With summer officially a few days old, we have entered into peak home buying season. For many first time buyers the next few months is the ideal time to purchase a house. This allows plenty of time to transition into the property before the start of the school year or before the change of season. Making the decision to buy a house is the first step in the process. Once you know you want to buy there are a few important steps you should take. Here are helpful tips every first time homebuyer should follow.
Know Your Financing. Regardless of how many times you have purchased everything starts with your financing. Most real estate agents will not show you properties unless you have a prequalification letter in hand. This requires you to reach out to a mortgage broker or lender to see where you stand. They will evaluate your credit score, debt to income ratio, down payment and current assets. From there they will be able to tell you how much you are qualified for. This will help narrow your focus as to where you could buy and the type of loan program you can accept.
Personal Finances.A common mistake that first time homebuyers make is not knowing the difference between their prequalification amount and what they can comfortably afford. Just because you are preapproved for a $400,000 house doesn’t mean you should buy in that price range. Calculate your current income and write down all of the anticipated monthly expenses. This should be enough to give you an idea of what you are comfortable with on a monthly payment. It is important that you are disciplined enough to stay in this price range.
5 & 10 Year Plan.Think about where you want to be in five and ten years down the road. Do you plan on starting a family? Do you have a job that can call for relocation? These answers, and many more, will give you some idea on the type of property, the market and the price range you will look at. It also has an impact on the type of loan term you take and in some degree the interest rate.
Expenses. If you have never owned a home before, some of the expenses can be shocking. No longer do you have a landlord taking care of the yard or snow removal. You have to take care of everything associated with the property. Shovels, lawnmowers, rakes, garage door repair, oil, appliance maintenance and patio furniture are just a few of the expenses associated with homeownership. Not only do you need to know your expenses but you need to brace for the unexpected.
Property Checklist. Once you get an idea of your finances and expenses you can start thinking about what you want in a property. It is important that you clearly define what you want and what you need to avoid. The first few homes you look at may feel like your dream home. If you don’t make a list you can end up making an offer on a home you aren’t in love with. Staging can make a property feel like home but once the furniture is removed you are left with a property you can regret purchasing.
The biggest hurdle for first time homebuyers is understanding what to do and when to do it. Only when your financing is in place should you move on to the property search. If you take your time and know what you are doing the process is much easier.