If you are a first time home buyer, you have a lot to learn. Working from a blank slate you must build an understanding of the housing market, determine what you can afford, land a loan and hone in on a home that's a good fit for your lifestyle.
The transaction will likely become your largest asset ever so there's little room for error. It is a daunting task, but you can ease your concerns if you take the process step-by-step, watching your footing as you move along the path toward the American Dream.
Below is a list of "Dos and Don'ts" to help first timers turn that stress into the self-confidence you'll need to move closer to your first home. The list focuses on areas first-timers typically stumble over in their initial home buying attempt. Knowing what you could face will help you avoid some of those trip ups.
The Dos:
DO examine your credit standing. You need to know your credit standing. You may need to request corrections if there are errors. You may need to adjust your habits if your credit behavior is less than sterling. And you need to take those steps before seeking a loan. Your credit report is free from AnnualCreditReport.com, the federally regulated place to go. You can stagger retrieval of your credit report from each of the big three credit bureaus, getting one from a different agency every four months. Your report is free, but you may have to pay a nominal fee for your credit score (a numerical scoring of your creditworthiness) depending upon your state law and other factors.
DO explore a mortgage pre-approval or commitment. An early green light on a loan will put you in a good negotiation position when you find your dream home. It will also help you shop within your budget.
DO line up a dream team of professionals. You may need a real estate agent, attorney, mortgage broker, home inspector and others to be your professional eyes during your home search. DO buy for your lifestyle. Your first home may not be your last, so try to anticipate how long you'll live in your home and buy based on plans for the duration. Raising kids, starting a business, taking on a new job, housing Grandma could all impact the size or type of home you need first.
DO heed housing priorities. Separate your "wants" from your "needs" so you know where you can compromise to stay on budget.
The Don'ts:
DON'T get taken by the first house or neighborhood you see. Keep an open mind and spend sufficient time finding the right fit in a house and neighborhood for your needs.
DON'T buy more than you can afford. Lenders will often loan you as much as your financial condition warrants, but that may not be what you can comfortably afford. It's better to live with a comfortable mortgage on a smaller home than to struggle every month paying a mortgage on a house with more room than you really need. The down payment, closing costs, monthly expenses and taxes must in total all be within your income and savings range.
DON'T treat your home like a stock portfolio. Homes appreciate and depreciate in cycles which often aren't so predictable. Don't expect your home's value to skyrocket. Buy a home because you need a roof over your head, not for a quick profit.
DON'T try to time the market. Pinpointing the bottom of the market almost always happens after the market has started to turn up. How, otherwise, can you see the bottom? Focus on personal lifestyle needs, not market trends, in terms of timing your home buy.
DON'T sign for a confusing mortgage. Shop around for the best loan, read every detail of your loan contract and get some help understanding terms and provisions that confuse you. Avoid exotic, "creative financing," multi-option loans you don't understand. Again, lifestyle is key. Get a loan that fits. |
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