Tips for First-Time Home Buyers

Posted by:
Dennis Nottingham
October 04, 2017
11 minutes, 51 seconds

Congratulations! You are now about to take on the next chapter of your adult life. We know how exciting it can be to finally have a property under your name. But let’s face it, home buying is not all excitement, it’s nerve-wracking too. Most especially if you are a first time home buyer. So to make your first-time home buying journey a little less stressful, here are important factors to keep in mind and some tips from our seasoned agents to help you navigate the process more smoothly and save money.

1. Know your budget and save for downpayment early.

Check your finances to make sure you are ready for this new responsibility.  Play around home affordability calculators online to give you an idea of how much is within your price range. After knowing what you can safely afford to spend for a house, start saving money for down payment. ( Tip: Setting aside your tax refunds and bonuses is one of the best ways to save for down payment apart from setting aside a budget from your main income.)

 2. Check your credit.

In as much as we want to, not all of us can afford to pay in cash. So if you are planning to make a mortgage loan, make sure that your credit is in good standing. It is the key factor in whether you’re approved and will help determine your interest rate and possibly the loan terms. Look for opportunities to improve your credit and dispute any errors that could be dragging down your credit score.

3.  Research for mortgage options and compare mortgage rates.

Research and determine the housing loan package that best suits your paying capacity. Also, make sure to compare the mortgage rates. According to the Consumer Financial Protection Bureau, comparing mortgage rates from at least three lenders can save you more than $35,000 over the first five years of your loan.

 4.  Budget for closing costs.

Apart from saving for down payment, you also need to budget a significant amount for the money required to close your mortgage. Generally, closing costs can run between 2% and   5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections, and title searches.

5. Set aside money for after move-in.

 Don’t think that your expenses end with your down payment and closing costs. You also need to save a buffer for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and other personal touches you want once you move in.

6. Get pre-qualified. Better yet, get a pre-approval letter.

One concrete way to determine how much you can really afford for a home is to get pre-qualified.  You’d be totally bummed if you found a perfect home only to learn that you can’t really afford the house right?

Now, getting pre-qualified is good. But as you get closer to buying a home, it’s smart to get a pre-approval where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you and at what terms. Besides, having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.

 7. Decide on what type of home you would like to purchase.

Is it a condo or a house?  How many bedrooms would you want to have? Where do you want to live? What other specifics do you want in a home?

 Home searching can be very overwhelming. Knowing exactly what you want would help you narrow down the search to save time and avoid stress.

 8. Hire the right buyer’s agent.

You need someone to represent you and guide you through the process. Since you will be working closely with that agent, it’s essential that you find someone you get along with well. The right buyer’s agent should be highly skilled, motivated and knowledgeable about the area.

9. Schedule a showing and take advantage of Open Houses

Take time for viewings with your agent and check out open houses. There are specific details that a photo simply cannot illustrate so it is important that you see the property. This will also give you the opportunity to have an overall feel of the interior and check the view of the surrounding area.

10. Take photos of the property you visit and create a top 5 list.

 Which properties did you like best? Put them in a rank and take a second look at your top choices. (The photos are to help you remember while deciding.)

Points  to consider in deciding :

  • Neighborhood - Finding the right neighborhood is equally important with choosing the right house.  Do some research on the schools even if you don’t have kids since this affects the home’s value. Look at local safety and crime statistics.  How close are the nearest hospital, pharmacy, grocery store, and other amenities you’ll use? You can also drive through the neighborhood on various days at different times to check out traffic, noise, and activity levels. Or you can ask your realtor. He/She is expected to be an expert of the area.
  • Think Long-Term - Instead of just looking at properties that meet your current needs, consider other aspects for the future.  Are you planning to start or expand your family? Think of your future needs and wants and see if this home will suit them.
  • Stay under your pre-approval limit.

 While viewing homes with your agent, look for properties that cost a little less than the amount you were preapproved for. Think of the maximum amount as the ceiling - it doesn’t account for a broken dryer or washer or any other expenses that arise during homeownership.Rather than maxing out that amount, set a lower purchase budget to leave yourself wiggle room for unexpected costs.

 11. Be prepared to compromise.

You can’t find a house that’s perfect in every way.  So you need to think carefully about what you’re willing to compromise. Be ready to let go of the little things and details. Remember our number 5 tip? That what it’s for- the little things.

12. Make a strong offer but avoid bidding wars that blow your budget.

In tip number 6, we mentioned that having a pre-approval letter in hand will give you an upper hand over buyers who haven’t. However, in a competitive market with a limited inventory, it’s possible that you’ll be bidding on houses with multiple offers against buyers that are already pre-approved. Although it can be very tempting to make a high-priced offer that’s sure to win when you find a home you love, don’t let your emotions take over and stick to the budget you can afford. Your realtor can help you with tactics to win over the seller.

13. Buy homeowners insurance.

Your lender will require you to buy homeowners insurance before you close on a new house. Be sure to shop around and compare prices. Don’t forget to look closely at what’s covered in the policies.

Take note of the ff:

- A less expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim.

-The insurer can drop your property if the home condition isn’t up to snuff. It is advisable that you be prepared to find a new policy quickly if it sends someone out to look at the property and isn’t happy with what it finds.

-Flood damage isn’t covered by homeowners insurance, you may want to buy a separate flood insurance if your new home is in a flood-prone area.

14.  Know limits of a home inspection.

If your offer is accepted, you’ll have to pay for a home inspection to examine the property’s condition.  Take note that not all inspections test for things like radon, mold, or pests; so make it a point to know what’s included.  Attend the inspection and pay close attention. Don’t be afraid to ask your inspector to take a closer look at something and ask questions.

 15.  ASK your realtor.

The reason on why it is pivotal to have an agent in buying a house is because you need someone to guide you throughout the process.  So don’t hesitate to ask if you have questions. Your agent’s job is to make sure that your questions are answered and feel comfortable with the whole process.

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