding up all your monthly debt payments and dividing the total by your gross monthly income. For example, if your gross monthly income is $10,000, out of which you use $3,500 to make debt payments, your DTI ratio is 35%. Keep in mind that your DTI ratio also includes your mortgage principle, interest, taxes, and insurance. Ideally, your DTI ratio should be 36% or below, although some lenders are okay with this number going as high as 43% if there are other offsetting factors.

Determine How Much You Can Afford

Fannie Mae’s mortgage affordability calculator lets you get some indication of how much you can afford to borrow based on various factors like your income and existing debt. However, much like calculating your DTI, it does not account for expenses that fall outside of the debt category. These may include phone bills, insurance payments, and day-to-day expenses that can vary significantly from one person to the next.

To determine how much you can afford to borrow through a mortgage, make sure you account for your lifestyle as well as ongoing maintenance costs. When it comes to the latter, expect to spend 1% to 4% of a home’s value on its upkeep every year.

When addressing this important aspect of the mortgage application process, you should ideally avoid determining the most you can borrow. Instead, you should focus on how much you can afford to repay comfortably each month.

Think About the Down Payment

Just about every mortgage loan process flow chart you look at will devote a section to down payment because of the crucial role it plays. For starters, while many people feel they need to make at least a 20% down payment to get a conventional mortgage, this is not the case.

Depending on the program you qualify for, you might be able to pay as little as 3% to 5% toward down payment on a conventional mortgage, although you will need to pay extra for private mortgage insurance (PMI). Getting a no down payment mortgage might also be an option, provided you meet the required eligibility criteria.

While you might qualify for a mortgage that requires a small down payment, know that there are potential shortcomings. For example, a larger down payment will bring down your monthly payments and reduce how much interest you pay during the term of the loan. In addition, making less than 20% as down payment for a conventional loan will require that you get PMI.

Keeping adequate funds aside to cover the closing costs is ideal, as these can vary from 2% to 6% of the amount you borrow.

Look at Different Types of Mortgages

Given the different types of mortgages, it’s important to compare them and determine which programs best fit your needs. For example, if you know you will live in the house you purchase for just a few years, you may consider getting an adjustable-rate mortgage (ARM) with a low introductory rate.

Conventional Loans

Conventional or conforming loans are the most common type, and qualifying for these non-government-backed loans requires that you have a credit score of 620 or higher. Some lenders might be willing to accept down payments as low as 3%.

VA Loans

Backed by the U.S. Department of Veterans Affairs, qualifying for a VA loan requires that you have a credit score of 620 or higher. You may qualify with a lower score if you have a valid Certificate of Eligibility (COE). In addition, you may get a VA loan without making a down payment.

USDA Loans

The U.S. Department of Agriculture guarantees all USDA loans. You may apply for one as a low- or moderate-income borrower with a credit score of 640 or higher. Typically made available for eligible rural homebuyers, you may also apply for one as a resident of a suburban area of a large city or a town where the population does not exceed 25,000. Like VA loans, USDA loans come with no down payment requirement.

FHA Loans

The Federal Housing Administration guarantees these loans. You may qualify for an FHA loan with a credit score of 500 or higher, in which case you’ll need to make at least a 10% down payment. If your credit score is 580 or higher, the minimum down payment requirement drops to 3.5%.

Jumbo Loans

If you need to borrow an amount that exceeds conforming loan limits set by the Federal Housing Finance Agency (FHFA), you may consider applying for a jumbo loan. In this case, you’ll need a credit score of 700 or higher. The down payment amount may vary from 10% to 20%.

Fixed Rate vs. Adjustable Rate

The mortgage you get can come with a fixed or adjustable interest rate. With a fixed-rate mortgage, the interest rate remains the same throughout the term of the loan. This ensures that your payments won’t fluctuate with time.

If you get an adjustable-rate mortgage (ARM), the interest rate is subject to change after an initial period when it remains fixed. For example, with a 3/6 ARM, the interest rate will remain the same for the first three years, and it can then change every six months. If interest rates fall in the future, you stand to gain, but the reverse holds true as well.

