Tips for First Time Home Buyers - Preparing to buy a house
Buying your first home is exciting, and emotional … and so important to you. It is one of the most significant purchases you will make in your life and what most of us dream of when we are getting started in life. Your Favorite Real Estate Team wants the process to be smooth and successful when it is time for you to realize that dream. So we thought we would share a few tips to help you prepare for buying your first home.
Determine if you are ready.
The first thing you will want to ask yourself if you are
committed to being in this home and this area for the next 5 years. Is there anything in the near future that
could foreseeably impact your income, expenses, or location? Is your income
stable, and do you have at least 3 months-worth of expenses in an emergency
fund?
If you answer “no” any of these things you should consider
holding off for now. Don’t be pressured
to feel you are throwing your money away on renting if you don’t purchase right
away. Your first several years of
mortgage payments are mostly interest, not principle.
Plus, when you add closing costs and fees, as well as maintenance, the
first few years of homeownership are not necessarily where you will save money
or build equity.
Save up.
There is more expense to buying a house than most first time
buyers realize. The down payment can vary
based on the type of financing and the actual lender you go through. But in addition to the down payment, there
will be closing costs, potential attorney fees, appraisal costs, escrow, earnest
money, inspection fees, title insurance, etc.
There may be maintenance issues you will need or want to address after
purchasing your home. You may benefit by purchasing discount points to save money on your mortgage (which we will discuss in
another blog). Don’t forget move-in
expenses, deposits, utility installs and the like, as well.
Set a budget.
Just because a bank will loan you $200,000 doesn’t mean you should borrow that much. When preparing to purchase your first home, take a look at
your spending … not just your monthly bills but also what you spend on food,
entertainment, vacations, car maintenance, pet expenses, and other
miscellaneous expenditures. Figure in
property tax, HOA fees, insurance and home maintenance also. You don’t want to buy at the top end of your
budget, because it leaves you vulnerable in challenging times. Avoid being “house-poor” … don’t buy more
house than you can afford.
Watch your credit.
The amount you can borrow and the interest you pay will both
be affected by your credit. So, check
your credit report and fix or dispute any errors you may find. Make sure you pay all your bills on time and
keep the balances on your credit cards low.
Don’t open any new lines of credit or make any new purchases on
credit. Also, don’t close any credit
cards you already have open because that can actually hurt your credit
score. Finally, keep in mind that you
will want a maximum of 43% debt to income ratio.
After considering all these things, you will be ready to look
into financing. That starts with getting
preapproval before you begin your house search.
Then you will want to explore all your options when it comes to getting
a mortgage for your new home. In our
next blog, we will share more tips to help you with the purchase of your first
home, focusing specifically on preapproval, and mortgage selection. At Your Favorite Real Estate Team, we
are experienced with the entire real estate process and we love to help first
time buyers have a great buying experience.
If you have questions or would like us to be your team of experts, call
us today!
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