One of the greatest joys in life is buying a house for the first time. It is the next thing after becoming financially stable and ready to move on individually or with a partner starting a family. It is both the most exciting and nerve-racking period. Finally, you are able to make your dreams come true but at the same time, you have to be extra cautious not to make any mistakes and lose your earnings making the wrong deals. To help you start your journey for a new home, here are X incredibly useful tips on how to buy your first home and be completely satisfied with the outcome.
1. Leave No Debt Behind
It is utterly important to be debt-free before you buy a new home. Being an owner of home costs a lot. Keep in mind that you must pay a lot of money for house maintenance, bills and other upkeep costs. Also, it is a good idea to have some money put aside in case there is a necessity of emergency expenses for a period of three to six months. If you have loans, make sure you pay them off because embarking on this journey with an existing burden of loans will make the situation even more difficult. On the other hand, being debt-free and with an emergency fund you will be able to remain stress-free in trying times.
2. Determine a Budget and Swear by It
The next step is to determine the budget you can spend to buy your first house. Calculate how much money you can afford monthly and make sure you add housing costs such as HOA fees, insurance, taxes, etc. into the equation as well. Consult with a finance lawyer if you need help as they can show you how to calculate the mortgage payment with and without extra costs so you can know for sure what kind of a house to look for. Before making it clear what the precise sum of money that you can spend on a house is, don’t browse through any houses on the market. Avoid the possibility of getting emotionally attached to a house you can’t afford.
3. Get Introduced to Down Payment
It is always great if you can finish the process of buying a house by paying cash for the total price of the house. However, rarely this is the case with today’s homebuyers, especially the ones that are buying a house for the first time. So, the next best thing is to save for a down payment of at least 20%. In this way, you will avoid paying for private mortgage insurance. This private mortgage insurance is beneficial to the mortgage company because it pays off the company if you can’t make your payments. It costs about 1% of the total loan value and you will have to pay it monthly together with the monthly payment.
If you don’t know the mortgage options, be aware that there are many of them and all of them have pros and cons. It will be up to you to decide which is the most suitable for you. Here are three of the most popular ones.
- ARMs (Adjustable-Rate Mortgages) – these have a low initial interest rate. However, they allow lenders to change/adjust the rates of monthly payments in order to transfer the risk of rising interest rates.
- FHA loans – the are insured by the Federal Housing Administration and allow down payments as low as 3.5%.
- VA loans – these are given by the Department of Veterans Affair and they might require no down payment.
4. Save Along the Way for Closing Costs
Payments don’t stop with the mortgage costs. There are other costs along the way and you have to plan a substantial sum of money for them as well. Some of these costs are the closing costs which are especially important for the first time home buyer. They are about 4% of the purchase price of the home. The fees include an appraisal, home inspection, credit report, attorney and homeowner’s insurance.
5. Get Preapproved for a Mortgage
By getting pre-approval, the lender will perform an extensive examination of the finances and will put in writing how much they will lend you along with the terms. With this letter in hand, you will have much more credibility in front of a seller and will put you in advantage before those who don’t have such a document.
6. Find a Reliable Real Estate Buying Agent
Do some research about reliable real estate agents in your area or ask for some recommendations by people you trust in order to find the person who will take care of this process and will facilitate it for you. They need to be motivated, knowledgeable and with a vast range of skills.
7. Choose the Neighbourhood Then the Type of a House
Many people make the mistake of choosing the type of the house first and then they look for a neighbourhood when it needs to be the other way round. Why? Because you need to research all the factors that will affect the home value in future. This means that the neighbourhood and everything in and around it will make your life easier or harder depending on what you are going to choose. Therefore, make sure that you research the nearby schools, the crime statistics, the local safety, the nearest hospitals, markets, pharmacies and the traffic, noise and activity levels. Even if you choose the best house possible it won’t matter and your lifestyle will not be satisfactory if the neighbourhood is bad.
8. Don’t Take the Pictures Online for Granted
You must be aware that home sellers use enhanced digital representations of the homes they sell in order to get your attention. You will come across luxurious settings that will catch your eye and you will surely end up imagining living there. However, you should know that many real estate agents or FSBOs use a modern technique called virtual staging of a house. It is a technique which transforms the empty space of a room in a completely furnished setting. Basically, what you are seeing is not what exists in reality, but a potential that this home has to be designed in the future. Always look for disclaimers in such cases, so that you are not tricked into believing that you are getting what is presented on the photo if you decide to buy the house.
Also, don’t forget to make the most of open houses where you see the exact condition of the house and ask as many questions as you want.
To sum up
It is not easy to buy your first home. But it is a joy like nothing else in the world. Yes, it can be an excruciating process if you don’t have the right set of experts by your side but if you do, the whole process will be pleasant and a life-cherishing moment. Just follow the tips and enjoy the ride.