First-time homebuyer? Here are 5 tips to make sure you don’t regret signing on the dotted line
Posted: Jun 18, 2021
Buying a home for the first time will almost always be a difficult process. After all, there are a lot of tasks, requirements, and standards to consider, and it is normal for you to be concerned about making a costly error.
A house is a long-term investment, so we get why it can be overwhelming to make this decision. In most cases, this process involves getting a loan or a mortgage as well, so the last thing you want is to end up paying at least 15 years of mortgage for a house you don’t really enjoy.
From paperwork to making sure you are choosing the right neighborhood to the emotional journey that comes with such a large purchase, homeownership starts out as a very daunting and lenghty task. But a successful homebuying process, like any other large job, is all about getting the details perfect from start to finish. These first-time house buyer ideas can assist you in navigating the process, saving money, and closing the sale.Start saving beforehand
The cost of buying a house is much larger than the initial house price, which is why. You need to start saving way before you want to make the purchase. How much you should have in your savings account depends on the particularities of your purchase, but these are the main costs usually associated with buying a home:
Down payment: The required down payment will be determined by the lender considering the type of mortgage you select. While some conventional loans for first-time home purchasers with a good credit score require as little as 3% down, sometimes even a tiny down payment might be difficult to save for. A 3% down payment on a $300,000 home, for example, is $9,000, which is not exactly pocket change.
Closing costs: When finalizing your mortgage, you will have to pay some fees, which usually amount to about 2-5% of the total loan amount. You may be able to convince the seller to cover part of the closing costs, but that does not always happen.
Move-in costs: After the purchase, you will need to move all your stuff to the new house, so set some money aside for this process as well.
It should not come as a surprise if the mortgage lender will offer the maximum loan amount that they believe you are capable of repaying. However, you may not want to go for the full amount, particularly if it will conflict with other financial goals. So, before you apply for a loan, you should determine how much money you want to take out.
Consider both the monthly mortgage payment and the cost of the loan when considering how much housing you can afford to pay for. Experts advise keeping yearly housing costs below 30% of income, but you may even want to go lower if you feel you can’t afford this. Starter homes may be a good option if you're attempting to keep your monthly expenses low for your first mortgage, as they are much less expensive than other homes.Choose a trustworthy real estate agent
Many house buyers, especially first-timers, choose to hire a real estate agent to make the process easier for them. They will act as your representative throughout the home-buying process, assisting you in finding houses, talking to the sellers, and negotiating a reasonable price.
You can, of course, go through all this process alone, but it will be much more difficult than if you had an experienced real estate agent to help you out. When you look for a real estate agent, make sure you choose someone that has experience with first-time homebuyers and knows the city well. Go online to read reviews and testimonials, and don’t hesitate asking about their past experience with similar buyers.
Another piece of advice to follow when it comes to choosing a real estate agent is to discuss fees upfront. Most agents will require a commission of 3-6% of the total home value, but this commission is usually paid by the seller.
Decide which type of house suits you
Given your lifestyle and budget, measure the benefits and drawbacks of various types of residences. While a condominium or townhome may be less expensive than a single-family house, it will offer less privacy, as you are sharing walls with your neighbors.
If your top choice is a condo, townhome, or house in a gated community, don't forget to factor in homeowners’ association costs.
There is also the alternative of purchasing a fixer-upper, which is basically a home that needs upgrades and repairs. Fixer-uppers typically sell for less per square foot, but you need to also factor in repairs and remodeling costs. For a fixer-upper, you also have the option of getting a renovation mortgage, which will finance both the cost of the house and the cost of the renovation for you.
Do a thorough home inspection
Once you have decided on the house that you see yourself living in, you need to do a thorough home inspection before sealing the deal. A house inspection is an in-depth examination of the structure and all other systems in the house, to determine if there are any issues that may affect the integrity of the property.
Professional inspectors will check for any issues so you can make an educated decision about the property. Here are a few things to remember:
If you only request a standard inspection, they won’t test for mold, pests, or radon. Understand what you are getting for your money.
Ensure the home inspector has access to every section of the house, including the roof and basement, so that they can properly evaluate the property.
As a buyer, you can attend the inspection as well and you should do that in order to understand the house you are about to move in better. The inspector should be able to explain not only the current issues, but also potential problems you may have.
Make sure you read the inspector’s report as well, regardless if you attended the inspection or not.
Cynthia Madison is a young blogger and economics and marketing graduate. She writes about home, lifestyle and family topics and is a senior contributor to popular niche publications.