Loan Term                  

Another important aspect of the mortgage application process, when you’re comparing different types of loans, is to determine what loan term suits you the most. A 30-year mortgage term is the most common, although you get other options from which to choose. For example, many lenders offer 15-year and 20-year mortgages.

Bear in mind that the loan term affects the overall cost of a mortgage. This is because the more time you take to repay the money you borrow, the more you end up paying as interest. However, while a shorter loan term can lead to savings in the long run, you will need to make higher monthly payments.

Get Pre-Approved

Even though you’ve done a fair amount of groundwork before you get to this stage, the mortgage loan process timeline typically begins when you apply for pre-approval. This process usually takes one to three days. Getting a pre-approval is ideal because it gives you a clear indication of whether you qualify for the type of mortgage you select and how much a lender is willing to lend.

During this stage, you may expect a lender to go through your credit reports, verify your employment and income, and look at your existing assets and debt. Getting pre-approved before you begin looking for a home is ideal as you can limit your search to the given budget. It also helps demonstrate that you are a serious buyer, which is perfect when you’re negotiating.

Find a Home

With a pre-approval in place, you may begin looking for a home. Depending on your requirements, the neighborhood you want to purchase a home in, and other factors, this may take a week to a month or more.

Make an Offer

Once you find a home you like, it’s time to make an offer. Real estate agents come in handy during this stage too because they know how to structure these documents and know which contingency clauses to include. For example, your agent might include a mortgage contingency clause that gives you a predetermined time period to get a mortgage. In this case, if you terminate the contract before the contingency date, you stand to get your earnest money back.

The earnest money is what you need to pay as the cash deposit that secures your offer. Depending on how hot any given market is, this could be as little as $5,000 or up to 5% of a home’s selling price. If you’re buying a house in a competitive market, make sure you’re ready to write a check or carry out a wire transfer when you make your offer.

Submit Your Mortgage Application

You may complete this crucial section of the mortgage application process timeline in an hour or two if you have all the required paperwork and information at hand. While some lenders might require additional information, this is what you need to provide when dealing with a typical mortgage application.

• Photo ID and Social Security number
• Employment and income information
• Pay stubs and W-2s (self-employed applicants can provide tax returns)
• Proof of additional income
• Income tax returns
• Bank statements
• Retirement and investment account statements
• Details of existing debt
• Details of alimony/child support payments (if applicable)
• Signed purchase and sale agreement

What Happens Next

Moving down the mortgage loan process flow chart, once you submit your application, the appraisal can take one to seven days, as is the case with the home inspection. The title search can take one to two weeks, and you may expect the underwriting process to take 10 to 15 days. Once you receive the loan estimate, review it carefully. Then, compare it with the closing disclosure you receive at the time of closing to ensure that the terms and conditions remain the same.

Conclusion

With knowledge of what the steps in the mortgage application process are, make sure you follow the right approach to becoming a homeowner. If you find yourself stuck at any stage or if you need more information about the process, consider seeking professional assistance. This can be from a real estate agent when it comes to looking for a home or from a mortgage provider if you need any mortgage-related information.

Buying a home is probably the biggest investment you will make. As a result, you must know what you’re getting into at the very onset. You don’t want to overlook any important aspect that you may regret later. Fortunately, you can avoid commonly made home buyer mistakes if you follow some basic guidelines before and during the process.

So, what are the most common home buying mistakes to avoid?

1. Not Contacting a Lender Early Enough

It is important that you contact a lender as soon as you decide to go the homeownership route. This gives you insight into the types of loans on offer, the down payment you need to pay, interest rates, loan terms, and whether or not you might require private mortgage insurance (PMI). Consider getting pre-approved as this gives you an indication of how much you can afford. It also serves as an indicator that you are serious about making a purchase.

2. Buying While Still in Debt

If you go through first-time home buyer tips, you will notice that thinking about buying a home when you have considerable debt is not the way to go. Think about it this way – would you want to run a marathon with ankle weights slowing you down? Debt has a way of eating into your monthly budget, and it might even cause problems when it comes to keeping up with regular monthly repayments toward your mortgage.

Getting a mortgage if you already have considerable debt is one of the biggest mistakes when buying a home, and one that you best avoid. If you’re in debt, reduce it, build your savings, and then think about buying a home.

