10 Things To Know Before Buying Your First Home
You've landed your dream occupation and a dream spouse / partner / whatever. Unexpectedly, you end up thinking about putting down roots, moving out of your own noisy apartment, and buying a house. Slow down a bit. It is a huge step. Choosing a home translates into an increase in your regular mortgage, repair and utility obligations, and a commitment period to keep your lawn in shape.
Still, it is the American dream: to go hand in hand with the occupation and also with the spouse. Before you wind up in a nightmare, look through our checklist of things to consider to help create the much sweeter fantasy.
10. The Market
Since the onset of the good recession in 2008, the housing market has contracted between the buyer's market and the seller's market in most places. Perhaps you have wondered what those terms mean?
A buyer's market is if there are more houses on the market than you can find buyers. That happened first in the recession after the new home sales boom; unexpectedly, there were many more new homes than contractors can sell. Even the buyer's market lasted as the recession dragged on, people lost their jobs, foreclosures spread, and home prices spread.
In contrast, a sellers market occurs when there are fewer houses available on the market than you can still find buyers. The run-up to the recession proved to be a thriving seller's market in many regions of the US, along with multiple buyers regularly bidding on the same home; Home prices kept reaching new heights.
Talk to your real estate agent in the area, who will help you figure out the market and how it is currently bothering buyers.
9. The Procedure
Buying a home is not just buying markets, sometimes possibly a vehicle. It is sometimes a complex process involving a great deal of paperwork that often makes little sense. Below are some of the general steps (details vary by country) that you will want to take when preparing to register on the dotted line.
Before looking, you have to consider things:
- Save your cash. You'll want you to get a down payment, a home overhaul, closing costs, some improvements or repairs to a new home, and annual mortgage obligations.
- Get prequalified for a loan to find out how much you can afford on a home, preventing you from taking a look at homes that are out of your budget and letting sellers know that you are serious and can afford your home.
As soon as you are under contract:
- Apply for a loan. Just because you're pre-approved for a particular amount doesn't mean you're qualified for that loan. Your lender will help you recognize the loan process, such as the records you will need to provide and the loan costs that go with it.
- Own the house inspected. A qualified inspector can discover problems that you may not find differently.
- Raise your capital for the closing. You may need to obtain licensed funds (a bank account, perhaps not just a personal one) for your down payment and closing costs.
Buying a new home can be a difficult job. The ideal plan would be to do the job well with a real estate agent who knows the market in your city and can help you discover your dream home at a reasonable price.
8. Kind of House
Do you dream of living in a conventional house in the suburbs, just one that uses a large yard and a house full of children and pets? Maybe your better half enjoys the idea of being alive in the city, a flat within walking distance of restaurants and shops. Think of two or more stories. a single level house? Imagine a basement or garage where you can have space or workshop to have a home business office?
You may not be able to pay for everything on your wish list. However, it would be best if you spoke with your partner and your real estate agent about what may be a deal breaker for you.
Just because you have been pre-approved for a certain amount does not mean that you should maximize this loan along with your first home. In reality, you may not want to pay every penny on your home loan monthly. When considering how much home you can afford, here are some other costs to know:
- Mortgage obligations are the regular monthly premiums that you enter into the financial institution to pay off your loan. Often times, these obligations include not only the premium and interest on your loan, but also land taxes and property insurance. If your creditor does not collect or cover your taxes and insurance, you will be responsible for yourself.
- Closing costs, which can be paid at loan closing, can include attorney and lender fees, flood or title insurance policy coverage plan, and some other initial interest on your loan called points.
- Your new area may own a homeowners institution with monthly or annual fees.
Keep each of these expenses in mind as you search for a new home and talk with your real estate agent and your lender about every unforeseen expense that you can anticipate.
6. Credit Score
Before you start looking for a home, get a copy of your credit score. Your credit score can play a big role in setting the interest rate you are able to afford on your loan. The FICO credit score is probably one of the most widely used and ranges from 300 to 850 [source: Bankrate Credit].
Credit scores are affected by things like the variety of credit cards you may have, outstanding bills, student and auto loans, and paying your bills on time. The higher your credit score, the more likely you are to receive a home loan at a reduced interest rate.
It is not uncommon for there to be more mistakes in a credit file, which often cause your credit score to go down. Please review it carefully and correct any errors you find before applying for a home loan.
5. Down payment
The down payment is the cash you pay up front for the home, it can range from 0 to 20 percent or more depending on your type of loan and your credit score. Do your research and talk with your local creditors about how much you might really need to deposit.
Marriages on credit and many government-supported programs, for example the Veterans Administration (VA) and the Federal Housing Administration (FAH), offer loans with a low down payment. Most traditional loans that are not regulated by the government require more down payment.
Many first-time homebuyers have trouble storing enough to receive their down payment. The blessed have relatives who will provide money to help with this. Before you get too excited, discuss the finished gift with your creditor, which would require making sure the money is a gift rather than a loan dressed up as something special.
