Buying a home could be the biggest purchase of your life, and it can be overwhelming, especially if you are a first-time home buyer. Some things to consider during the home buying process are taking enough time to really look over the house you want, making sure you can afford the loan, and knowing what you are getting into.
Certainly, buying a home is a process, and it is not something you can do overnight. It takes time, lots of contracts, and many other extra things in the process.
Without a doubt, buying a home is a big investment and a huge commitment. The list below will allow you to make sure your buying experience is positive and that you are ready for the commitment of a new home.
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10 Must-Know Tips for First-Time Homebuyers
1. Saving Money Ahead of Time
Make sure you have a savings account ready to help cover closing costs, inspection fees, and other costs. Yes, you can get a loan for your home, but a lot of the inspections and even the closing costs will come out of pocket. You might get ready to buy a home and then find that you need $4,000 in cash for closing costs, and if you don’t have it, you lose your new home.
In most cases, you need to have a down payment to get a loan; some companies require a certain percentage based on your loan amount. Your real estate agent can give you a ballpark figure of all of the out-of-pocket fees you might have once they pinpoint your price range and budget.
2. Know Your Credit Score
Knowing your credit score ahead of time will allow you to get a better picture of the right time to buy a new home. Your credit score is a big factor in buying a home. It will determine your approval, interest rate, and loan terms.
Many companies can provide your current credit report; however, my preferred company is Credit Sesame. I like Credit Sesame because it’s free to join, and you’ll be able to know your credit score instantly. It is very safe and keeps you informed with real-time monitoring and alerts.
The best part of Credit Sesame is that you can obtain a report each month and monitor it at no cost. Here’s the link to get your free credit report.
3. Look for the Right Real Estate Agent
When you have a great real estate agent by your side, he will help walk you through the steps. Make sure you feel comfortable with him so that if you have a question, you are not afraid to ask. Your real estate agent will be the one showing you houses that might become your future home. You want him to truly get an idea of your perfect home so you don’t waste your time or his.
4. Maximum Spending Limit on a Home
This is one thing that happens often: you get qualified for a certain amount of money, and you buy first-time that is on the high-end of your home approval. Try to remember that you will have homeowners insurance, possible flood insurance, and other fees that go along with owning a home.
If something breaks, you need to fix it, so make sure you can afford to keep saving money. Plus, your monthly house payments may go up over time, and you need to ensure that you are not buying a home based on the maximum amount of money you can spend each month on your home payment.
5. Think About the Future
Many first time home buyers make the mistake of buying a home because it fits their current situation or needs. However, if you are planning to start or expand your family, consider buying a home large enough for your family to grow into. Also, try to consider the idea of how effectively the house could sell in the future (if you ever need to sell it).
6. Choose the Right Neighborhood
The task of finding the right neighborhood is important. Some things that can help you to decide on the right neighborhood are how safe is the area, the quality of schools in the area, and the surrounding safety and crime statistics. There is nothing worse than living in an area where you and your family don’t feel secure at all.
7. Additional Costs
Buying a home doesn’t just mean you simply buy the home and you’re are done. You can have additional costs that really add up quickly, and you want to make sure that you are prepared and can financially cover it all. Here are some recurring costs you will want to factor in when you purchase a new home:
- Property Taxes
- Utility Bills
- Homeowner’s Insurance (possible flood or hurricane insurance if you are in a high-risk area)
- Mortgage Insurance
- Home Maintenance
8. Checking Homeowner Insurance Prices
Depending on where you buy your home, the price to insure it will vary. If you buy a home on the beach, the price can be pretty high. If you live in an area that is at high risk of floods or even hurricanes, you have to factor in those special insurance items.
Flood and hurricane insurance is required in certain areas if your home is at risk, and they are not cheap! Reach out to your insurance company ahead of time or speak to your realtor to see if the home is in a high-risk zone.
9. Home Inspections
Making sure your potential new home gets inspected will help save you money in the long run. If, for example, you buy a country home and don’t get a home inspection before purchasing, you may find some leaky faucets, your septic might need to be updated, your basement might leak, and you could have mold.
All this can go unnoticed when you’re simply viewing the house, and then you are stuck with some hefty bills when it is all over. Replacing a septic can easily cost $9,000. I highly suggest getting your potential new home inspected to know if there are any issues with the roof, water, and so on that need to be fixed. Some mortgage companies require inspections, and others do not.
10. Don’t Get Attached
When buying a home, you have to know things can happen in the process, and you can lose out on buying a home. You can put an offer down on a home and get declined. Try not to get too attached to the home.
Buying a home is one of the most important decisions in your life. It can be nerve-wracking, especially if it is your first time buying a home. The list above will serve as a starting point for some of the most important aspects of the home purchasing process.