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An Easy Guide For First-Time Home Buyers
Buying your first house can be exciting and daunting at the same time. You will surely love the feeling of being a proud homeowner, but reaching there is a challenge. Things can get even more complicated if you don’t have real estate experience. The domain is dynamic, and the pandemic has made it even more unpredictable, so there isn’t a one-size-fits-all rulebook you can follow to achieve success. It makes sense to start with some research and a good understanding of the prices so that you can have a smooth and seamless journey from start to end. Here is an easy guide that first-time homebuyers can rely on.
An Easy Guide for First-Time Home Buyers
Start planning early
Home buying requires a hefty investment, and you will have to start planning early unless you are a millionaire. Even though mortgage cuts down the stress with funding, you need to have enough savings for a down payment. It means that you should think long-term and start saving early. This can be a struggle for first-time home buyers.
Down payment requirement typically depends on the lender and type of mortgage you choose. You can expect it to be as low as 3% if you have excellent credit, but it will still be a big dollar amount. Consider closing costs and move-in expenses to decide the sum you will need when buying the property. Set up a savings account and automate monthly payments to have enough.
Decide your budget
Once you have savings in place to pay for the down payment, closing costs, and other expenses, it will be easy to decide on a budget for the house. As first-time home buyers, you may feel the temptation to overstep your resources, but it is the last thing you should do. Figure out how much you can afford and safely spend without worrying about your cost of living.
A clear budget right at the start will make home shopping easy. You can stick to the right options within your means rather than waste time on every random property that comes your way. Finding the right one is doable if you can compromise on factors like location, size, and age of the property.
Prepare a checklist of your expectations
At this stage, you must also have a checklist of expectations because they play a significant role in house hunting. Your expectations will depend on several factors such as your family size, whether you have kids and the elderly in the family, space requirements, preferences in property types, ideal location in terms of proximity from school and workplace, etc.
The checklist is long enough to miss out on things if you have a verbal one. Have all the checkpoints in writing so that you can evaluate them as you assess potential deals in the market.
Fortify your credit
Another aspect of home buying that newbies must prioritize is your credit score. It is crucial because it decides whether you qualify for a home mortgage. Moreover, lenders will pick interest rates according to this score. You will have to pay a higher rate if you don’t have a solid credit score, so you need to work on fortifying it early. Start by accessing your credit information from Credit Karma because it offers genuine and accurate reports.
Keeping track of the score will enable you to decide the right time to get a step closer to your dream property. Meanwhile, measures such as paying bills on time, keeping your current credit cards open, and maintaining low credit card balances will help you strengthen your score.
Explore your mortgage options
The next step is to explore your mortgage options, and you must do it even as you look around for properties. Thankfully, there are a variety of mortgages available with different eligibility requirements and down payment expectations. It means that you can find an alternative that matches your circumstances.
You can check conventional mortgages, Federal Housing Administration (FHA) loans, U.S. Department of Agriculture (USDA) loans, and Veterans Affairs (VA) loans, and pick the one that you are eligible for. Go through the terms carefully, assessing details such as mortgage period, interest rates, and monthly payments. Even as a first-timer, you must have a good look at different options and compare them to choose the most viable one.
Get a preapproval letter
If you are serious about buying a property right now, don’t stop at just exploring and comparing mortgage options. Getting a mortgage pre approval is a good idea as it shows your intention to close a deal at the earliest. It is a letter of offer by a lender that states their willingness to lend you the amount to buy a house.
A preapproval gives you an edge over potential buyers when you approach a seller for a deal because they will see you as a genuine prospect. They may even bargain the price if they want to sell fast because a preapproval letter shows that you are all set to buy.
Choose a reliable real estate agent
As first-time homebuyers, you will have limited knowledge about real estate prices in your area. Further, you will probably have no idea about the buying process and paperwork. Going ahead on your own is fraught with risk as you may fall for a fake deal or waste your time checking ones that aren’t the right fits.
Having a reliable real estate agent by your side saves time and gives you peace of mind about finding the best deals. They can help you by scouring the market for the best options and guiding you with the negotiations. Look around for reputed agents in your area and ask for recommendations to find one you can rely on.
Look for properties that match your preference
After collaborating with an expert real estate agent, you can convey your preferences so that they show the right options. Consider the pros and cons of diverse options and match them with your lifestyle and budget. You may prefer a condominium if you want an affordable option, but it may not be ideal from a privacy perspective. If privacy is a concern, opt for a single-family home.
Further, you may have to pick between new construction and an existing home according to your budget. Consider the costs of an upgrade and compare the total with the price of a new house to make a wise decision. Check out the potential neighborhood and available amenities.
Be ready to spend on home inspection
You may be adamant to spend on a home inspection, but it is the smartest thing you can do as a first-time buyer. It involves a thorough assessment of the building’s structure and mechanical systems by an expert. These professionals have a keen eye and relevant experience, making them capable of identifying the potential problems and give you the right recommendation about buying the property.
Choose an inspection expert who will perform in-depth checks for issues such as radon, mold, or pests. Ensure that the professional inspect every part of the property. It is advisable to be there for the inspection to get it done thoroughly.
Negotiate with the seller
Once you are sure that you like the place enough, it is time to step forward and close the deal. But even as you buy your first home, don’t let your enthusiasm drive a hasty decision. You can negotiate with the seller and save a considerable amount by buying at a bargain price. Look for valid points for negotiations, such as asking the seller to bear the cost of repairs and maintenance of the property if it requires them. Alternatively, you can convince them to lower the price of the house to cover these costs.
It makes sense to research the local market to understand the dynamics of demand and supply at present. Knowing the impact of the pandemic on current real estate prices can also help you with the negotiation. Close the deal at the best price and move ahead with the paperwork.
Don’t skimp on home insurance
If you are looking for a comprehensive home buying guide, you cannot skimp on insurance. After all, you cannot buy a home and forget about securing it. Moreover, your lender will expect you to buy it as a part of the process before closing the deal. Essentially, home insurance provides coverage for the cost of repair or replacement of your home and belongings if they get damaged by an event covered in the policy. It could be a natural disaster like flood, fire, or earthquake, or other incidents like pilferage and theft. You must buy an adequate cover to provide for the cost of rebuilding if the home is destroyed.
Even as the process may seem long and challenging for a first-time buyer, completing it is easy, provided that you follow these steps. Having guidance from a seasoned and reliable agent puts you in a good place. Also, you must invest in some research and planning to get a good start and stay on track. Finally, having clear expectations is vital because it prevents you from wasting time on properties that aren’t right for your needs.
Being first-time home buyers can be scary but when you’re prepared, it’s much easier!