Buying a home for the first time can be a daunting experience. It is a decision that will have a major impact on the rest of your life.
It is a big commitment, like marriage or choosing your career. The process is a lot of work and can be intimidating to novice buyers. You will be bombarded with unfamiliar terms and expenses that come out of nowhere.
Fortunately, a little research before diving in will save you a lot of trouble. Here are ten tips to ease your home buying experience.
1. Polish Your Credit Score Until It Shines
Let’s not beat around the bush. To get lenders to trust you with a mortgage loan, you need a high credit score. It is one of the key factors to qualifying for a loan.
And it is not just about getting approved for a mortgage. Your credit score will determine your interest rates and the terms of the loan. Having a high score will literally save you thousands of dollars.
Check your credit before even considering buying a home. Look for ways to improve your score and dispute any errors that might cause it to dip.
And if you need to repair your score, start the process at least six months before looking at homes to buy.
2. Know Your Limits
Your first home might be the biggest purchase of your life to date. You should know by heart how money flows in and out of your pockets every month.
You have to be realistic about what your money can buy. Don’t buy a house that is outside your price range. Starving is not fun.
And it’s not just about financial limits. For example, can you put having children on hold so you can purchase that house?
If buying a home will stretch you out too thin on a financial and personal level, it is best to wait until things are more stable.
3. Research Mortgage Options
Know which type of mortgage you can qualify for and which one suits you the best.
For example, you could get a Federal Housing Administration (FHA) loan that requires as little as 3.5% down payment. However, if you put in less than 20% (as seen in conventional loans), you are required to pay for private mortgage insurance.
You also need to choose a repayment method. For a fixed rate, the usual repayment term is 30 years. But you can opt for a shorter-term (25, 20, or 15 years) mortgage loan if you can afford higher monthly payments. You’ll pay less in interest on shorter-term repayments.
Adjustable rate mortgage will let you enjoy paying a low rate for the first few years. This will go up higher for the succeeding years, so this repayment method is riskier.
4. Save Money for Down Payment and Closing Costs
Start saving money right now if you’re planning to buy a house. This is a feat that might take you years to accomplish. It might also involve asking friends and family to chip in.
But it will be worth the effort. A big down payment will save you money in the long run. It will also reflect the strength of your offer to the seller.
In addition to the down payment, you also need to set money aside for closing costs. This is the money required to close your mortgage. The amount is usually between two to five percent of your loan.
5. Choose the Right Realtor
First time home buyers are like a naive Luke Skywalker flying out of Tatooine for the first time. Your real estate agent will guide and mentor you through the process of finding a home, just like Obi-Wan did for Luke.
It is important to hire an agent that is trustworthy, knowledgeable, and patient with your questions. And you will have a lot of questions.
Building a good working relationship with your agent is essential to find the perfect home.
6. Decide Where You Want to Live
There is a saying that home is where the heart is. Some prefer the quiet living of the countryside. Others prefer living close to the city or within the city itself.
Living in an area that doesn’t suit your lifestyle can cause grief and regret. Even if you found the perfect home, if you don’t like the location, you will eventually hate living in the home you bought.
It is better to live in a not-so-perfect house, as long as you’re surrounded by the things you love.
7. Study the Neighborhood
Researching the area or district of your future home is a big part of the buying process. Even if you don’t have kids, you have to know where the schools are. Being in a school district, or having a strong school within the district, can drive the prices of homes up by as much as 10%.
It is also a good idea to look at the local crime statistics.
Other places of interest are hospitals, restaurants, and grocery stores.
8. Absorb Details like a Sponge During the Open House
At the open house, you’ll have to channel your inner Sherlock Holmes. Don’t miss any details about the condition of the house. Look for signs of mold, stains, or water damage.
Ask questions but do not interrogate the seller. Inquire about the age of the place and of key systems like the heating and air conditioning.
This is also a good opportunity to check out your potential neighbors.
If you have more questions but lack the time, don’t hesitate to schedule another visit.
9. Compromises Are Expected When Buying a Home
There are things that you have to be firm on, and there are some that you have to let go. It is rare to find the perfect house, and even rarer to find a perfect one within your budget.
Don’t get caught up on the little things like paint color or carpets. You can always do renovations to fit the image of your perfect home.
10. Make an Offer
This is the last step to buying a home. Make a strong offer to win your dream home.
Unfortunately, unlike the Godfather, your initial offer can be refused. That’s okay, you can renegotiate. But avoid getting caught in a bidding war that will sink your finances.
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