Buying your first home is not something you (or anyone) should take lightly. You should be prepared with as much information about the process as you can learn before you begin. You should understand your real estate market and the current mortgage market. The more you know – the better. Here are some of the most important pieces to consider that are often left off the list…
- Think long-term and think re-sale.
Are you planning to have kids? Will you be taking care of elderly relatives? You might be planning to live in your first home for only a few years. In that case, who is your target audience when it comes time to sell the house? If you buy a house in a very bad school district or a house on a very busy street, when you are ready to sell the house, most families with children will be out of your list of potential buyers.
- Look into grants and other sources of funding: There are a lot of options for grants and funding sources, and the income limit to qualify isn’t necessarily very low. There are generous income limits on many of the choices. There are many different options based on profession (grants for teachers, farmers, etc.) as well as the area of the potential house (whether it’s in a rural area, high-poverty area, etc.) Just be sure to look into all the grants and funding options you are eligible for before you automatically decide you won’t qualify for anything.
- Check out the neighborhood demographics: If you are buying a house in a neighborhood full of renters, it only takes a few bad renters or bad landlords to drive the neighborhood down fast. If the neighborhood is full of single people, will you be happy there if you have very young kids? Things like that.
- Look beyond the staging: The psychology does work; staged houses look far better than houses that are still being occupied. A house that has nightstands with lamps on it next to the bed can really increased the appeal of the room. In reality, though, maybe there aren’t even plug points anywhere near the lights. Tricky, huh? So basically, that setup would not have been possible without remodeling. When you are considering a house, mentally try to remove the staging. Pay more attention to the layout of the house and the structure itself. Ugly wallpaper and paint can be easily fixed later.
- Do your homework on what a reasonable offer is: This changes as the market changes year to year. Unless you are very familiar with your area and completely understand how to price an offer on your first home, you might want to consider getting help from an expert. A real estate agentcan be very helpful in deciding how much your offer should be. In today’s buyers market, your best reasonable offer might actually be lower than you would think. Have your real estate agent run comparable sales in your area and pay attention to prices per square foot for recent sales. This can give you a very good idea of how much to offer.
- Budget for closing costs: This is probably the top asked question by first-time homebuyers. All mortgage lenders are required by law to disclose in writing your estimated closing costs and fees, so you’ll know ahead of time. If you don’t get this from your mortgage lender, you know something is wrong. Back out before you waste any money. Before your closing, you’ll receive a document that outlines the actual costs you’ll pay at closing. You’ll be asked to bring a valid picture ID, a certified check (if applicable) for any down payment due (or you may have to wire the money to the title company) and any other additional documents that your circumstances may require. Just don’t forget to factor your hard earned money into this fee.
- Do a final walk-thru: Be sure to ask for and to take a final walk through of the property shortly before the closing to make sure the home is in the condition you expect it to be. You never know what can pop up or change from the time you initially saw it, to the time the inspection happened to the time the previous owners start packing up.
- Understand what you’re getting with your new homeowners insurance: Look closely at that’s covered in the policies. Going with a less expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim. Know that flood insurance isn’t covered by homeowners insurance, so if your new home is in a flood-prone area, you may want to buy that separately.
- Set aside more money for after move-in: Once you’ve saved for your down payment and closing cost, you will inevitably need money for items that will go IN your new home. Furnishings, appliances, rugs, updated fixtures, new paint…the list goes on!
- All the old advice about buying your first home is true. Like have an emergency fund, save for a down payment of 20 percent, get your credit into a better shape and don’t buy more than you can afford.