There are very few things in life that are as intimidating as buying your first home. Whether you look at it from a mortgage, insurance or title perspective, there can be an overwhelming amount of detail included in your purchase.
Before you decide to make that life-altering decision, here is a little insight of each step you will face during the buying process. The information below should not only alleviate your first-time buyer jitters, but also help you approach the market as an informed consumer.
Here are 3 things to consider when buying your first home:
1. Determine your price range
Before you decide to look at any homes, you need to first determine your price range. Figure out how much of a financial obligation you can afford. If you are buying your home with a partner, it is best to openly communicate about the investment you will be taking on. When applying for a home loan, your lender will determine your maximum monthly payment. Lenders predominately calculate this monthly payment by summing up your debt to income ratio, also known as your DTI. Before you make the decision to purchase a home, be sure to list out all of your anticipated expenses so you are not overwhelmed in debt down the road. Don’t agree to a mortgage loan that leaves minimal wiggle room for other expenses. Borrowing less is the easiest and fastest way to pay back your financial obligation.
If you plan to move into a bigger space expect an increase in other household expenses such as utilities, insurance, repairs and maintenance. A larger home can cost more to heat or cool down, just as your homeowners insurance will be required to cover more space. Also keep in mind the extra responsibility you will be taking on such as lawn care, changing of lightbulbs and other tedious home owner tasks. Homeowner fees will also be added to the mix if you plan to move into a condo building or special community.
2. Find Money
The first step in buying a home is to find money. There are multiple outlets for home loans but the key to finding the best loan is to shop around. A lot of the time, mortgage lenders can offer competitive rates with no added bank fees. RP Funding’s website, a Central Florida direct mortgage lender, says that “encouraging people to say no to ridiculous bank fees and shop around for better deals” is a good thing. A good lender is on your side and wants to close the loan for you. Call around and talk to different lenders.
Down payment- According to realtor.com, the average downpayment can range anywhere between 5 to 20 percent. The decision of your down payment depends on a variety of factors, including home prices in your market and your income.
State programs- Buyers must meet requirements on credit, income and home sales price. To find out if you qualify for similar assistance, contact your local state housing finance agency.
FHA-backed loans- These are subject to credit and mortgage-size requirements.
3. Hire a real estate agent
Once you have nailed down your price range and have gone over all of your financial options, it’s time to take one of the most important steps and hire a real estate agent. A safe bet for finding a great agent is to ask around for referrals from friends and family who have recently purchased a home. You can also request a list of possible real estate agents from your local realtor association. Mortgage bankers and title officers may also be able to provide you with a good referral. Once you’ve nailed down a list of potential agents, ask them in for an interview to find out their experience, qualifications and compensation.
Although these three important tips should assist you in purchasing your first home, you must remember there are other considerations to take into account. Keep in mind that your monthly housing cost must also include homeowner insurance, taxes and also any emergency costs that might pop up, such as a busted water pipe. Owning a home is a huge responsibility but if you take your time researching all the facts beforehand, you should have no little surprises along the way.