Buying a house is a huge milestone moment in your life. This is likely the first time you’ll own a significant investment, and when done properly, give yourself a chance to make a tidy little profit when you move on to your next home.

However, buying a house in Delaware has probably never been more difficult as the housing market benefits sellers, so the prices are high while at the same time it’s harder to save enough for a down payment than it used to be.

Today’s blog post is dedicated to those of you out there thinking about taking that next huge step in your life and purchasing a house for the first time, so The Peninsula On the Indian River Bay put together this comprehensive list of tips for first-time home buyers, divided neatly in the chronological order of the home-buying process.

Insight Homes is one of the best home builders in Delaware and offers the nicest new homes in Delaware, with exceptional build quality. Plus, you gain amazing access to the finest resort community in the state, featuring an award-winning Jack Nicklaus-designed golf course!

Mortgage Down Payment Tips

This first step in the home-buying process is critically important because it sets the stage for everything else. Take notes if you need or save this post to your favorites because it’s going to be a life-saver for you and a great resource as you buy your first home.

  1. Start Saving Early

As you’ve likely heard, it’s fairly common practice to put 20 percent of the house’s cost down as payment, but many lenders allow much less, especially in first-time homebuyer programs, which could accept as little as 3 percent down. However, keep in mind that putting less down means higher costs and paying for mortgage insurance. Even a small down payment is a large sum of money. Just 5 percent of a $300,000 home, for example, is $15,000. Here’s a helpful down payment calculator to help you get a sense of what you need or can put down. Set aside tax refunds, work bonuses and set up an automatic savings plan to help save for the down payment.

  1. Explore Your Options

You’re never locked into one mortgage option. There are plenty of choices for you to consider, each possessing its pros and cons. Some common loans include:

  • Conventional mortgages: These conform to standards set by government-sponsored entities Fannie Mae and Freddie Mac, requiring as little as 3 percent down
  • FHA loans: These loans are insured by the Federal Housing Administration and allow for down payments as low as 3.5 percent
  • VA loans: These loans are afforded to military veterans by the Department of Veteran Affairs and sometimes require no down payment at all

A higher down payment results in lower mortgage payments every month, depending on the length of the loan. A 30-year fixed mortgage spreads the payments out longer, so smaller payments, but a shorter loan term (20- or 15-year mortgages) will get you lower interest rates, saving money in the long run. An adjustable-rate mortgage is riskier but guarantees a lower interest rate for the first number of years of your mortgage.

  1. Research Assistance Programs

There are also state assistance programs that are designed to aid first-time homebuyers and provide you perks such as down payment assistance, closing cost aid, tax credits and discounted interest rates. This is also true of the county or municipality you’re looking to live in, so do some research because it’s definitely worth it.

Mortgage Application Tips

Once you’ve gone through the important work of figuring out what kind of mortgage you would like, finding any assistance available to you as a first-time home buyer and have saved the money you’ll need when buying a house, you’re ready for the next step: applying for a mortgage!

  1. Determine Your Budget

Just like it is for any large expense, you need to understand how much you can realistically afford. This includes the down payment and monthly mortgage payments. This will give you a price range to shop within. Stick to your budget, even if you are approved for a loan limit that’s higher than your budget.

  1. Check Your Credit

Your credit score will be important to qualify for a loan and a strong interest rate, so it’s important to know what your credit is and take measures to improve it if necessary. This is a key factor in approval, interest rate and possibly even loan terms. Settle outstanding debt, dispute errors and avoid opening any new lines of credit when applying for a loan until your home loan closes.

  1. Compare Rates

Don’t leave money on the table by getting a loan quote from a single lender. Shop around and see what loan quotes you get because it can be large savings in the long run. Receiving quotes from at least three lenders is preferable and can save you as much as $3,500 in the first five years of your loan, according to the Consumer Financial Protection Bureau. Compare the rates and fees and ask lenders if they would allow you to buy discount points, which is where you prepay interest upfront to secure a lower interest rate on the loan. How long you live in the house and if you have the money to purchase points should, of course, be considered before taking this route.

  1. Get A Pre-Approval Letter

Getting pre-qualified for a mortgage just means you have an estimate on how much a lender is willing to give you based on your income and debt (credit). But as you draw closer to actually purchasing a home, it’s best to get pre-approved, which is when a lender does a deeper analysis of your financials and confirms in writing the amount they’re willing to lend you and under what terms. This makes you look far more serious to sellers and may just give you the upper hand over other buyers who don’t have pre-approval.

Delaware House Shopping Tips

OK, now things are getting exciting! You have money saved, a loan and interest rate secured and hopefully a pre-approval letter to indicate just how serious you are to buying a new home in Delaware. Now you get to shop around and find the perfect house for your needs and desires, which fit within your budget. What now? Let’s take a peek!

