The typical American spends more time thinking about buying a car than buying a house. Even though the house they buy will wind up costing several times as much as the car. Many first-time homebuyers become overwhelmed simply due to lack of understanding the process.
It doesn’t have to be that way. The fact is, today’s housing market is a once-in-a-lifetime opportunity for first-time buyers. Interest rates are at near-record lows, homes are more affordable than they have been in years and there are plenty of homes for sale. Buyers are more likely to truly find the home of their dreams than they were in years past.
Here are six simple tips when buying your first home.
Tip #1: What’s the budget? It seems like a no-brainer, but you’d be surprised how many buyers don’t start by figuring out how much money they have to spend on their house purchase. It’s easy to show up at open houses and fall in love, but why waste time looking at homes that are out of your price range? The last thing you want is to find your dream home and realize it’s way over your budget.
To calculate a housing budget you can live with, start by figuring out how much you spend each month. Track your daily expenses in a notebook over the course of four weeks to get a real sense of how much is going out and where you’re spending most of your available cash. Watch your savings and calculate how long it will take you to come up with a down payment.
Tip #2: Come up with a realistic wish-list. The key here is ‘realistic.’ Based on the housing budget you figured out, and where you want to live, compile a list of what you’d like to have in your first home.
Research is helpful when putting together your list. Check out some homes in your price range online to get a feel for what your money will buy, and make your wish list based on the home you see. If you’d love a fully renovated kitchen but none of the listings in your price range have one, be prepared to compromise. You can always upgrade later, but you really shouldn’t spend more than you can afford just for nicer finishes.
Tip #3: Get pre-approved for a mortgage. In this market, many deals contingent on financing fall apart because buyers can’t find a bank to give them a mortgage. Getting pre-approved for your mortgage will help you avoid this problem. Reef Point Realty is partnered with a team of mortgage professionals that will provide you with a free pre-approval at the best available interest rate. You’ll need to provide the lender with details of your credit, income and assets to start the process.
Tip #4: Understand the true costs of homeownership. Many first-time home buyers get so caught up in the idea of owning a home that they forget about life after closing. In addition to mortgage payments, you’ll owe taxes, insurance and homeowner’s association (HOA) fees, and be responsible for any maintenance issues that come up while you own the home. It’s important to be aware and prepared for these expenses.
Tip #5: You may love the home, but get to know the neighborhood before you make an offer. If you think you’ve found the neighborhood you want to buy in, take it a step further. Drive from your potential new home to your office during rush hour to see what the commute is like, and to places you’d go on a regular basis like the grocery store, gym and gas station.
There’s a lot to think about when buying your first home, but remembering these tips should help you navigate the process and avoid potential minefields. Take your time, do your research and be ready to enjoy life as a homeowner.