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Friday, March 22 , 2019, 9:52 am | Fair 55º


David Kim: Tips for First-Time Home Buyers

When the time comes to take the leap from renter to homebuyer, one of the most important steps is establishing a budget. Here are four steps to help prepare your finances for buying a home:

1) You must have your credit in order.

2) Save adequately for a down payment.

3) Prepare for upfront costs (i.e. inspections and closing costs.

4) Save for unexpected maintenance.

It is crucial for a homebuyer to have the best credit score possible before applying for a mortgage. The better your credit score, the lower interest rate you will pay on your mortgage. Having a lower interest rate will put more money in your pocket instead of to the bank.

When it comes to a down payment on a house, a good amount to save up for is 20 percent of the purchase price.

Buyers can put less down on a home but lenders will see this as risky. When you put down any less than 20 percent, your lender will likely require private mortgage insurance (PMI), which adds another cost to your monthly payments.

Some upfront costs to keep in mind during a transaction include home inspections (few hundred dollars and up), closing costs (approximately 1-2 percent of purchase price) and some extra cash.

Lenders have been known to require cash (reserves) in your bank after the purchase is complete (2-6 months) worth of mortgage payments.

When owning a home, you do not have a landlord to call when things break. It is up to you to pay for and fix the problems that will eventually happen. That is why you should have a safety fund for when issues arise.

There are many resources out there for first-time homebuyers to consider. Do your research and contact a professional REALTOR® to help assist you on your journey to homeownership.

— David Kim is a licensed real estate broker with Village Properties and the 2017 president of the Santa Barbara Association of Realtors. Contact him at [email protected] or 805.296.0662. The opinions expressed are his own.

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