Tips for first time home buyers

Tips for first time home buyers


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Are you planning to buy a home? It takes considerable planning before you can commit to buy a house of your dreams. Whether it is setting up the budget, saving for the down payments or exploring the neighborhood to see if the area will suit your requirements – the journey of buying a home can be challenging, especially for the first time buyers. How can you make the journey less daunting? In retrospective, many homeowners believe that they could have done differently if they had known better. If you haven’t done your homework yet, we bring a few important tips for the first time home buyers to help them avoid making rookie mistakes.

Determine your budget: It is true that owning a house is more affordable than ever before. Low interest rates and tax savings are reasons exciting enough to take a plunge. But have you considered the real costs associated with buying a house? If not, you will be shocked by so many extras popping in your monthly payments. Creating a budget for your house is not all about down payment and monthly mortgage payments. It is also very important to consider all possible expenses such as closing costs, homeowner’s insurance, utility and maintenance bills, new furniture costs and of course moving expenses. If not included in the budget beforehand, these costs will add up quickly and can make a dent in your bottom line. Factor in all the obvious and hidden costs and ask yourself: Can I afford it? As a thumb rule, don’t buy more than you can really afford.

Start saving and have your finances in place: Saving for a down payment or to build an emergency fund may be easier said than done, but it is possible if you start to save right away. If you are able to build a fund prior to start the home buying process, you will stand more chances for getting your mortgage approved. It will also make it easy to know what you can afford and what you can’t. Always remember that if you don’t want to pay private mortgage insurance (PMI), you will have to pay a down payment of 20 percent of the home’s value. It is also important to have a healthy, shining credit. Your mortgage approval and monthly payments will depend largely on your credit score. But you can still buy a house even if don’t have enough money for big down payments and if your credit score is not that stellar. FHA loans can help you qualify for mortgage with less demanding qualification requirements. Want to know more about FHA loans? Read Things to Know Before Applying for FHA Loan.

Plan for the future: Experts believe that when you are thinking of buying a house, you must be prepared to settle there for at least five years. This time frame is required to recover the buying costs. If possible, think long-term. Are you single? Are you planning to get married soon? Are you planning to have kids? Would you be taking in any elderly family member? Think of all these factors when buying a house. And yes, think re-sale. For example, if you don’t have kids and never thought about investing in an area that have a good school district, you might lose on families with children as your potential clients.

Home Inspection: Hire a professional home inspector who will be able to look beyond the staging. It is important to watch out for the foundation problems, faulty fixtures, plumbing and electrical systems. This exercise will help you understand what amount and effort you will be putting in later in repairing the house. It is very easy to overlook a few problems if you like a house. But most often than not, these blinders turn out to be an expensive proposition. Think from your head when evaluating a property and bring along a check-list to make sure that you have looked for all the desired elements that you would want in your house.

Shop for best mortgage rates: You will be surprised to know that different firms offer different mortgage rates. It is recommended to take your time and explore various options to get the best mortgage rates available to you.

Neighborhood: You can repair a faulty fixture or improve a lot of things but one thing you can’t change in a new house is the location and neighborhood. Explore the location and the surrounding area before you close the deal. Does it have all the elements that suit your lifestyle such as shopping and nightlife? Do you have a good school district and good parks for children to play in that area? What about everyday groceries? Is there a good hospital and a pharmacy nearby? Look out for the surroundings carefully and see if this is what will fulfil your requirements both short-term and long-term.

Get a good real estate agent: Buying a home is fun and exciting but it can overwhelm you with the kind of effort and time it requires. Hire a reliable, experienced real estate agent who know the ins and outs of a buying a house and can guide you during the entire process. Be wary of pushy agents who can pressurize you to buy before showing you many options. Be firm and make it clear that you are not in any hurry.

Read your contract before signing: Buying a home and that too for the first time is one of the most important and perhaps the largest transaction you must be dealing with. If any term or a condition in your contract is not making sense to you, always ask your real estate agent. If possible hire a reputed real estate lawyer to look for the finer prints in your contract. And very important point for first time home buyers, don’t hesitate to walk away from the deal if something doesn’t look or sound right. Go by your instincts. Walking away when you have a chance is a lot ways better than regretting later.

Not sure whether to own a house or to rent it? Buying or renting a house is personal choice based on your short-term and long-term plans. But if you are interested to know the financial benefits of owning a house, read Tax Benefits of Owning a House vs Renting.

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