Preparing to buy your first home can be an incredibly intimidating process but it leads to awesome reward. When buying your first home it’s generally the first time you’ve had to truly understand what a mortgage is or how much a down payment typically is. To ease some of the stress, we’ve compiled a list of our top eight most important tips to follow when starting the home buying process.
1. Set a budget
Being realistic about what you can actually afford may be one of the most difficult parts of the home buying process. It’s important to consider all costs; don’t stop at principal, interest, taxes, and insurance. Having your own home also means you will be paying for utilities, groceries, and all of the furniture it takes to fill it! Deciding the budget for your home needs to be all inclusive in order to be accurate.
2. Check your credit
It shouldn’t be a surprise that if you’re getting a loan you will need a decent credit score. Check your score well in advance to the application process to give yourself time to improve it if need be. A fast way to improve your score by a few points is to pay down credit card balances and stop using them for two months before you apply for a mortgage. Also, you’ll want to avoid applying for credit (for example, a new credit card or car loan) until after you’ve closed on your new home.
3. Prepare your finances
Before buying your home it’s imperative to save, save, and save some more. Down payments can vary anywhere from 5-20% depending on your mortgage type. After buying the house there will plenty of costs ranging from buying appliances to putting deposits on utilities. Along with these costs it’s also a good idea to have an emergency fund.
4. Do your homework
There’s a lot of research that should be done before you buy your first home. It’s important to know the market and if any financial assistance is available to you. Be mindful of what houses are selling for in your desired area and budget. There are numerous grants and funding sources that first time home buyers may qualify for. There are options based on your area, property type, and even your profession.
5. Set goals
Before buying your first home you should think about how long you plan to live there, if this will be a good home for children. If the plan is to stay in the home for a very long time, a longer term and fixed-rate mortgage are probably the best bet, while for a starter home it may be better to find an adjustable rate.
6. Location, Location, Location
You’ve heard the phrase repeated over and over, because it’s true. Location is one of the most important aspects of buying property. While you can upgrade and renovate the house itself, the area isn’t controlled solely by you. We’re not just talking about the view here, it’s key to know the demographics of the area as well. What age range will most of your neighbors be? Is it in a good school district?
7. Look a little deeper
A property can be beautiful and seem like everything you’ve dreamed of but actually be riddled with problems. Don’t let the excitement give you tunnel vision. Be sure the home has a sound foundation and everything is up to code. Whether you’re getting a fixer upper, or your dream home it’s vital to be mindful of the structure in addition to the visual appeal.
8. Understand the contract
For many people, buying a home is the largest purchase they will ever make. Signing a 15 or 30 year contract that you don’t understand is crazy talk. Thoroughly read through any contract before signing, and don’t be afraid to ask questions!
Finally, enjoy your new home! Owning a home is an exciting step your life, and while the stress isn’t over once the papers are signed, you should be filled with pride for accomplishing this milestone.