What Every First-Time Home Buyer Should Know

Your home will likely be the largest purchase you will ever make in your life. So, s a first time home buyer, it is really reasonable to be at least a little bit terrified! It is a HUGE change to your life and a huge financial burden as well. On the other hand though it is also a truly awesome thing to buy your first home. Doing all the research and hiring a licensed home inspector can go a long way for peace of mind.

(This is a contributed post, for more information about my compensation please read my disclosure policy)

Read more: Documents You’ll Need to Buy a House

Purchasing your first home is an exhilarating experience you will always cherish.

But as a first-time buyer, how do you confidently navigate the property market and avoid some of the common pitfalls of the purchasing process? Remember, buying a house involves a lot of critical decisions, from identifying the right property to getting your finances in order. One wrong move could have costly repercussions that can make the entire experience a nightmare before you even move in.

If you are a first-time home buyer, this article is for you. We discuss everything you should know about the property-buying process so you could secure your dream home like a pro.

Let’s get started!

Spend Time on Due Diligence

Performing due diligence is undoubtedly time-consuming and often costly. But if something is wrong with the property you want to buy, you are better off finding out about it before you sign on the dotted line.

To minimize risks and avoid costly mistakes,

• Arrange for a home inspection by an experienced professional. If they recommend a more in-depth inspection in a specific area, like the roof or plumbing, get that set up, too, before making any commitments.
• Review the property title and history to ensure the current owner has legitimate ownership and there are no glaring red flags.
• Carry out a reverse address search online, speak to the neighbors, and go through the local news to learn more about the neighborhood and the surrounding area. Pay particular attention to crime rates and new developments that could affect future market prices.
• Find out the local laws applicable to your property in case you are considering major updates or extensions.

Understand Your Finances

Owning a home, whether it is your first one or the fourth, is a significant responsibility that will tie you to a sizable financial commitment for several decades.

So, before making the leap, you must ensure you are financially prepared for it.

To get an accurate idea of your ability to shoulder the expenses, consider your current and future responsibilities and financial commitments. How much debt have you already taken out? What is your current monthly income and savings? Are you expecting any big changes in your life that may involve additional expenses in the next few years?

Keep in mind that there will be various recurring and ad hoc costs attached to living in your own place—including mortgage payments, property taxes, insurance, maintenance, and repairs. A bigger space could also lead to higher bills. You should be able to meet these expenses with your current income.

Determine the Budget

Once confident you are financially ready to buy your first property, go ahead and set up a budget. It will allow you to understand what you can realistically afford and plan your finances stress-free.

When preparing a budget, most rookie buyers only consider the cost of the property. But there are other expenses involved with the purchasing process.

These can range from closing costs and housing insurance to inspection fees, taxes, and moving expenses. You should also take note of potential repairs and updates.

When it comes to the down payment, the more you allocate for this, the more you will save. So, decide how much you want to pay up-front based on your savings.

Determining what you can comfortably allocate for mortgage payments is just as important. According to the Federal Housing Administration, your monthly mortgage payment should not be more than 31% of your income.

Know Your Priorities

One of the biggest mistakes new home buyers make is failing to separate the must-haves of a property from the good-to-haves.

As a result, they could end up cash-strapped with a home that doesn’t fit their lifestyle or wallet.

So, take a moment to assess what is essential to you. Some may prefer to live in an area with good schools, while for others, quick access to public transportation could be a priority. Proximity to hospitals, parks, shops, restaurants, and other amenities can be important, too.

Then, make a list of the specific property features you require. For instance, how many bedrooms do you want? What should be the total square footage?

All these will have an impact on the property value. Residential areas close to schools and the city will naturally be in high demand and, therefore, will come with higher price tags. So, take into account the cost factor as well when identifying what is absolutely necessary and what you can do without.

Research the Market

An experienced real estate agent could advise you about current market trends and prices.

However, buying a house is a major decision with significant financial implications. It is critical that you do your own research and gain an in-depth understanding of the housing market and the purchasing process so you can make informed decisions without entirely relying on others for information.

For this, there are plenty of resources available online, from industry news sites to blogs.

Online real estate marketplaces, such as Zillow, can provide enough insights into current price ranges for the type of property you are looking for. They can also help you get an idea about the going rates in different neighborhoods.

This is vital to manage your expectations and negotiate tactfully when you finally find a place you would like to own.

Shop Around for Mortgages

Apart from conventional mortgages, there are different loan types, like adjustable-rate mortgages, that could expose first-time buyers to significant risks in the long term.

So, speaking to several lenders and familiarizing yourself with these is a must before you borrow.

Here are a few other tips to keep in mind.

• Compare mortgage rates, fees, and terms. Avoid shady lenders who offer below-market rates and unusually attractive terms.
• Explore your eligibility for loans and assistance programs in place for first-time home buyers.
• Check how much you can borrow, but don’t plan to take out the full amount.
• Inquire about the necessary paperwork and arrange them in advance.
• Get the loan pre-approved before you go house hunting. This will likely allow you to negotiate a better price.

Summing Up

If you want to avoid common rookie mistakes when buying your first property, you must prioritize several critical areas at the outset.

We suggest starting your home-buying process by spending adequate time on due diligence to minimize risks and taking stock of your finances and allocating a budget. Also, consider the essential property features and other requirements and separate them from the good-to-haves and what you could do without.

Then, research the market to understand the current prices and trends, and shop around for mortgages so you can select what works best for your current financial circumstances.

(This is a contributed post, for more information about my compensation please read my disclosure policy)