15 First Time Home Buyer Tips
For most people, buying a home is the single most expensive venture they will undertake, and understandably, it can be nerve-wracking.
A few mistakes during the process of home buying can prove to be very costly. While homeownership is a great accomplishment and investment, before you purchase your first home, do the legwork, read about the process of home buying, and speak to other homeowners. To help ease your path, read on to learn 15 practical first-time home buyer tips.
Tips For First Time Home Buyer
Take Advantage of Being a First-Time Homebuyer.
All first-time homebuyers should be aware that even if they do not have the required minimum 20% down payment, they are eligible for a variety of state and federally-backed loans. In addition, there are also tax breaks on certain loans, which help save a lot of money.
Evaluate your financial status.
Before checking out the real estate market for a dream home, it is important to carefully assess your financial status.
Besides buying a home, there are other major expenses one should consider including property taxes, utilities, insurance, maintenance, HomeOwners Association fees, etc.
Start by calculating your monthly expenditure and savings and do not even look at homes unless you have emergency funds to manage at least 3-6 months of living expenses.
Be aware of the upfront costs.
When you purchase a home, there are many upfront costs like the down payment, insurance, lawyer fees, and closing costs.
Reassess your spending habits.
Before you purchase a home, you need to know exactly how much you spend every month. This calculation will tell you if you can pay your monthly mortgage premiums.
Things that you should take into account in your spending include rent, utilities, car maintenance, food, student and personal debts, entertainment, clothing, childcare, and other activities like travel.
If your spending habits are excessive, then you need to cut down on your spending, or you will not be able to make the monthly mortgage premiums.
Know your credit score.
If your credit score is subpar, then it’s important to work on boosting it before you apply for a loan.
Narrow down the type of home you need.
There are several options when it comes to the purchase of a home and they include a duplex, a traditional single-family home, a cooperative, condo, or a multifamily building with 2-6 units.
Depending on your homeownership goals, each of these options has its pros and cons. And more importantly, the pricing also varies.
So you need to know what you want and how much you can afford. The biggest mistake many first-time buyers make is to purchase a home that is way too much (size, area, amenities, etc.) and then find out that they cannot afford it.
Create a list of necessary features.
When buying a home for the first time, most buyers have certain basic desires like a good neighborhood, moderate size, hardwood flooring, modern bathroom, finished basement, etc.
However, it is important to be realistic with your needs since the more things you desire, the higher will be the cost of the home.
Understand how much money a mortgage lender can offer you.
Most first-time homebuyers have no idea who much money a lender will give. Even if one qualifies, most lenders will never give 100% of the cost of the home.
For example, if a home is worth $400,000, then the lender may only give $250,000 after factoring in your other debts, job, and monthly income. So you need to have some money of your own to be able to afford a home.
Obtain multiple mortgage quotes.
Do not just walk into a bank for a home loan; banks usually have the highest interest rates. Try and obtain several quotes from multiple lenders and determine who offers the lowest interest rates and is easy to work with.
Get a preapproval letter.
Before you consider looking for a home, visit a lender, and see if you qualify for a loan. If you do, you will be provided with a preapproval letter that states how much money you have qualified for. Many sellers will not even entertain an offer that is not accompanied by a preapproved letter from a lender.
Find a good realtor.
To buy a home that meets your needs and affordability, you need assistance from a reliable real estate agent.
These professionals can provide you with practical first-time home buyer tips. In addition, they can help locate a property that meets your needs and is in your price range.
Further, a real estate agent can help make a reasonable offer, negotiate the final price of the home, obtain a mortgage, and assist with all the paperwork required for a home purchase.
A good realtor will help mitigate any pitfalls encountered during the homebuying process. To seek the services of a good realtor, speak to your friends, check up online reviews, and get referrals from a builder.
Make the 20% down payment.
When you obtain a loan for the home, the recommended down payment is 20%. If you do not have the 20% down payment, then you will be required to obtain private mortgage insurance, which adds more monthly costs to the loan.
Thus, if you do not have the 20% down payment, your options are to save money or seek other governmental loans from HUD, Veterans, or the Federal Housing Administration.
Get the home inspected.
No matter how nice and immaculate the home looks, it is vital to get it inspected by a professional. The inspector usually assesses the home for safety, quality, and livability.
The last thing you want is to be stuck with a huge bill for fixing the defective foundation which came to light after you have bought a home.
If the home inspection does reveal an issue that was not disclosed by the seller, then you can rescind your offer or negotiate the sale on the condition that the seller makes all the repairs.
Be aware of the closing costs.
If the home is defect-free, then the next step is closing. This step involves signing several papers including having the home appraised (a requirement by most lenders).
Plus you will have to conduct a title search to make sure no one else has a claim to the home, obtain private mortgage insurance, and pay the taxes, loan fees, title fee and obtain insurance.
Continue saving, even after you move in.
Even after you have moved in, there are many things you need to do like continue saving money in case of an emergency like a leaky roof.
To maintain the functionality and aesthetics of the home, you will need to do regular maintenance.
Home buying is not a difficult process, but it is one fraught with potential issues at each step - issues that can lead to an adverse outcome - and stress - in the future.
The more you know about the process of home buying, the more likely it is that you will be able to buy a home that you can afford.
The best way to start on the purchase of a home is to consult with a real estate agent and build a trusting relationship. Think of a good real estate agent like a savvy, home-buying companion.
Finally, home buying should not be an emergency. The more you rush into the process, the more likely it is that you will end up making a major financial mistake.
Start your search with Homes & Land; we have excellent resources and experienced real estate agents who can help navigate this complex process to the home of your dreams.