3. Using Credit Carelessly

It is common for lenders to check borrowers’ credit reports at the time of pre-approval, and then again at the time of closing. A mortgage provider does this to ensure that there is no change in an applicant’s financial position during this period.

Not surprisingly, one of the top mistakes to avoid when buying a house is applying for other forms of credit after the pre-approval and before the closing. Refrain from making big-ticket purchases on credit as well. This is because any significant change in your debt-to-income ratio can get an underwriter to reject your application or provide revised terms that are less than favorable.

What you should try to do is get your existing outstanding balances to below 30% of your available credit limit, while paying all your bills in full and on time every month.

4. Thinking You Need a Down Payment of At Least 20%

Several first-time home buyers think they need to pay at least 20% of a home’s selling cost as a down payment, making it among the more common mistakes when buying a home. However, if you pay 20% or more as down payment, you do not have to worry about getting PMI. The flip side is that it might take you several years to save the required 20%, and you might also limit your cash flow during the period.

Depending on the type of loan you get, you can pay as little as 3% down payment for a conventional loan. With some government-insured loans, you can pay even less.

5. Not Considering Government-Insured Loans

Some real estate experts feel that the answer to, “What is the biggest mistake when buying a house?” is ignoring government-backed loans. The ones that require your attention include the United States Department of Agriculture (USDA) loans, Federal Housing Administration (FHA) loans, and U.S. Department of Veterans Affairs (VA) loans.

• USDA loans are available for rural homebuyers, suburban homebuyers, as well as buyers looking for homes in towns where populations are below 25,000. These loans are designed for low-to-moderate income earners.
• FHA loans are ideal for borrowers with less-than-perfect creditworthiness. However, they come with mandatory mortgage insurance.
• VA loans are designed for veteran and active-duty military service personnel and their spouses. Veterans have the option of not paying any down payment.

6. Rushing the Process

Getting a mortgage to buy a home can be a complicated process. One of the top mistakes first-time homebuyers should avoid is to rush through the process of getting a loan. If you rush through things, you get little time to save money for the down payment, and you will probably miss fixing errors on your credit report. Bear in mind that it may take months or even years to repair poor credit. As a result, map out a suitable home buying timeline well in advance.

7. Not Considering Other Costs

Not factoring in costs other than the home’s selling price makes it to the list of the top first-time home buyer mistakes to avoid with good reason. This is because there is no dearth of prospective buyers who focus on making the down payment and forget to account for closing costs. Typically, closing costs hover between 2% to 4% of a home’s selling price.

You need to take the cost of homeownership into account as well. In addition to making repayments toward your mortgage, you will also need to pay property taxes and any applicable home insurance premiums. Ongoing repair and maintenance costs require your attention too, failing which you might find yourself overshooting your monthly budget. You should ideally aim to set aside around 1% to 3% of the home’s buying price each year for repairs and maintenance.

8. Buying a House Outside Your Budget

It is not uncommon for people to fall in love with homes and buy them even if it requires them to stretch their pockets. This is among the most common first home buying mistakes to avoid, even if you qualify for a mortgage. This is because the mortgage payments, homeowners insurance, and property taxes might add a severe burden on your finances. While the added cost might not seem like much initially, it might turn out to be problematic in the long run.

9. Not Saving Enough

Not saving enough money before you buy a house makes it to the list of the top home buyer mistakes to avoid for different reasons. For starters, while saving money for the down payment is important, you also need to consider ongoing repair and maintenance costs. In addition, spending all or a major portion of your savings on the down payment is not a good move.

While paying 20% or more toward down payment does away with the need for PMI and helps reduce monthly costs, you should have some savings in place to account for unexpected expenses. Ideally, you should have an emergency fund with at least six months of living expenses.

10. Not Giving the Neighborhood Enough Attention

Another home buying mistake you should avoid is to give more priority to a house than its neighborhood. Consider this – you find a house that suits all your requirements perfectly, but once you move in you learn that you don’t quite like the neighborhood. Narrowing down on the right suburb or town can make a significant difference when it comes to the lifestyle you lead as well as family development.

