12 Tips For First-Time Home Buyers
What are the most important things to do before buying a house?
Being informed is important when you are making big financial decisions, and there are few financial decisions bigger than buying a home. Take the time to educate yourself about what you are getting into before you commit to buying any property. I know that this process can be stressful - but RELAX… I’m here to help!
- What’s your credit score?
Your credit score is one of the biggest factors in what your loan terms will be. Know your score before you try to get a loan. A good score which leads to a low-interest rate can save you tens of thousands of dollars over the life of the loan. The three major consumer credit bureaus are Equifax, Experian and TransUnion. You can get your credit report for free once a year or you can use a company like Credit Karma which will give you 2 of the 3 for free. When you check your own credit, it does not negatively impact your credit score so check it today!
- Finding a lender and getting pre-approved.
This is one of the most important parts of the home buying process! Pre-approval means you should be able to get the loan as long as nothing changes about your financial situation or your credit score. To get pre-approved lenders will verify employment, income, and credit.
A pre-approval letter also helps when you want to compete with another buyer for a home you love. One of the first things most sellers are going to ask their agent when receiving an offer is how qualified the buyer is to purchase. Sellers want to feel comfortable knowing the buyer is not going to get turned down for the loan.
While getting pre-approved for a mortgage is a significant step for a first-time buyer so is shopping for the best deal possible. You will probably be paying the mortgage for a while so getting the lowest mortgage rate should be one of your prime considerations. Be sure to look at the annual percentage rate you are paying (commonly referred to as the APR) so you can compare apples to apples. With some loans, you may be paying more points or have higher closing costs than others. So, when you are shopping for the best mortgage possible, don’t just look at the rate but the whole package.
- Understanding additional expenses.
Sometimes there can be are a lot of fees that come with a home purchase above and beyond the mortgage. Insurance, repairs, association fees, property taxes to name a few – you should have the income and the budget to handle all the things relevant to your purchase. Your Real Estate agent will talk about the additional expenses to consider when buying a home.
- Know what you want and where you want it.
Do you want a single-family house or a condo? For many first-time home buyers, this is one of the first dilemmas they will try to solve. In fact, many buyers will look at both because they can’t make up their mind. To make sound decisions, you should know the pros and cons of a condo vs. a house. More buyers will end up disappointed when picking a condo because they did not understand the ramifications of how restrictive they can be or how quickly fees can change. The appeal, of course, is usually for those buyers who do not have time for home maintenance.
Make sure you are shopping for a home that will meet your needs and your lifestyle. More space is not always better. Lawns require upkeep. Being close to the things you like may wind up being more important than you realize. Understand you are not just buying a home but a location as well.
- Work with a Real Estate professional.
Your agent should be there for you through every step of the process. From helping you understand the home’s value and inspections to the paperwork involved. I am here to help!
Every neighborhood has its unique qualities that you want to be aware of before you buy. An agent that is well-informed about the area will know what homes there are worth, which will help you avoid overpaying for a property.
Your agent will also help to verify that all the information given about the home is correct. Sometimes other real estate agents put things in the listing that they may not have verified or may just not be aware of the facts. Understanding what is considered a fixture (things that are included in the house) and what is personal property (things that will be removed before the sale) is generally one of the biggest errors.
Some homes are part of a homeowner association. All condominiums also have HOAs. These organizations are mandatory if you live in the area, so you will have to pay dues and rely on the association to take care of certain things, like maintenance of common areas. Your agent will be able to explain the fee’s and should provide the documents for your review.
- Spend in your comfort zone.
You may be cleared for a loan that is far above what you are comfortable paying for. Lean on the side of caution and mortgage only as much money as you are comfortable with. There are a lot of home buyers who will mortgage themselves to the hilt only to find out later they are a slave to their home. Unless you want to be eating spaghetti dinners at home every weekend, don’t stretch beyond your means.
- Can you see yourself living there?
Sometimes when you view a home, it will be filled to the brim with the current owner’s things. Learning to see past the clutter to the potential of the home for you may allow you to find better deals than you would otherwise. This is why real estate agents often recommend to their seller to clear the clutter before listing the home. Cluttered homes can sell for less money when those with a lack of vision can’t see past it.
- Use a reputable home inspector.
Find a home inspector that is a part of the American Society of Home Inspectors, or someone your real estate agent knows and trusts. You want someone who knows what he or she is doing and is not motivated to miss issues to encourage a sale. Your home inspection should include the heating system, central air conditioning system, plumbing and electrical systems, the roof, attic, walls, ceilings, floors, windows and doors, the foundation and any other structural components.
- What’s your plan for furniture?
If you have furniture you like, you will want to bring it with you. Make sure your new home can accommodate it. Or, if you plan on buying new furniture, you want to purchase a home at a price that leaves you with enough left over to furnish it. This relates back to understanding additional expenses with owning a home.
- Try to have vision… there’s an app for that!
Many buyers don’t have a vision when looking at homes. As crazy as it sounds there are customers who will turn down a home that meets all the criteria they are looking for because they can’t see past the ugly mauve carpeting and the purple and green wall colors. If you are having trouble “seeing” what the house could be there are lots of apps for home design that can help! Paint and carpet are easy to change. Don’t miss out on a great property!
- Don’t make any large purchases.
I like to educate all my buyers on the impact of making large purchases while buying a home. Your pre-approval is based on the information given at the time of your application. Any changes, like getting a different job or taking out a car loan, can result in denial of the loan request when you go to purchase a house. Making any type of large financial purchase is not in your best interest while going through the process of buying a home.
- What is the potential growth of your investment.
Buying a fixer-upper in an area that is growing more popular offers the possibility of an increase in the value of your home. In contrast, buying the nicest house in the area may not have much of an upside. Consult with your real estate agent and ask them their opinion on the prospects for profit if the general area continues to rise in value.