Tips for First Time Home Buyers
To be a first-time home buyer is an exciting time.
In addition to excitement, first time home buyers may also feel pressured, overwhelmed and frankly, nervous for what’s in store for them in the upcoming months.
Available homes are flying off the market in record time and on average, being purchased around the $300,000 mark. With real estate statistics like these, every homeowner is bound to feel a little nervous.
While you may be tempted to make an abrupt purchase on a home, Shore Bluff Realty recommends that you weigh out all the options and odds beforehand.
An impulsive real estate purchase could lead to damaged finances and unwanted debt.
To prevent any fiscal disasters from happening, Shore Bluff Realty has the tips for first time home buyers that you won’t want to skim over.
First Time Home Buyers’ Tips
Pay Off Debt & Build Emergency Fund
Your home should be a blessing, not a financial burden. This seems obvious, but you’d be surprised.
Owning a home is typically much more expensive than renting.
Now, you are responsible for the maintenance costs and upkeep of your entire home, which actually, adds up faster than you think.
Before you even think about purchasing a new home or property, make sure that you are debt free. This means car payments, student loans, credit card expenditures, all gone.
In addition to being debt free, you should also separate three to six months of expenses for an emergency fund.
Determine What You Can Afford
Determine your monthly budget before a beautiful house puts you weak at the knees.
A monthly budget will essentially determine how much house you can afford at that time.
Leave room for other expenses in your budget and ensure that your monthly housing costs (taxes, insurance, HOA fees etc.) are going to be less than 25% of your monthly pay.
For example: If you take $5,000 home each month, multiply that by 25% = $1,250 is your maximum monthly house payment.
Make sure to add all monthly expenses to see what mortgage and interest rate you can afford in the end.
Down Payment Savings
If you're not planning to pay for your down payment with cash, you should save a down payment that is 20% or higher than the value of the house.
If 20% seems too high for you, first time home buyer programs will entice you with percentages that are lower, but don’t fall for them! These programs are designed to take more of your money over a longer period of time.
Here are the low-down payment mortgage options to avoid:
Adjustable-Rate Mortgages (ARMs): This loan allows lenders to adjust the rates to transfer the risk of rising interest rates.
FHA Loans: This requires you to pay a mortgage insurance premium for the life of the loan, and the money won’t go toward paying off your actual mortgage amount.
VA Loans: If the real estate market changes, you could owe more than the market value of your home with a VA loan.
Closing Cost Savings
On average, closing costs on a home are anywhere from 3-4% of the home’s purchasing price.
Closing cost fees cover:
Your lender will give you a specific price on closing day, so you are notified with what amount to bring.
Get Preapproved for a Loan
Once you’re positive that you have enough money to cover the closing costs plus 20% of your home, a mortgage lender will help you afford the other 80%.
Take your time and get preapproved for a loan before you start your search for a dream home. When a buyer is pre approved, it shows the seller that they are serious and committed to buying. Getting preapproved for a loan ultimately gets the buyer ahead in the competitive real estate market.
Research the Area & Neighborhoods
Your final decision should not be solely based on the home and its property.
According to recent studies, 23% of home buyers are willing to compromise on a home’s condition and 19% are willing to compromise on size. As opposed to 7% compromising on neighborhood quality and 2% on distance from a school.
Factor in neighborhood quality and location into your decision because your surroundings are what make your house, home sweet home.
Ask about the crime rate, quality of schools around the area, commute times for work, traffic conditions, noise levels.
First time home buyers should ask about every detail of the home and its surroundings before committing to it.
Go to Open Houses & Invest Long-Term
When you’ve decided on a neighborhood, explore your options and go to various open houses.
Even if you’re uninterested at some, looking at houses around you is a great way to learn about the environment and location.
When you finally find the winning home, you will understand how yours compares to others around the district.
A good strategy for buying a home for the first time is to find the most affordable one in the location of your choice. If you purchase at the bottom of the price range in a great neighborhood, you’ll be able to make home improvements to bump up the overall value of the home.
Make an Affordable & Competitive Offer
Finally... A home that you love and that's in your price range.
Because you're already pre approved for a loan, you can choose to make an offer.
If you’re a first-time home buyer, it’s hard to gauge how much you should offer which is where your real estate agent’s expertise comes in.
Ask your agent what amount is competitive, yet affordable enough, for you to make.
Prepare to Close
The closing process begins once the seller has accepted your offer.
On average, the closing process takes about 43 days to complete, which is plenty of time to tackle things on your new-homeowner-to-do list.
As you prepare to close, make sure that you read every word of every document and don’t hesitate to ask your agent anything that you don’t understand.
You’re responsible for any paperwork that you sign, and the downfall is on you if you skim over any important documents.
Help for First Time Home Buyers
Shore Bluff Realty does whatever we can to make the home-buying process as smooth and seamless as possible for our clients, including a host of support services geared for both pre- and post-purchase stages. Check out our website for more information: www.shore bluff.com.
We have many prospective clients who don’t always meet first time home buyers’ qualifications, but we hope that our tips have steered you in the right direction.
If you have any questions, comments or concerns about first time home buyers’ requirements, don’t hesitate to reach out to us online, via email to: email@example.com.