Ideally, the neighborhood you select should not be a mismatch with the culture and values you follow. Once you find the right neighborhood, you can always consider buying a house that you can tailor to your needs. Aspects that typically need your attention include school ratings and crime rate as well as access to public transportation and healthcare.

11. Not Carrying Out an Inspection

It is crucial that you have a good idea about what shape a house is in before the closing of a sale. This is because you don’t want to end up with a house that requires unexpected repairs, especially when they burn a hole in your pocket. While inspecting a home on your own gives you a basic indication of its condition, you might be better off opting for a professional home inspection.

When it comes to some of the worst home buying mistakes that lead to monetary losses, you can find not using the services of professional home inspectors on almost every list. This is because they know just what to look for and where, and can end up saving you heartache and money in the long run.

12. Paying Too Much Attention to Aesthetics

It is only natural to want to buy a house that appeals to you visually. However, some cosmetic changes, such as replacing old wallpaper, may well be worth the cost. Not buying a house just because you don’t like its paint job, landscaping, or carpeting is a rookie home buying mistake you should avoid. If you look for a home with the approach of not minding making a few cosmetic changes, the possibility of landing a good deal increases.

Physical appearances can take a backseat if you are getting a house that fits your budget and meets your other requirements such as size and location. Remember that owning a home is usually a long-term proposition, and you can always think about making changes further down the road. Some of the other aspects you need to focus on include the home’s floor plan, roofing, and foundation, as well as its plumbing and electrical systems.

Remember that fixing a house on your own or hiring a contractor to do the job is typically more cost-effective than buying a house that has recently been fixed by its existing owner. Besides, you can then do up the house according to your liking.

13. Not Getting a Homebuyer Rebate

One of the most common first-time homebuyer tips that pass the attention of people is to get homebuyer rebates or commission rebates. The rebate can be up to one percent of a home’s selling price. It is deducted from the buyer’s agent’s commission. First-time home buyers can benefit by getting this rebate in most states in the U.S.

If you plan to buy a house in a state that allows homebuyer rebates, find out if your agent will offer the rebate before closing. The states that prohibit homebuyer rebates include:

• Alaska
• Alabama
• Iowa
• Kansas
• Louisiana
• Mississippi
• Missouri
• Oklahoma
• Oregon
• Tennessee

14. Buying Without a Real Estate Agent

Given the widespread use of the internet and easy access to real estate listings, some prospective buyers feel that can get through the process of purchasing a house on their own. However, this is one of the mistakes first-time homebuyers should avoid. According to data collated by the National Association of Realtors, 89% of buyers bought their homes through real estate agents or brokers in 2023.

Typically, the seller pays the buyer’s agent’s commission, so this is an aspect you don’t have to worry about. In addition, a real estate agent can:

• Help you determine what types of homes you can expect to find within your budget.
• Give you access to a wide range of homes in your desired neighborhood based on your requirements.
• Give you an edge over other prospective buyers who are without buyers’ agents.
• Provide valuable assistance at the negotiating table.

15. Not Getting All the Details on Paper

Not getting all the details surrounding a purchase in writing is among the most common home buying mistakes that can turn ugly in the future. There have been instances of homebuyers assuming that the kitchen appliances they see during their inspections are part of the deal, only to find the kitchen bereft of any equipment after the deal is done.

Expect a home’s previous owner to take all that can be detached away once you buy the house. This can include hot tubs, bath fixtures, light fixtures, washers, dryers, ceiling fans, and other home appliances. Make sure you go through the contract in great detail before the closing. If any of the items you think come with the house are missing, get them added before signing on the dotted line.

Conclusion

Buying a home might seem like a daunting task, although carrying out a little groundwork ensures that you minimize the possibility of getting a bad deal. The best place to start is to contact a lender and establish how much you can afford to borrow. Then, make a list of what you require from the new home and the locality, and look for homes accordingly.

Do not hesitate to seek professional assistance because doing so makes the process considerably simpler and you get to avoid all the common home buying mistakes easily.

If you plan to buy a home, chances are you have heard about the concept of attending open houses, where you get to view properties that are up for sale. In such scenarios, you must remember that the home belongs to someone else and you’re a guest, and it’s crucial to treat the process professionally. In this blog post, we’ll share best practices for attending open houses and answers to commonly asked questions.

