Special offer

Home Sweet Home: 6 Tips for First-Time Buyers

By
Education & Training with HomeInsurance.com

You’ve decided you’re finally ready to bite the bullet and purchase a home for the first time. If the thought of homeownership causes your palms to sweat and butterflies to explode in your stomach, you’re not alone. Investing in a home is a huge decision and shouldn’t be taken lightly. But, when armed with the right amount of know-how, conquering the real estate market and finding the right home can be an enjoyable adventure.

To keep your search as low-stress as possible, follow these tried-and-true tips to avoid some common rookie mistakes.

1. Don’t Blow Your Budget.

Setting a realistic budget for this large purchase is the first step in smart home shopping. Many factors go into how much your mortgage payment will be, including your credit score and how much you’re able to put down. Consulting with a lender at the beginning of your search can help streamline the process.

Don’t forget to account for other expenses that are part of the home-buying process. Additional costs that could cause you to go over budget include:

  •         Moving expenses. Whether you’re hiring a moving company to get you settled into your new home or plan on renting a truck and loading it up yourself, be prepared to spend anywhere from several hundred to several thousand dollars, depending on the distance of the move and the amount of items you own.

 

  •          Closing costs. When a purchase agreement is made, be prepared to pay closing costs. Depending on what is negotiated, you could be responsible for all costs, or just a portion of them. Closing costs cover everything that goes into getting a mortgage loan from start to finish, including a credit check, title search and home appraisal. To get a rough idea of how much you may have to pay at closing, multiply the amount of your loan by 3% or 4%. The fees can rack up to be a hefty sum, so make sure they’re accounted for in your budget.

  •          Realtor fees. If you used the services of a realtor, you’ll be required to pay them the agreed percentage upon closing. Real estate agents make their money off commission, which is typically 6% of the total sale.

  •         Repairs and upgrades. If you plan to update the bathroom fixtures, change the kitchen cabinets or replace the carpet in the upstairs bedrooms to make the home your own, add a few hundred – or thousand – dollars to your budget to cover these costs. Maintenance issues, such as a faulty hot water heater or an air conditioning unit that’s on the fritz could be found during the inspection. Make sure you’re financially prepared for these expenses, if needed.

Once you’ve determined what you can afford, stick to it. Although you may be curious, only look at houses that you could realistically purchase. Looking at properties outside your budget could cause you to fall in love with something that could tempt you to strain yourself financially.

2. Make a List, Check it Thrice.

When it comes to shopping for a new home, all buyers have specific things they have their hearts set on. After determining what you can afford, make a list of your must-haves. Whether you are looking for a home in a specific school district, want a certain number of bedrooms or prefer electric over gas-powered appliances, writing down your priorities will help you save time by narrowing your search. 

It’s easy to get swept up in excitement the first time you see a house you love and forget about your budget or checklist. Before you start daydreaming about future holiday gatherings in the home, schedule a second walkthrough to catch any details you may have overlooked the first time. Checking out the property during the day and at night can also help you get an accurate feel for the area, including traffic density and potential neighbors, to avoid any surprises upon move-in.

3. Location, Location, Location.

Location isn’t everything, but it does play a large role in buying a home. Purchasing near your place of employment, gym, child’s school or other places you frequent should be taken into consideration. Even if you find a home for a steal, you could end up paying the difference in gas — and time — if you have a longer commute to work or if you have to drive farther to your favorite locations.

When choosing a location to live, think about the lifestyle you want. You may choose to pay a little more for a home in a good school district, which would benefit your future kids. Or, you could buy for a lower price in an up-and-coming area and have more money for changes to the home.

Also, consider future resale of the home when weighing your options. Living in a high-rated school district, county with low property taxes or a coveted area could help you sell your home down the road.

4. Hire a Trusted Inspector.

Before you make an offer on a property, schedule an inspection. Having the home inspected before you’re legally bound to it could save you hundreds or thousands of dollars in repairs if any unexpected issues are found. The house may seem perfect at first glance but, especially if it is an older home, termites or mold could be lingering behind the walls.

