10 tips that will help first time buyers purchase a new home successfully
Research Your Location
When you are a first time buyer your not just buying a home, you’re also buying a lifestyle. Whether you want to live in an urban area or just outside of town, your location will be important to consider when looking at homes. Likewise, it’s important to know how close you are to parks and major transportation routes. Take time to research your neighborhood before choosing where to buy. That way, when real estate agents show you homes in other areas, you’ll have enough information about what else is available in your preferred area that you can be sure there isn’t something better suited for your needs out there.
How Much Can You Afford
As a first time buyer, don’t underestimate how much you can afford. Figure out how much you’ll need to live comfortably before you start looking at properties. Also, be sure to consider your credit score, since it affects your interest rate and your monthly payment. A good rule of thumb is not to spend more than 30% of your gross income on housing costs, including mortgage payments, property taxes, and insurance. So, if you make $4,000 a month after taxes, don’t pay more than $1,200 a month on rent or a mortgage. Remember that buying a home takes several months—start looking early so you can get pre-approved by banks before houses in desirable areas are snatched up.
Do a DIY Mortgage Comparison
A first time buyer should know that there are several different types of mortgages to choose from, each with pros and cons. On average, a 30-year fixed mortgage carries a lower interest rate than an adjustable one and doesn’t fluctuate based on market rates—but you have to pay it off within 30 years. A 15-year fixed mortgage is considered half as long as a 30-year one but is also twice as expensive; meanwhile, an adjustable-rate mortgage (ARM) can come with lower monthly payments that fluctuate over time.
Think About the Long-Term Costs
Before you get too excited about buying a home, think about some of its long-term costs. For example, homeowners’ insurance is often required to buy a mortgage—and it’s not cheap. According to Bankrate, annual premiums can run around $1,000 in some areas (much higher in others), and that doesn’t include things like maintenance and repairs. It may also be worth considering if you plan on staying put homeowners who move within three years of buying lose out on nearly $50,000 in equity appreciation over time. Talk to an agent or lender about insurance plans available in your area and whether they are necessary before buying a home.
Start Setting Money Aside Now
If you’re ready to buy a home but not quite financially ready, start saving what you can right now. While it might be tempting to start digging into your savings as soon as you find a house that’s within your budget, resist temptation: if you don’t already have at least a 20% down payment saved up and invested, now is not the time to start pulling from your nest egg. Having cash on hand is one of many things that make homeownership possible—and when it comes to investing in real estate, there are no guarantees. That said, putting money away now will give you peace of mind and help ease any anxiety about purchasing real estate later.
Get Your Credit in Shape
If you’re planning to get a mortgage, you must be prepared to prove your financial worthiness. That means not only getting your credit card bills under control but showing evidence of stable employment and having established, consistent sources of income. In other words, if you haven’t been paying off your debts on time or can’t provide proof that you make more than enough money every month (after taxes), it will be much harder to get approved for a loan—not impossible, but harder. Your bank may require an official letter from your employer saying how long you’ve worked there and how much you make; they may even do a credit check.
Consider an FHA Loan
Federal Housing Administration loans are a great option for first-time homebuyers. They allow more room to negotiate and don’t require private mortgage insurance (which conventional loans do). But, if you don’t make enough money or have bad credit, an FHA loan might not be available to you. Talk with a lender to see what your options are.
Take Time to Understand the Paperwork and Processes
You may not realize how much time and energy goes into buying a home. There is a lot of paperwork to sign, lots of phone calls and appointments, and some processes that need to be gone through with your lender or title company. All of it will likely feel overwhelming at first, but it will make sense once you understand what’s happening. Take your time; don’t be afraid to ask questions; figure out how things work. You’ll soon get into a routine as you settle in and start feeling comfortable with your new home.
Do Some Homework Before You Start House Hunting
When you’re a first-time homebuyer, it can be easy to make big purchases without thinking about them. Before you start house hunting, set some guidelines for yourself about what is and isn’t acceptable. For example, maybe you decide that when house shopping, you won’t look at homes that don’t have an attached garage or no room to build one in the future. This way, even if you fall in love with a house that doesn’t meet your ideal criteria, at least you won’t spend money on a house that might not suit your needs down the road. Stick with your guidelines and be willing to negotiate if necessary—you may find something better than anything on your wish list!
Don’t Rush Into Anything
Buying a home is a huge investment, and rushing into a decision can be costly. Many first-time buyers make mistakes by either buying too quickly or settling on homes that are not right for them. The best time to start your search is when you know exactly what you want in a home, which could take some time. As you research houses and neighborhoods, keep track of homes that really speak to you so that when it comes time to make an offer, your house hunt won’t have to be restarted from scratch. To help you get started, check out these 10 tips for first-time home buyers, then shoot us an email when your ready to line up some properties to see, we would love to show you what’s available on today’s market.
By following these steps, you’ll be able to buy a house that fits your budget, ensures your safety, and offers long-term value. When you sign on that dotted line, it’s a big decision—one of the biggest you’ll ever make. But once you make it happen, there’s no better feeling in real estate than saying I own my home. Talk to you soon!