What is an Open House?

An open house is when sellers invite the general public to view a home that is up for sale. More often than not, real estate professionals take the responsibility of hosting open houses on their clients’ behalf, although some sellers may choose to host them on their own. An open house typically lasts for a few hours, and most people hold them on weekends to attract more foot traffic. You may also find some that take place on weekday evenings.

When homeowners decide to sell their homes, their real estate agents tend to recommend that they host open houses to attract more potential buyers. However, a seller may decline the proposal and request to show the house only by appointment.

A typical open house is informal, and you might even find small refreshments that help make the atmosphere more welcoming. It’s common for open houses to have sign-up sheets, which you may fill with your details. Some real estate agents and realtors create informational flyers, giving potential buyers further insight into the property. These can come in the form of its key details, price, photos, and information about the neighborhood.

Can You Go to an Open House Without a Realtor?

The main goal of an open house is to give potential buyers the opportunity to see any given home in person. Whether you choose to go alone or with a friend, family member, or real estate professional is entirely up to you. However, as per an October 2023 court verdict, buyers will need written agreements with their realtors if they wish to take them along to open houses.

The answer to, “Do realtors go to open houses with you?” depends on the stage of the home buying process you’ve reached. For example, it makes sense to take your realtor along if you’ve already signed an agreement, or at least keep them in the loop. This is because they can provide valuable insight into aspects like pricing, a home’s features, and its neighborhood.

Can You Go to an Open House Without an Appointment?

Given the nature of an open house where a property is open for public viewing during a predetermined timeframe, you don’t need to make an appointment to visit an open house.

Finding Open Houses

If your main goal of visiting open houses is to determine what the market has to offer and you’re not particularly serious about buying a home yet, you may begin the search online. This is because several real estate websites update region-specific open house listings regularly, and you may also find them on social media platforms.

Some agents post open house ads in local newspapers, and going through the real estate section might work well for you. Placing signs of open houses outside of the property is common too, so you may consider driving around the neighborhoods you’re interested in at a relaxed pace when you have time.

Prospective buyers who are serious about the process may benefit by enlisting the services of real estate professionals who have good knowledge of the desired neighborhoods. This is because they tend to have access to resources that the general public does not.

Keep in mind that open house listings often make their way to multiple listing services (MLS) and agents’ websites, giving other real estate professionals the ability to view all properties and notify their clients when they find suitable options.

The Importance of Open Houses for Buyers

The open house concept is an important element in the home buying journey, allowing you to get a close look at the property in question, beyond photos and videos. An open house typically gives you more time to explore a home than a one-on-one showing, so you can get a better feel of how you may use the space. You can also walk around the neighborhood to explore what it has to offer.

If you’re wondering what to do at an open house as a buyer, know that you can examine different aspects of the home such as the size of the rooms, floor plan, quality of fixtures, and overall upkeep. You may use this opportunity to determine if the house receives adequate natural light and establish general noise levels. Finding out what’s motivating the existing homeowner to sell might help at the negotiation table.

Once you attend a few open houses, you get a better understanding of what you need in a home and the elements you can do without. When at an open house, it’s also important to get additional information such as proximity to schools, public transportation, healthcare facilities, and open spaces. You should also keep an eye out for elements that might need extensive repairs.

If you like what you see at an open house, you can always ask your agent to arrange for a professional home inspection later.

Open House Tips for Buyers

Buying a home is typically the biggest financial decision that many people make, so it’s best to approach the process with caution. No matter which open house checklist for buyers you go through, you will find that you need to pay attention to multiple aspects, even ones that extend beyond the actual property. So, what should you do at an open house as a buyer?

Get a Pre-Approval

Getting a pre-approval for a mortgage before you start looking at homes comes with numerous benefits. For instance, a pre-approval gives you an indication of how much a mortgage provider is willing to lend to you, and this can help you carry out a more focused search. A pre-approval can work in your favor when you’re negotiating with sellers because they tend to take you more seriously than other prospective buyers. Besides, it can also lead to a faster closing.

