First-Time Home Buyers Guide
Buying a house is the most expensive thing you will ever do, so it’s important that first-time home buyers don’t make any costly mistakes. Not only can financial pitfalls leave you in more debt than you’d like, but you’re going to be living in this house, hopefully, for a very long time so you want to make sure that the building is sound.
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You need to take the time prepare yourself in every aspect in order to make sure your home is everything you ever hoped it would be, and not a negative experience. Here is everything first-time home buyers need to know while they undergo this monumental milestone.
Can you afford it?
Owning a house is a lot more expensive than renting. You’ll be responsible for repairs, utility costs, taxes, and insurance. If you’re struggling to set aside some money while paying the bills and the rent, chances are you will have a difficult time keeping up with mortgage repayments.
But don’t give up because you can’t afford a house just yet. Use the time you have to get on top of your financial situation; pay off as much debt as you can and boost your credit wherever possible. This will help your chances of getting a good mortgage.
Depending on where you live, there could be government schemes in place to help you buy your first house. If not, you should seek out a reputable mortgage lender to pre-approve your mortgage before you talk to an estate agent. Getting a pre-approved loan will let you know what your price range is for a house, and it will speed up the process once you’ve decided where you want to live. However, your small local bank or your credit union may have options that will also save you money.
All your debt payments plus your new housing expenses – mortgage, homeowners association fees, property tax, homeowner’s insurance, etc. – shouldn’t equal more than 43% of your monthly gross income, according to the federal housing administration (FHA). Although it can often change depending on market conditions, this ratio is the best way to determine if the borrower can repay the mortgage.
You should make your calculations based on what you can definitely afford. It won’t do you any favors if you factor in any future income; you might not get that job promotion or raise that you were promised, and then you’re trapped in a repayment plan you can’t afford.
Start shopping for a house
Thanks to the internet, there are a lot of options out there for buying a house. Some homeowners put their house on the market themselves, which will save you from paying realtor fees. As a result, the seller might also be flexible on pricing since they also do have to pay realtor commission. On the other hand, there is a mountain of paperwork to navigate, whereas with a realtor you just show up for the house closing to simply read and sign the legal documents prepared by the agent for you.
Not to mention, you don’t have any way of knowing the house’s history if an agent hasn’t done a thorough investigation for you. If you want to make the buying process as smooth as possible, finding a Realtor is the best option for first-time home buyers. Your realtor will listen to your wants and needs carefully, offer several different options, and make recommendations or explain the market to help you find a home that suits your needs and that you can afford. Once you make an offer your realtor should work to negotiate terms that you are happy with.
Request an inspection
Before you sign any documents, you should request an independent inspection of the house. The home inspector will look for hidden problems with the house, and you can learn about any issues that may prevent you from buying the property before it’s too late.
This may include mold problems, termites, foundation problems and a bad roof. The inspection can save you thousands in repairs later on, and you may be able to negotiate a lower price if you know the home needs a new roof. Be sure to pester your realtor with questions about the property; they are legally obligated to tell you everything they know.
Make an offer
When you’ve clearly shown interest in a house, you’re expected to make an offer as soon as possible. However, you shouldn’t feel pressured into making a bigger offer than you can afford – after all, you’ll be the one suffering when you can’t make ends meet. Your real estate agent will help you decide how much money you want to offer for the house along with any conditions you want to ask for, like having the buyer pay for your closing costs.
If you reach an agreement, you’ll make a good-faith deposit and the process then transitions into escrow, which is a short period of time (often about 30 days) where the seller takes the house off the market with the contractual expectation that you will buy the house – provided you don’t find any serious problems with it when you inspect it. Once everything is completed for escrow you will sign the closing papers. You may or may not sign your mortgage papers at escrow. If you do, you can request that the bank send a representative to help you fully understand your loan.
Close and move in
You can breathe a sigh of relief when all the first-time home buyers paperwork is completed and the house is finally yours. You should definitely rest while you can because the is still a lot of work to do. Make a checklist for the days leading up to moving day, which should include hiring a moving company, a cleaner to go through the house before you move in, decorating, and forwarding all your mail. The work doesn’t really end there either since you will always be responsible for fixing the house, but at least you can rest easy knowing you have a place to call home.