Buying Your First Home. Consider the Following.

So you have heard that it is a great time to buy a home.  You’ve heard that renting is just throwing your money away.  You’ve heard that owning a home is the American Dream.  Well, all those things are true, for many people, at certain times, and at specific points in their lives. 

If you think you are ready to buy your first home, consider the following items before starting to pack.

1. How’s your credit? It might not seem like a big deal but a credit score of 750 vs 700 can make a big difference in your monthly payment.  Those 50 points could save you $100 or $200 or more each month by reducing the interest rate you qualify for with a better credit score. 
2. Do you have a clear understanding of what you can afford? Many people start looking for a house but have no idea what homes cost in the area they want to live.  Spend some time researching the homes that are for sale in the areas you are wanting to live in.  Determine the features of the home you want.  What the ‘must haves’ versus the ‘like to haves’ and see what a house with those features really costs.  Do homes that meet your needs require renovations?  If so, what will those cost?  Be sure to add those to the bottom line.  Visit the neighborhood at different times of the day to check traffic patterns and various amenities that are close to the home.  Is the shopping and entertainment close by?  Are the schools appropriate for your needs?  What about public transportation or highway access?  Are there parks, medical, or office locations nearby?  These should all be considered based on your needs.  Once you have found a place you can be comfortable in, hit the online mortgage calculators and see if you can afford the locations.     
3. Do you have a down payment? 20% is typical.  10% is possible.  Some programs are available that allow you to provide a 6% down payment but either way, you will most likely be putting down a sizeable chunk of cash at closing.   Be sure you have this money available to you in a way that is not a high-interest loan or other barrowed format.  FHA Loans have some options that allow for a 3.5% down payment and VA loans offer some programs with no down payment at all.  Be sure to research these options to see if you qualify as they can save you a lot of money.
4. Get PreQualified and obtain a Preapproval Letter. Once you are serious about buying a home, get your financial records in order and start shopping for a loan.  There are several online lenders who make comparing loans quick and easy.  These are a good place to start. 
5. Find your perfect buyer’s agent. Find someone you get along with, who knows the area and makes you feel comfortable. 
6. Stick to your budget. Look at homes lower than your budget so you have room to make improvements if needed.  If you only look at properties at the top of your price range, you will overspend and not have any money left for improvements or changes.  In a competitive marketplace, a bidding war may develop.  If you need to pay more than asking price, having some room left in your purchase price top end is beneficial to outbid other buyers.
7. Show up to Open Houses. Tour as many homes as you can.  Even if you don’t like the outside, you may love the interior and get some really good ideas for what makes up your perfect home. 
8. Don’t forget about Closing Costs. Closing costs are those expenses paid over and above the cost of the home.  These costs are usually the responsibility of the buyer but sometimes are split between buyer and seller.  These costs are usually between 2% and 5% of the loan amount.
9. Buy for tomorrow. It is very expensive to buy and sell a home.  When buying try to think of how the home will fit into your life over the next 10 years. Will you be starting a family?  Will your existing family be growing?  Be sure to consider any impacts that could affect the functionality of your new home in the long term.    
10. ALWAYS get the home inspected. Sometimes lenders require a home inspection before they will write a loan for it.  Some states don’t require that.  But buying a home without having it inspected is a recipe for disaster.  For example, a bad foundation can be hidden by a rug but an inspector can spot it from the crawlspace or basement.  This could easily turn into a $10,000-$40,000 fix that could be avoided with a $400 inspection.

Hopefully these points will help prepare you for the biggest purchase decision of your life.  With the proper research and preparation, the home of your dreams awaits. 

Check Out Our Check Lists: