We’ve talked about tips for first-time home sellers. This time we are going to discuss some of the best home buying tips you should know, especially if it’s your first time buying a home. Knowing these tips will make it easier for you to navigate the homebuying process, save money and close the deal successfully.
Home Buying Tips: Preparation on How to Buy a House for the First-Time
1. Pay Off All Your Debts and Build an Emergency Fund
Owning a house is expensive. Aside from monthly house payment, you also need a budget for maintenance and in case something needs to be repaired. This is why you’d want to be free of debt and have an emergency fund of at least 3 months expenses.
2. Save Early
First, you must decide your total money target and set a deadline on when you’ll reach that amount. To make things easier, you can set up automatic transfers from your checking to savings account. You would need to save for:
Down payment – How much you’ll pay for the down payment will depend on your lender and the mortgage type. There are conventional loans targeted at first-time home buyers with excellent credit that only requires as little as 3 percent down payment. But it can still be challenging to save up for that. For instance, a $300,000 house requires $9,000 down payment.
Closing costs – These include fees and expenses required in finalizing the mortgage and typically range from 2 to 5 percent of the amount of the loan. You can ask the seller to shoulder a portion of the closing costs.
Move-in expenses – You would also need money for home repairs, upgrades and furnishings in your new home.
3. Decide How Much You Can Afford Using the 25% Rule
Your housing costs which include taxes, HOA fees, insurance, etc. should not be more than 25 percent of your monthly take-home pay. You can use a home affordability calculator online to have an idea on how much you can afford based on your credit score, income, down payment, debt, and location.
4. Get Pre Approved
Once you have saved enough cash to pay for 10 to 20 percent of your future house and closing costs, you can now talk to a mortgage lender. Before shopping for a home, get yourself prequalified for a loan and get a preapproval letter. This letter will let the seller know that you’re a serious buyer. It’s one of the first-time home buyer tips you should not miss as it will give you an advantage in a competitive market.
Real Estate Home Buying Tips: Shopping for the Right Home
Pick the Right Real Estate Agent
A good real estate agent can search the market for houses that meet your needs and your budget. You would want someone who really knows the neighborhood where you want to buy your house from. For example, the Cincinnati Property Twins are knowledgeable of the neighborhoods in Cincinnati even the off market homes for sale. If you can, get referrals from other recent home buyers. Interview at least 3 agents, and ask them about their experience.
Choose the Right Type of House and Neighborhood
List down the pros and cons of different types of houses. See new home buying tips on what works best for your budget and lifestyle. A town home is cheaper than a single-family home but it means less privacy. When you are shopping for condominiums, or houses in gated communities know that it will come with homeowners association fees.
You might also want to consider buying a fixer-upper. Since it needs repairs or updates, it’s more affordable but you do need a budget for repairs and remodeling. You can get a renovation mortgage to fund both the price of the home along with improvement costs.
Think about your needs. Are you going to buy a starter home? Are you going to buy an investment property? Or is it going to be your forever home?
No Matter What, Stick to Your Budget
To avoid future problems, only consider homes that fit your budget and stick to it. Look at homes below your price limit so you can have some wiggle room for bidding, especially in a competitive market.
Hire a Home Inspector
A home inspector will make an assessment of the condition of the home, which includes a report on the plumbing, electrical work, heating and cooling systems, water, sewage, fire and safety issues. They will also check if there is any evidence of insects and other issues that affect the value of the property. By having a home inspection, you will be able to make an informed decision about buying the property.
Make sure to know what’s included in the home inspection you’ll be paying for. Standard inspections don’t include checking on things like mold or pests. You have to be sure that the inspector checks every part of the property including crawl spaces and the roof.
Know-How to Negotiate with the Seller
If the property needs repairs, you can ask the seller to lower the price to cover repair costs or pay for repairs in advance. You may be able to save money too by asking the seller to pay a portion of the closing costs. You can negotiate based on the condition of the local market. As expected it is harder to negotiate for a lower price if there are more buyers than properties for sale. You might want to ask your real estate agent to look for an off market property that is more affordable and with less competition.
Purchase the Right Home Insurance
You will be required to purchase homeowners insurance by the lender before you close the deal. Get a home insurance that is adequate enough to cover repair costs or replace your home and belongings in case it gets damaged as well as the cost of rebuilding the house if it’s destroyed. Your insurance will also include liability insurance if you will be responsible for an accident or injury.
All these 1st time home buyer tips can help your home buying experience success even if it’s your first time.
