So you experienced the daunting task of buying your new home. But what keeps your head up is that millions of people have been in the same situation and survived. If you do your homework and take your time you’ll have the best chances of finding something within your budget and you can handle. Believe it or not the big surprise for many “first-timers” is that they need to finish the first 5 steps on this list before they can even begin to look for a suitable home.
- Analyze your financial health.
First thing is first, before falling in love with the beautiful two-story house in the neighborhood you always wanted you need to do a serious audit of your finances.
Look at all the money you have worked hard for and saved in your savings. You shouldn’t even consider buying a home before having an emergency savings account with at least 3 to 6 months of living expenses. Look at how much is left over in your savings and investments accounts that could go toward a good down payment.
Next step, look at how much you’re spending every month – and where it’s all going. This will be the simplest way to tell you how much you can set aside for mortgage payments. You have to make sure to write down every dollar you spend on utilities, gas, food, kids (if any), car maintenance, entertainment, savings, miscellaneous smaller items etc., this is important because this is how you know how and where a new mortgage payment fits into your budget.
Another great idea is that you should research how long it will take you to get to work and transportation cost. There many online cost-saving calculators that takes into account your car’s vehicle type along side with payments, miles from A to B, gas and other factors to help you estimate the cost of a potential commute.
- Research benefits for first-time homebuyers.
Being a first time homebuyer has its benefits but in order to benefit from all of these special programs you need to do your homework to see which one is the right one for you. After doing your research take this information with you when you start looking for a mortgage.
- Meet with lenders
If you haven’t made it clear to your realtors how much you can afford to spend they won’t even bother spending any time with you, just like the saying goes “time is money”. And in most instances, sellers will not even entertain an offer that’s not accompanied with mortgage pre-approval. If you don’t have cash in hand just like many first time buyers do your next step will be talking to lenders and or mortgage brokers.
A lender will or broker will assess your credit score and the amount you can qualify for on a loan. The lender will go over your saving, 401k etc. and debt as well as any local programs that might be available for down payment assistance. This is where your homework on first-time homebuyers program will help. If you think you qualify, look for a lender that handles the program you hope to get.
A smart thing to do is to research online, but with a live person who can review your situation, answer questions and, if necessary, suggest how you can improve your credit. Something to take into consideration is that online calculators don’t always include insurance and taxes or PMI (Private Mortgage Insurance that’s required if the down payment is less than 20%)
- Don’t go with the first mortgage you see, shop around.
Don’t be fooled by loyalty when seeking a pre-approval or searching for a mortgage. Shop lenders, even you don’t qualify for many loans.
- Be smart, have a backup lender.
Qualifying for a loan isn’t 100% guaranteed your loan would eventually be funded. There has been cases where clients have signed loan and escrow documents, and a day later right before they were supposed to close were notified the lender froze funding on their loan program. Having a second lender that has already qualified you for a mortgage gives you a backup to keep the process on, or close to, schedule.
- Find a realtor.
When everything is set and you know how much you can afford and the loan amount you’ll qualify for, its time to find a real estate agent. A smart way to go is to find one that works with a team of people who can offer suggestions about home inspectors, good insurance agents etc.
If you think about the realtor’s job they do a lot of your groundwork up front for you by contacting listing agents to set up showings and help you negotiate the purchase. Some say that the best part is that a buyer doesn’t pay for working with a realtor. The service is free for the buyer, since the sellers pay the commission.
- Now is the time to decide on a neighborhood
Just like most buyers you probably have an ideal location, a good thing to keep in mind as you see how much house you can buy in different locations. You have to realize that homes and land are less expensive the farther they are from a metropolitan area. On the other hand, imagining that the long commute wont matter that much is an easy trap to fall into. The long drive and cost of a long commute can undermine marriages, stress and finances.
- Utility bills will be different, look over them.
Since apartments and condos use less energy (gas, oil, electricity, propane, etc.) you’re going to see a big difference in your utility bills. It is easy to be ambushed by soaring rates when your new house has ceilings higher than your rental.
- Home inspection: Don’t forget to get one.
After your offer has been accepted, splurge for a home inspection. Spending even a few hundred can educate you about the house and help you decide if you really want to pay for necessary repairs. You can also leverage your offer depending on the results of the inspection report and make the seller financially responsible for all or some of the repairs.
- History report of your new house
So you got your dream house, you’re living the “American dream” you’re one of those people who are homeowners. Now what? The next smart step you could take is to get a history report of your home. A history report is detail document on a specific property that gives you all the information you need. We did some research to find the best property profile reports in the real estate market and we found a few but on stood out from the rest, this company goes by the name Local Records Office based in Los Angeles and for a small fee they will gather information about your property. Here is what’s included in the report: property details, transaction history, comparable, foreclosure activity, demographics, etc. You could find more about history reports and Local Records Office here.
- The bottom line
Purchasing your first home is perhaps the biggest financial decision you’ll ever make. Don’t take on more of a financial obligation than you can handle. A small stretch may be worth it, but a big one could haunt you if life gets temporarily bumpy.