Buying your first home is exciting but, at the same time, can be overwhelming with the paperwork. When you’re spending a lifetime’s worth of savings, the last thing you want to do is make rookie mistakes that could have you paying your mortgage well into retirement. Even with eyes full of dreams, it is necessary to make careful decisions regarding a home purchase. However, taking too long could cause you to lose your dream home to another buyer. The following are things you should keep in mind when buying your first home.
First Time Home Buyers: Here are 9 Things You Should Keep in Mind
Determine what your priorities are before buying
Before you start shopping for a home, figure out the specifics of what you’re looking for. It can save you time and help you make a well-thought-out decision when you begin the home-buying process. Think about the price, location, conditions, size, and how to personalize it. When you know what your priorities are, it enables you to narrow down homes. Sometimes, you may give up a neighborhood for a beautiful home, and with time, the area transforms into a more desirable one.
Pay your debts and have a backup fund
Owning your first home brings about more costs, much more than living as a tenant. It’s not just about paying the mortgage but also maintaining and improving it. Upkeep and maintenance costs of a home can increase fast; ensure you have an emergency fund and be free of any debts before purchasing your new home. After you’ve bought your new home, it’s easy to get carried away with the excitement of furnishing decorating it, but strive to stay debt-free by being mindful of your budget.
Determine what your finances can afford
Many costs come with buying a home; determine how much your monthly financial plan can afford before you get attached to a beautiful home. Ensure there’s budget room for monthly housing costs like HOA fees, insurance, and taxes, which should be approximately 25% of your monthly payments. Remember that homeowner’s insurance and taxes affect your monthly payment; factor those numbers in your maximum price.
Apply for mortgage
One of the mistakes many first-time homebuyers make is viewing homes before applying for a mortgage. The real estate market is competitive because there’s more demand for homes than people can afford. If you don’t have a pre-approved mortgage in such a market, you could lose a dream home fast. Explore available mortgage options with varying eligibility requirements and down payment. Some of the major categories include:
- USDA loans: Are guaranteed by the U.S Department of Agriculture for rural homebuyers. They don’t require a down payment.
- VA loans: Are insured by the Department of Veterans Affairs for veterans and current military service members. They don’t require a down payment.
- FHA loans: Are insured by the Federal Housing Administration. They allow as low as 3.5% down payments.
Get pre-approved for a loan
Consult with a mortgage lender when you are confident that your finances can cover the final costs and 20% of the home. When you get pre-approved, request a letter of pre-approval from the mortgage lender to begin your home search. For pre-approval, your mortgage lender will need to verify your monetary info, for example, proof of taxes and income, and look at your credit score on your report.
Check your credit score before approaching a lender to work on any errors that could embarrass you or limit the loan you could get. Pre-approval signals the seller that you’re serious about buying a home and can get you ahead fast in a competitive market.
Research on best-fit neighborhoods
Buying a home is a life-long decision; do not base it on the property alone. Ensure you research properties that are in conducive neighborhoods for you and your family. Seek information from the internet and your realtor on the quality of the prospective neighborhood and location.
Research the closest schools if you are a young parent, hospitals, shopping centers, proximity to work, and crime rates. Visit your prospective neighborhood at different times to establish factors like noise levels, traffic, walkability, and the nature of people.
Attend open houses
When you’ve narrowed down the potential neighborhoods, begin showing up for open houses. Look for a house for sale, even if it’s not the perfect fit, as it’s an ideal way to make discoveries about the area and compare prices. When you find the house that you love, compare it with others in the area to determine if it will give you value for your money. If you find a home at the bottom of your price range in an attractive neighborhood, you’ll have more room in your budget to personalize it and grow its value.
Make competitive offers
When you find the home you want within your budget, it’s time to table your offer. As a first-time homebuyer, this may pose a challenge because you don’t know how much of an offer you should make. Seek the assistance of your realtor to ensure that your closing offer is competitive, within the home’s value and your budget. Avoid making an offer on impulse to keep away from the competition.
Prepare to close
When a seller agrees to your offer, prepare to close the deal. The average time for closing on a house is 43 days, which gives you ample time to tackle other issues before the final detail. Some of the fees you should expect during the buying process include:
- House inspection
- Homeowner’s insurance
All of these are covered in your closing costs. Your lender should give you a rough estimate, so you know how much to bring. Keep negotiating after inspection for price reductions if you discover particular flaws. Review HOA documents with your real estate agent to find out if there are any restrictions, bylaws, covenants, and conditions to avoid unpleasant surprises.
Purchasing your first home is one of the biggest moves that is life-changing. Although it’s your first time engaging in this process, ensure you get into it when you’re ready and with the necessary information to avoid making mistakes. Seek professional help to help you through the process from the beginning until closing. Get pre-approved for a loan, personalize your home before purchase, and find your dream home in the perfect neighborhood.