For a first time home buyer, choosing and then buying a new home can be a confusing and somewhat daunting task. Here at Solutions, we’ll help you understand the process and find the home that’s the perfect fit.
Know your needs.
First, examine your lifestyle. Do you want to be in the country? Would you like to walk to work or other city spots? Looking forward to a family-friendly suburban lifestyle?
It’s important to think of the limitations each locale places on your lifestyle and the perks each has to offer — before making the commitment to buy.
Suburban lifestyles are flexible, offering children the opportunity to play outdoors and enjoy a neighborhood environment. Urban areas offer greater social, culture, educational and career opportunities. Rural environs offer privacy, room to roam and the ability to pursue hobbies — such as gardening — on a larger scale.
In addition to locale, it’s important to think about the type of dwelling you’re considering. Will you quickly outgrow that city town home? Is a country cottage the perfect size? Will purchasing a condo allow you to forego lawn and home maintenance and enjoy more leisure time?
Be okay with missing out on a house
it’s tough not to get disheartened while house hunting, competition is fierce, and you need to prepare yourself for the long haul and be okay with missing out on a few properties.
You may need to adjust your criteria so more possibilities are opened up. In the meantime, keep making those offers as one of them will get accepted.
Weigh the costs of homeownership.
There’s more to consider than just a monthly mortgage payment. Will you be able to afford the expenses that come with owning a home? Utilities, property taxes, repairs, homeowners association fees, lawn maintenance (unless you will do the work yourself) can all add up.
If you’re moving to a new part of town or a new city, it’s important to consider the cost of living for that area. Transportation, school tuition and everyday living expenses can also make homeownership more expensive than it initially appears.
Better to build or buy?
Having a home custom-built to your specifications can be expensive. But are you ready to take on remodeling and updating an older home to meet your needs?
A remodel can often be expensive and in the end, is less satisfying, and finishing a project yourself, without experience, can result in the purchase of costly tools and the loss of your valuable time. Do your research before signing with a contractor or deciding to revamp an older home.
Location, location, location.
A bargain is never really a bargain when located in a bad neighborhood. Sometimes lightning will strike and gentrification of certain areas will result in skyrocketing property value — but that’s rare. It’s better to take a chance on a smaller home — or one in need of repair — in a great area where the value will only rise.
Know your loans.
A loan rate can look great in an advertisement, but once bankers have drawn you in to the branch office, what will you really pay? Points, PMI (private mortgage insurance) and closing costs can drive your mortgage cost up.
Some programs allow buyers to have smaller down payments. But how long are you required to stay in the home without penalty? And how much more will you pay each month?
Be sure to read all the clauses and fine print before getting a mortgage. And don’t be afraid to shop around for the best rate.
Online surfing and research serve a purpose, but if you’re serious about buying a home, it’s not until you get pre-approved for a mortgage that the home-buying process becomes real.
You need an experienced lender who will take a detailed history and require documentation of your assets and income. This is the only way you’ll establish if you qualify for a mortgage and for how much.
Consider a buyer’s broker.
Most real estate agents represent the seller, but a Buyer’s Broker (also called a Buyer’s Agent) represents your needs and desires and helps you locate the property that’s best for you.
While buyer’s brokers are difficult to locate in some markets, locating a professional advocate who is required by law to get you the best price and terms can alleviate home shopping stress.
Demand full disclosure and a professional home inspection.
Most states require that a home seller disclose potential problems with the property, but the homeowner may not always know or reveal existing structural problems (despite the legal requirement).
The only way to truly know what’s going on inside (and over and under) a home’s structure is to secure the services of a reputable home inspector. Expect to pay $300-$600 for the inspection. It seems like a lot of money, but consider the thousands it could save you if the home isn’t up to code or has major issues.
A Buyer can then use this info to renegotiate a lower price with the home sellers. The last thing you want to discover after you buy is a major problem that could have been identified early on.
No matter how nice a home looks, a home inspection is the only way to make sure you aren’t buying a lemon – you don’t have to ask the home seller to make repairs, but you do need to know whether you should proceed with the purchase or not.
Get it in writing.
Perhaps one of the best ways to protect yourself is to have every part of the sale in writing, and make sure you understand every aspect before making a commitment. Legal jargon and real estate terminology can be confusing and somewhat frustrating, so hone your real estate vocabulary before house hunting, and don’t be afraid to ask a lot of questions along the way.
What to do before completing the purchase.
First, make sure your title is “free and clear” and there are no problems with you assuming ownership of the property – this is often coupled with “title insurance.”
Then, purchase homeowners insurance. Finally, decide if the purchase of a home warranty (if not included as part of the sale) is in your best interest. These should all be taken care of before “closing.”
Don’t forget about taxes.
Are your property taxes rolled into your monthly mortgage payment? Or will you be responsible for paying them yearly?
Don’t forget to keep paperwork for your annual federal or state income tax return. You can often deduct the property taxes, points and interest paid on a mortgage.
Set up a consultation with a tax accountant to learn more about the restrictions on these types of deductions.
Never miss a deadline
Pay attention to the time line – if your home purchase will close in two months make sure you understand every step of the loan, inspection and purchase process and stay on top of every deadline.
Buying a home requires you to stay on top of your to-do items, especially during the escrow process where there may be penalties for missing a deadline or a deposit.
A lender can make or break a deal, so choose wisely. One of the main things to look for besides the loan rate is the responsiveness of the lender. They need to move fast or the deal may fail.