Are You a First Time Home Buyer? These 7 Tips Can Help
If you are looking to buy a new home, you are not alone. At least 560,000 homes were sold in the United States in 2016. Many of the people who are interesting in buying a home are first time home buyers. They amount to about 32% of people looking to buy a home. Here are some tips to make the process easier and less stressful:
- Work on your debts. Before you start to talk to a real estate company or your bank for a loan, you should try to pay off all of your debts. People do not always see that there are a lot more expenses associated with owning a home vs. renting it. That means you should also start to add money to an emergency fund. Experts recommend a fund that can cover maintenance costs for about three to six months. These can add up quickly when you own your own home.
- Look at what you can afford. This means taking a hard and deep look at your budget. Look at what money you have coming into your home and how much you have going out. In addition to your mortgage payments, you will have to pay for insurance, maintenance, taxes and a host of other things. The process of buying a home is a long and expensive one. Working with an experienced real estate agent can also help you decide what you can afford to spend on your new home.
- Save up for your down payment. Most home buyers do not have enough cash on hand to buy the place outright. A safe rule of thumb is that you will have to come up with about 20% of the full cost of the home you want to buy. This will allow you to avoid paying for a private mortgage insurance policy, so you can save some money there. These are usually about 1% of the value of your loan and this is tacked on to your monthly loan payment. That’s a lot more money on a 30-year mortgage in the long run!
- Make sure you have the money to cover the closing. Many first time home buyers do not factor this into what they need to spend when they are buying a home. This is generally between 3% and 4% of the value of the home. You should be able to get a more precise amount from your mortgage provider.
- Try to get a preapproval for a loan. The first place to start with this is at the financial institution that you work with most often. If you do not get an approval from your bank, you can also talk to the local credit union or community bank. Their whole raison d’etre is to help people in their community to be able to afford to buy a home. You can also get someone to cosign your loan if other options do not work out.
- Look for homes you can afford. This is an important thing to do when you are looking into buying a home. Your real estate company should be able to narrow down your options to homes that are in your price range. Most real estate agents can walk into a home and know immediately what the home is worth. They are also experts at pairing home buyers with the right homes. There is no reason to waste your time looking at places that are too far above or below what you can spend.
- Look in neighborhoods you like. If you are looking at buying a home in the city where you live this can be a lot easier. You can drive around the areas you like and see how they look at different times of day and during the week. That quaint looking neighborhood may undergo a Dr. Jekyll to Mr. Hyde transformation from Sunday afternoon to Friday night. It is worth it to drive back through at different times. If you are not moving to a place in your city, you can do research online.
The process of buying a home is complicated and pricey. These tips can help make it easier, less stressful, and give you a better chance at success.