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Jermaine MedleyWritten by:
Jermaine Medley
Lafayette Federal Credit Union
Vice President, Mortgage Originations

Deciding to buy a home for the first time can be a mix of feeling excited and overwhelmed. For many people, it’s the most significant purchase they’ll make in their lifetimes. Factor in things like current market conditions and your desired location, the homebuying process can quickly change your feelings from excitement to down-right stressful.

The housing market in the Washington, DC metro area is known for being competitive—and that’s never been truer than in 2022. However, there’s plenty of expert advice available to help make the homebuying process less stressful, even in the current market. 

Below are some tips for success as a first-time homebuyer in the Washington DC metro area. 

Know Your Monthly Expenses

Before embarking on your homebuying journey, you should set aside time to calculate your current average monthly expenses. This is a necessary step to have an accurate understanding of the mortgage payments that you’ll be able to afford. 

When calculating, you should take into account every expense your money goes to each month, including minor ones (like groceries and gas) to major ones (like auto and student loan debt). It’s essential to have a good understanding of your monthly spending - you will want to see the entire picture of your costs, once you start paying back your mortgage.

Gathering your monthly expenses into account also allows you to see where you have flexibility in your budget. You can see how your mortgage payment fits in—especially if it will be more expensive than what you’re currently paying in rent. 

Establish a Homebuying Fund

As soon as you decide you’re ready to buy a home, you should establish a savings fund for all costs associated with the purchase. It’s important you’re prepared for all the expenses associated with homeownership - beyond just the actual purchase price of the home.

In addition to a monthly mortgage payment—which typically includes principal and interest, homeowner’s insurance, property taxes, and private mortgage insuranceOpens in New Window (PMI)—there are other expenses associated with buying a home. The five most significant expenses include:

  1. Down payment
  2. Closing costs
  3. Moving expenses
  4. Homeowner’s emergency fund

Down Payment 

You’ll likely be required to make a down payment on your mortgage loan. (Although some programsOpens in New Window allow qualified buyers to purchase a home with no down payment.) The amount you’re expected to put down will vary depending on your lender and type of mortgage loan you get, which is something to take into account when choosing one.

With the median cost of a home in the DC metro area being around $700,000Opens in New Window, the average down payment could range thousands of dollars. Because of this, it’s important to save the majority of your down payment before you start looking at properties. 

However, contrary to popular belief, you do not always need to put down 20% of a home purchase price to obtain a mortgage. Although you may pay more in fees and interest over the overall life of the loan, a lower down payment can give buyers more purchasing power, opening up the door to more home possibilities. (And in today’s housing market, home prices are often rising proportionally faster than many people’s ability to save that much.)

Closing Costs

In addition to the down payment, you will also be required to pay closing costs when purchasing a home. Closing costs are made up of various expenses including loan origination fees, lender fees, appraisal fees, title searches, homeowner’s insurance, and more. Closing costs average between 2% to 5%Opens in New Window of the purchase price.

Moving Expenses

Moving expenses vary from person to person, but are still an important part of your homebuying fund. Whenever you purchase a home, you’re likely to have some additional costs, which may include setting up utilities, purchasing furniture or paying for a moving truck. Therefore, factoring in moving expenses should be a component of your homebuying savings fund.

Homeowner’s Emergency Fund

Finally, it’s important to establish an emergency fund when you’re buying a home for the first time. As a renter, you were likely fortunate enough to be able to call your landlord if you noticed a water leak or an appliance fell into disrepair. As a homeowner, you’ll be responsible for all upkeep and maintenance on the home.

Because you can’t predict when something will happen—your AC unit may need to be replaced in the middle of July, or old plumbing may result in a damaging water leak—you’ll want to have an emergency fund saved up so you’re not scrambling to finance a major repair.

Check Your Credit Score

Another important task is to check your credit report.Opens in New Window You can request a free credit report from each of the three credit bureaus: Experian, Equifax, and TransUnion. 

Look for items on your report that may stand out negatively to potential lenders. If you notice any errors or inaccuracies, take steps to correct those by contacting the credit bureau(s). At this point in the process, you should also be taking steps to either maintain or improve your credit scoreOpens in New Window by continuing to pay your bills on time and limiting any excessive credit card spending, especially if you can’t easily pay most or all of the balance each month.

It’s important to note that this is not the time to close any credit card accounts. It may seem like paying off and closing credit card accounts would be beneficial to your cause. And, yes, paying cards off completely could certainly improve your score, but closing those credit accounts could lower your score by increasing your credit utilization ratioOpens in New Window

(Your credit utilization ratio is calculated by the amount of available credit you have to the amount that you have already used, and it’s generally recommended to stay under 30%.)   

Determine Your Priorities

As previously stated, buying a home is a big financial commitment. One of the things that may be helpful in finding your perfect home is to make a list of your must-haves. This list should include everything you require in your future home—things you’re not willing to negotiate on. 

For example, you may be only interested in a single-story home, or only homes in certain school districts. These are things that will play a big part in your decision, so it can be helpful to make note of them ahead of time.

It may also be helpful to decide on the things you’re interested in but are willing to compromise on. You may want a fireplace, but it’s not a requirement for your new home. Having predetermined lists of your needs and wants can make the process flow smoother. 

Note Questions You May Have

If you’re buying your first home, you may find yourself with a lot of questions. Another helpful task to start at the beginning of your homebuying process is to make note of all the questions you initially have, then add to it as needed. Your real estate agent and your lender will be invaluable resources to help answer your questions and ensure you understand every part of the process.

As a first-time homebuyer, it’s completely normal to have questions, and no question is too small when it comes to a major purchase like this. A good real estate agent and lender should be readily available to answer any questions you have. Being prepared with your questions can offer you peace of mind and clarity as you move forward in your journey. 

Budget for Less than You Qualify For

If you’ve been pre-approved for a large amount from your lender, it can be tempting to want to look at homes in this price range. But just because you qualify for a certain amount doesn’t mean you can actually afford that amount. Be careful to note the difference between what you qualify for and what you can comfortably afford.

This is especially important given the current competitiveness of the housing market in the DC metro area. By starting under your budget, you’re left with extra funds if you end up needing to bid over the asking price. 

Be Patient and Listen to Your Heart

Buying your first home can be exciting, but it can also be frustrating when the process doesn’t pan out the way you expected. Not being able to find a home that meets your needs or losing a bid on a home you loved can be discouraging, but it’s important to remain patient. Sometimes the process can take time.

Remaining patient is also key to ensuring that you’re not settling too much or jumping into a poor financial decision. It can be easy to be enamored by an expensive home or influenced by the opinion of others, so you should always take time to reflect and ensure you’re making the decision that is best for you. 

Lafayette Federal Is Your Trusted Homebuying Partner

Simplify your journey by partnering with Lafayette Federal for your mortgage lending needs. 

At Lafayette Federal Credit Union, we offer competitive benefits, including our Peace of Mind Purchase Lock (rates locked up to 120 days at pre-approval) and a 30-day close guarantee. If closing takes longer than 30 days, we offer a $250 closing cost credit (up to $2,000) for each day beyond 30 days. Additionally, Lafayette Federal offers nationwide financing, competitive rates, up to 100% financing options, loans up to $3,000,000, and money-saving rate discounts.

Not a Lafayette Federal member yet? You can become a member by completing an online membership applicationOpens in New Window.

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