What Every First-Time Home Buyer Needs to Know
Posted On Monday, October 19, 2015
If you're buying your first home, your first vacation rental or investment property or whatever first it may be for you in terms of real estate, it may seem a little daunting. It may be tempting for you to buy the first house you like or not want to commit at all because there are too many choices that you're feeling overwhelmed. Don't fret. Though it is a big decision, it is completely manageable if you put for the time and effort to prepare and get acquainted with the process.
You want to go in to the process feeling confident and come out feeling happy with your purchase. How do you do that? Here are some questions you should ask yourself to help with your planning and decision making as a first-time home buyer.
What are you able to qualify for?This is a fundamental step in the home-buying process. You can't begin to look at houses if you don't even know what an affordable price range is for your upcoming purchase.
Start by looking at your debt to income ratio, which is what lenders are going to look at to get a snapshot of your current financial situation and to determine what you can afford. This is pretty much a summary of your current income versus your current debt. This includes any outstanding debt you have including car payments, credit cards, and student loans, for example. This will be compared against your previous tax records, pay stubs, and other records of your earnings to create an accurate picture of your financial profile. This can help you set your limits in advance and give a realistic range for what you can qualify for when it comes to a mortgage.
There are plenty of online resources to help get you started, like mortgage calculators, that you can do from the comfort of your own home before you ever even sit down and start talking with a lender.
Knowing this information also helps eliminate homes and properties that are not in your price range and narrows the field to make your home buying search more efficient and relevant.
What can you afford on a monthly basis?While everyone is different, it is wise to try and spend less than you qualify for, instead of maxing out at the get-go. This gives the first-time home buyer a little breathing room for life's unknowns while also allowing for the option to pay off the mortgage at an accelerated rate over time.
With the different types of mortgages available, interest rates and payment terms have to be considered into your monthly payment. Also in need of consideration are the tax rates of the area you're interested in, homeowner's insurance pricing (it's worth shopping around on this one to get the best rate possible), and budgeting out all of the other home-related expenses to get a realistic vision of what money will be going out on a monthly basis. Combine that with your other life expenses, and keep a close eye on your budget. Tweak it when necessary, and remember it's good to have a buffer so that you're not fretting each and every month over the bills.
What kind of home do you want and where?Once you have a ballpark figure of what you can afford, now it's time to really think about where you want to buy and what type of home you're envisioning. You've heard it before: location, location, location. It matters! Think about travel time to your job, where the kids will be going to school, what kind of neighborhood you desire, and what matters to you and your family. Drive through some of the areas you're considering and get a visual of the surroundings. Research the town, city, county and know what's available to you.
From there, think about the logistics of the house you're in search of and what you want. What is non-negotiable and what is not? How many bedrooms do you need or want? Can you live comfortably with two bathrooms or do you need more? Do you want a yard? What about a pool? Instead of just starting your search blindly, go in with a list of what you must have and then what you'd like to have, but could live without. It will be so helpful in keeping you from getting too distracted or overwhelmed by the many options.
Who can help you navigate the real estate market?Once you have a solid baseline, it's time to enlist the help and expertise of reputable professionals in the real estate field. You won't have to go it alone!
Your real estate agent can sit down with you and go over your expectations and help you match them to what's available on the market. They have the biggest asset that you as a first-time home buyer lack: experience! A trusted real estate agent is your best resource when it comes to the ins and outs of the process like negotiation pricing, reviewing contracts, and advocating for your best interests. They also have an insider's knowledge of the communities and neighborhoods to help you make the most informed buying decision possible.
You see, it's not so bad. Being a first-time home owner should be an exciting, fulfilling and stress-free experience, and it can be. Take a look at our 6 steps for to purchasing a home and our buyer's guide for more helpful information.
We'll leave you with a good quote by Franklin D. Roosevelt:
"Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world."
Happy house hunting!