A thorough inspection will check out areas of the home that can’t be seen with the naked eye, such as the foundation and behind the walls, to ensure that the structure, electricity and plumbing in the home are all sound.

Being present during the inspection will help you make an informed decision. Knowing exactly what issues are found and the cost of repairs can indicate if it’s best to move forward with the purchase or walk away.

5.  Make the Winning Offer.

Making an offer on a home can be intimidating, especially if you’re facing a lot of competition from other buyers. You may be wondering if it’s best to highball, lowball or simply offer the asking price. Experts say that it simply depends, as the answer can vary based on each individual situation.

  •          Be wary of lowballing, but don’t rule it out completely. If you lowball your offer, you could run the risk of insulting the owners, causing them to immediately deny. However, there are exceptions that could help you seal the deal for a lower price. If the property has been on the market for a long time, or if the sellers need to move by a certain date, they could be more likely to accept an offer that is under their asking price. Do your research – much of this information can be discovered through conversations with your realtor or by checking the MLS listing.
  •          Aim high, but only spend what you can afford. Making an offer that is exactly at asking price could help the buyers realize you’re serious about purchasing their home, making them more prone to accept. However, if you’re competing with other buyers, offering to pay a bit more, but still remaining within your budget, could help your offer stand out from the rest.

If you’re working with a real estate agent, he or she could give you pointers on the best plan of action. Realtors tend to show buyers properties that are priced slightly above their budget, so disclosing a slightly lower price than what you’re prepared to spend could give you a little leeway when making an offer.

While it’s important to not hastily make an offer on the first house you see, taking too much time could cause you to miss out on a potential sale. Depending on the state of the market at the time of purchase, properties can disappear quickly. According to the National Association of Realtors, on average, most homes sell in less than one month. Be smart about your decision, but don’t overanalyze to the point of indecisiveness.

6. Protect Your New Investment.

Congratulations — you’ve fallen in love with a home, the seller has accepted your offer and you’re now anticipating the quickly approaching move-in date. Before signing on the dotted line, your mortgage company will likely require you to have a home insurance policy in place to protect the property.
 
Make sure your policy will provide adequate coverage for the type of home you’re purchasing. For example, a smaller, newly constructed home in an area not prone to severe weather may need less coverage than a mid-century oceanfront property equipped with a backyard pool.

If you’re at a loss when it comes to purchasing a home insurance policy, make sure you’re covered with the basics, which typically include:

  •          Structural coverage. Policies should include enough structural coverage to completely rebuild the home after a total covered loss, such as an earthquake that leaves your home in a pile of rubble. Although it may be uncomfortable to imagine this scenario, you’ll want to be protected if disaster strikes. The amount of this coverage is not the same as what you paid for the house. It accounts for building costs, which can vary by year, but excludes the price of the land your home sits on.
  •          Contents coverage. Protection for your personal belongings – such as electronics or furniture – is typically set between 50% and 70% of your structural coverage. This can help pay to replace or repair belongings that are damaged due to covered mishaps, such as fire or theft. If you have many high-priced items in your home, such as rare jewelry or fine art, you’ll need to talk to your agent about adding a floater to your policy. Items like these have a cap on how much your insurance company will pay to repair or replace them, so they need their own coverage.
  •          Liability coverage. This serves as a security blanket to protect you in the event that you, a family member or pet unintentionally causes damage to another person or his or her property. Your coverage can kick in when those scenarios arise to help pay for repairs, the replacement of items or possible court fees. Standard home policies generally set liability limits at $100,000, but medical expenses can add up quickly. Experts suggest setting it at $300,000 so you’re prepared for the unexpected.

Ready to Embark on Home Ownership?

A house is more than just where you live. It’s likely where you’ll witness your baby’s first steps, host a multitude of gatherings and bond with your family. Carefully considering this purchase is important, as it’s an investment you may have forever. After following these tips, you can cross the threshold of your new home with pride.


Shelly White writes for Quotes.Safeco.com and HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering automobile and home insurance quotes, consumers rely on HomeInsurance.com for competitive rates from top-rated insurance carriers. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases. 

Comments (0)