Research Online First

When a home that’s up for sale has an open house, there is a very good chance that you can find the listing online. Use this to get as much information as you can, which may include the home’s square footage, price, monthly payments, number of rooms, and age. Online listings also tend to come with photos and videos. Going through a home’s online listing gives you an indication of if it’s worth visiting at all.

Take Notes and Photos

Given that you will end up looking at a few or more homes before you buy one, keeping track of details can be challenging. As a result, it’s ideal that you take property-specific notes each time you visit an open house. These may include features that draw your attention as well as concerns and questions you might have.

Taking photos can also help you compare different properties at a later stage, but make sure you do this only after seeking permission from the sellers or their agents.

Make a Good Impression

It is common for real estate agents and Realtors to represent homeowners who wish to sell their homes, and it’s normal for them to help sellers determine which offers are the best. As a result, making a good impression with the seller’s agent can help give that extra push your offer requires in a competitive market.

Make sure you arrive at the open house dressed well and follow all house rules that might apply. Agreeing to any request that a seller’s agent may have, like completing a sign-up form, is the ideal way to go.

Look at Neighboring Homes

Visiting an open house gives you an opportunity to look at other homes in the vicinity. However, it’s important to be discreet and look at them from a distance. Remember that neighbors can be long-term, especially if they’re homeowners, so it makes sense to look for signs that might indicate potential problems. For example, are the homes of the immediate neighbors neglected or well-kept?

Inspect Closely

Given that you get considerable time to go through a property during an open house, use it to your advantage. Besides, make sure you don’t let the staging distract you, and inspect the home with a critical eye. For example, sagging roofs, cranky HVAC systems, and cracks in the walls can be signs of neglect.

Mold can lead to significant problems and can occur in homes that have suffered any type of water damage, either because of flooding or leaking pipes. While mold appears in plain view at times, it usually thrives in damp and dark places. This requires that you check for mold in the basement, under the deck, in the bathroom, and under the sinks.

With homes that are fully furnished, you should do your best to detect hidden problems by trying to look past furniture and check for damage to the floorboard, drywalls, tiles, and bricks. Remember that there are several elements in a typical DIY home inspection, and it’s best that you understand the process in advance.

Check Storage Space

The square footage of a home might not serve as a clear indication of the storage space it offers, so considering this aspect during an open house is important. Ask the seller’s agent if it’s okay to climb up the attic, open closet doors, check drawers, and inspect bathroom storage, and make sure you treat the existing owner’s belongings with care. If a home comes with an unfinished basement that can provide adequate storage space, determine if it is worth the expense.

Pay Attention to Other Prospective Buyers

At an open house, you need to view other prospective buyers as your competition, but it’s important to be respectful to them. Knowing how many people attend an open house can be useful because while many visitors might lead to stiff competition, only a handful might mean that the seller will receive few bids, and that yours might stand a better chance.

Follow Up with the Seller’s Agent

If you have questions about the property, don’t hesitate to contact the seller’s agent. You may also consider sending a quick email to express your interest in the home by highlighting the aspects you like. If you wish to give a home a relook, you may  request a one-on-one viewing.

Can You Go to an Open House Without a Pre-Approval?

The short answer to this is, yes, you may go to an open house without pre-approval from a mortgage provider, but having one in place comes with numerous benefits. For starters, it shows the seller that you are serious about buying a home and adds credibility to your offer. Besides, if you’re purchasing a home in a competitive market, a pre-approval letter can swing the pendulum in your favor, especially if a competing bidder does not have one.

If you decide to move forward with the purchase, a pre-approval can speed up the process because you’ve already taken care of the initial paperwork. Besides, a pre-approval gives you an indication of how much you can borrow, and you can then attend open houses based on this number. Bear in mind that lenders consider several factors before granting preapproval, which include your credit score, income, and debt-to-income ratio.

Conclusion

Now that you know what to do at an open house as a buyer, make sure you put your best foot forward when you attend the next one. If you feel you might not remember all the aspects that need your attention, jot down a few pointers from the open house tips for buyers you find on this page and refer to them as and when needed.

If you’re serious about becoming a homeowner, consider getting a pre-approval from a reputable lender ahead of time because this demonstrates intent to a seller or a seller’s agent. What follows is making an offer, negotiating, and closing the deal.