Lenders evaluate the credit rating, pay stubs, and tax returns of your banking ads before choosing to lend you money. Those who get a massive sum can suddenly find themselves within a free account; they will need to know where you have it. When it is just a gift with no strings attached, the issuer may ask you to offer a special letter, with the name, the date of the gift and the announcement that it is something special with no expected refund. [source: Brackel].
Certainly, there are always some things associated with an occupation that are crucial once you consider buying a home. To begin with, how stable is it? Have you ever needed your occupation at least once a year? Do you find yourself attached to the entire occupation for the next two decades? These are all matters that a creditor can discuss and discuss with you before creating that loan.
The second thing to think about is your daily commute. Does this matter how long it is? Does this matter to your partner? If you select a nearby home to operate and lose your job or have a job in another space, is that a place where you would certainly be happy to reside? Maybe you work at home. If this is the case, do you need a dedicated distance for computers, equipment, or even a phone? There are no right or wrong answers to these types of questions. Seriously imagine yourself about these and speak well with your housemate about these to get the right answers to the circumstance.
3. Home Repairs and Maintenance
Some of those hidden costs of home ownership have been linked to repairs and maintenance. When you think about the amount of home you can afford, consider these costs before investing in a payment that may require your entire budget. What are the results if the air conditioner has to be replaced due to a leaky roof and the refrigerator expires? Consider saving money on a monthly basis to make sure those domestic crises reap more regularly than you think.
If you are handy, you can think about buying a house that takes time. You likely have it for much less than an ideal home, after which it is possible to establish what is often called "sweat capital." Later, as long as you have your dream home, then it may be worth more than you covered it. Talk to your real estate agent about whether home values are increasing in your city. You never want to have a repairman in a downsizing location.
Do you have or are you going to have children? If this is the case, you will want to think about the school and local district before purchasing. Actually, even if you never have children, it's smart to consider the school district.
According to a survey, 20 percent of buyers said they would cover 6 to 10 percent of their financing for a home in the ideal school district. [source: DeBord]. This means that a buyer may have to pay more for a home in a great school district. On the other hand, whenever you move in to sell this home, you are more likely to earn more from the purchase than in a less desirable area.
Even though your school district may be a major concern when investing in a home, remember other things that might be essential when you have or intend to have children. Take a look around the area. Could it be familiar? Is it true that the road has a lot of traffic? Can there be a park? A pool for children? Are there sidewalks? Do you think of other children? Keep all of this in mind if you intend to start a family in your new home.
Currently, are you looking to get a promotion that can send you to the other side of the country? Have you ever wanted to live in a grass cabin on the other side of the universe? If both could be your case in your own life, there may not be enough opportunity to buy today.
You will want to try things like the market in your city. Why is it worth raising the house and quickly? You can pay closing costs once you get your home, as well as being asked to cover them when you sell it. And the one thing about home mortgages is that most of your regular monthly obligations for the first few years pay attention. That you never get very far on the main thing for a while, so you're not building capital.
Most importantly: Even if you reside in a buyer's market today, you may not have the ability to make more money if you try to market your home in the early years. On the other hand, if everyone else from great-grandparents down has lived in the exact same area and you're not about to break tradition either, today can be considered a fantastic time to buy a home. Start looking for a home that can grow with your family, or accommodate all the homes in a nearby area that is likely to be lost.
As a former real estate agent, I have seen many first-time home buyers make many mistakes, including buying more home than they can afford to lead to a more decrepit home than they can make habitable. Despite their best intentions, agents can do a lot with your information. The first time I saw the shoppers who stayed happiest in their homes, they had been the people who had done research, planned their purchases, dragged in by their spouses and representatives, and hadn't done much in their comfort zones. I love taking risks in life. After all, I went from selling real estate to writing about all of this. However, a home is the largest purchase you ever make; it is also a purchase that follows you for a long time. Do your homework before you buy. And happy home hunting!
- Bankrate. "What is a Credit Score?" April 22, 2010. (Oct. 19, 2014) http://www.bankrate.com/finance/credit-cards/what-is-a-credit-score.aspx
- Brackel, Christine. "Using Gift Money for Your Down Payment: What You Need to Know." Quicken. May 22, 2014. (Oct. 19, 2014) http://www.quickenloans.com/blog/gift-money-down-payment
- DeBord, Sam. "The Right School District: How Much Do Schools Affect Real Estate Prices?" Realtor.com. (Nov. 12, 2014) http://www.realtor.com/advice/the-right-school-district-how-much-do-schools-affect-real-estate-prices/
- Dratch, Dana. "6 Must-Do's Before Buying a New Home." Bankrate. (Oct. 19, 2014) http://www.bankrate.com/finance/mortgages/6-must-dos-before-buying-a-home-1.aspx
- HGTV Frontdoor. "10 Things Every New Homebuyer Needs to Know." (Oct. 19, 2014) http://www.frontdoor.com/real-estate/10-things-every-new-homebuyer-needs-to-know
- Holden, Lewis. "4 Mortgages That Require Little Money Down." Bankrate. (Oct. 19, 2014) http://www.bankrate.com/finance/mortgages/4-mortgages-that-require-little-money-down-1.aspx