  1. Hire the Right Realtor

Hiring a realtor is always a sound idea because they are your expert ally in the home-searching and home-buying process, and are experts in Delaware real estate. They can help find houses that fit your needs, many of which you wouldn’t know about on your own. They should be motivated, skilled and knowledgeable about the Millsboro, DE area.

  1. Pick the Right House/Neighborhood

This is going to be a serious investment so it’s well worth your time to make sure you will like the house and the neighborhood it’s in for years to come. A single-family home will provide space and a yard, but less maintenance and more amenities could come with buying a condo or townhouse if you don’t mind paying a homeowners association fee. Consider the neighborhood and if it has the amenities and lifestyle you desire. Be sure to: 

  • Research the schools nearby, even if you don’t have or plan to have kids, because they affect the home’s value
  • Look up crime statistics and local safety measures
  • Check to see how far a hospital, grocery store or other frequent/important locations for you are to the house
  • Drive around and see how the traffic is, what the noise level is and how much general activity there is

  1. Stay Within Your Budget

Remember that your pre-approval loan amount is really the ceiling of what you can afford. It’s best to shop for houses that are below your max loan because it will stress your future monthly budget. Plus, there are likely going to be unforeseen expenses such as repairs or home-improvement projects. This also helps when the time arrives to make an offer. Delaware is a competitive real estate market and offering the asking price won’t always mean you get the house. Shopping below your loan amount provides some wiggle room on your offer, which should be competitive but logical and without emotion. Don’t overpay and stick to your budget!

  1. Visit Open Houses

Looking at photos is definitely not enough. You should go to as many open houses as you can to get a sense of what Delaware houses you truly like, need and can ultimately live without. For serious prospects, this allows you to inspect things up close. Run the water for pressure and heat, flip on and off lights, look for stains or potential repairs. You want to see the home’s overall condition, so ask lots of questions like when it was built, were there upgrades or replacements and how old the air conditioning or heating is. Don’t be afraid to schedule a second or third visit in order to speak with the seller or selling realtor one-on-one.

First-Time Buyer Mistakes to Avoid

Not everybody was smart enough to read an excellent breakdown of tips for first-time homebuyers like you are! There are plenty of mistakes made out there and they can have very serious long-term consequences. Don’t be one of those people. Here are some common mistakes first-time buyers make so that you can identify and avoid making them!

  1. Not Accounting for Closing Costs

In addition to the down payment, there are fees for closing your mortgage, which can be significant sums of money. Closing costs typically come in at 2 or 5 percent of your loan amount. You should shop around and compare prices for closing expenses like homeowners’ insurance, home inspections and title searches.

  1. Not Saving Enough for Expenses

After you finish buying a house in Delaware, there are additional expenses when it comes to moving, purchasing furniture or appliances and any paint or general improvements you’d like to make, so don’t forget about those.

  1. Buying for Today and Not Tomorrow

Purchasing a home for today’s needs is tempting because you don’t know what you’ll need in 5, 10 or 15 years. But a smart homebuyer plans ahead and at least guesses at what they’ll need in the future, so buying a house that can accommodate those requirements in important. If you plan to have kids, buy something with enough space. If you want a dog, make sure you have a yard that works for a pet. You get the idea.

  1. Not Negotiating

Most everything is up for some level of negotiation in the home-buying process, so don’t waste the chance to save money in multiple areas to keep the costs as low as possible. Can you get the seller to cover some major repairs? Are they willing to cover a portion of the closing costs? If you’re lucky enough to be in a buyer’s market, the seller is likely to be very willing to negotiate in order to close the deal and get the house of the market.

  1. Expecting Too Much From the Inspection

After the deal is agreed upon, it still pends an inspection of the house. This process examines the property to ensure it holds up to standards, both inside and outside. But it can only tell you so much. Some things an inspection might not look for or tell you could be: 

  • Radon, mold or pests
  • The roof and crawl spaces
  • Attend the inspection
  • Ask the inspector to look for specific things — or a closer, second look

  1. Not Having Adequate Homeowners Insurance

Before closing on your new house in Delaware, your lender requires that you purchase homeowners’ insurance. You’ll want to shop around for rates and find the best price. Closely pay attention to what’s covered in the policies and where you’ll take the liability. Less-expensive policies generally mean you carry the risk. Flood damage isn’t covered by homeowners insurance, so you may want to purchase separate flood insurance if your area is prone to flooding. Homeowners insurance claims can be extremely expensive, so don’t find yourself in a terrible financial position if the worst were to happen and you had inadequate coverage.

Contact Insight Homes Today

When it comes to purchasing new homes in Delaware, there isn’t a finer resort-style, private community in the entire state or region than The Peninsula on the Indian River Bay. Better yet, Insight Homes is among the best home builders in Delaware. Every Insight home is built with only the highest quality, which allows you to live a life of luxury and experience everything the Peninsula has to offer each summer or year-round! To learn more, don’t hesitate to contact Insight Homes today.