What to Think About When Buying Your First House
Are you thinking about joining the ranks of homeownership? Does the thought of owning your own place bring a ton of excitement? If you are not overcome with fear, you're probably reading to do what so many have done before you - get out from under a rental and purchase a home!
Without a doubt buying a property of your own can be an emotional process. Buying a house for the first time is undoubtedly a daunting prospect for a significant percentage of people.
First-time buyers commit to a binding financial contract that will impact their lives for many years to come. These feelings can be even stronger when you are doing it as a single person. Lots of sleep was lost by many over purchasing their first house. Never fear, though! You will get through it and will be thinking about why you even bothered to worry.
As long as you follow some solid first time home buyer advice and align yourself with a team of experts, you'll do just fine!
Let's take a look at some excellent tips for first-time buyers to buy a house for the first time will be a smooth experience.
The Upsides of Being a First Time Home Buyer
Strange as it may sound, there are some excellent advantages to not having purchased a house before. The government has specific programs to get you on the property ladder, and these include tax breaks, loans backed by the federal government, and programs to reduce your down payment requirement.
Even if you think you aren't a first-time buyer, you may qualify for the government programs anyway. The HUD (the Department for Housing and Urban Development) states that you are considered a first-time buyer as long as you have not owned a home for three years.
If you are a single parent and bought a house with a partner previously, you are eligible too. Displaced homemakers that owned with a partner and people owning property that isn't permanent or complying with codes could also qualify.
Some of the more popular government financing programs are an FHA loan and a VA mortgage. For example, an FHA loan has low down payment requirements, and a VA loan is one of the few no down payment loans out there.
What to Consider Before Committing to a Purchase
One of the great first time home buyer tips is to think about your long term aims when purchasing. Do you want to stop wasting money on rent, and instead, put it into a mortgage that will better serve you in the long run? Perhaps, you see it as an important life goal or a way of establishing your independence.
There are quite a few steps to a successful home purchase. Let's take a gander at a few of them that are super important.
Your Financial Picture
Before you begin to search for your first house, it's essential to understand what you can afford. Having a firm knowledge of your savings, your monthly spending, and your income to work out what loan payments you could make each month is crucial.
It will be vital to get preapproved for a loan before sellers will take any offer you make seriously. When you apply for preapproval, you might discover that you can't afford the mortgage you were expecting, and this will change the focus of the homes you view.
There is also the issue of finding a down payment and covering the other expenses at the closing. Traditionally, a down payment of 20% of the purchase price was seen as a must, but fortunately, there are more options for first-time buyers nowadays.
If you don't have money for a down payment, you will need to save first, unless you qualify for a zero percent down payment from the VA loans program. Other government schemes like FHA loans could help you buy a home faster, only needing a 3.5 percent down payment.
If you have a retirement plan like an IRA, you can withdraw a lump sum of up to $10,000 without penalty. This should go a long way to help with the down payment and closing costs.
Where Is The Money Coming From?
Another financial consideration when buying a home for the first time is documenting where your funds are coming from. Lenders today are sticklers for paperwork. It would be best if you had a trail of all of the money going in and out of your accounts. Having documentation becomes even more crucial when you are using cash deposits along with getting a mortgage.
The lender is going to require you to document where the cash is coming from. You will want this money to what's called "seasoned" or in an account for a certain period of time.
The Type of Home You Want
Once you are aware of how much you can afford to spend, it's simpler to choose the type of property to buy. The location is all-important as well. In what sort of neighborhood would you like to reside? How far are you willing to commute for work?
Maybe you want to find a home that needs some care and attention like a fixer-upper? Taking on a project could save you a lot of money and be a terrific longer-term project, but there are downsides too. You might find that you've taken on more work than you'd imagined, causing you to spend more money and time on the home.
Help With Home Buying From Your Real Estate Agent
When you are looking for a home for the first time, the Realtor you choose can really make a significant difference. The home purchase process can be chaotic at times, with choices to make and deadlines to meet. An exceptional agent will be able to answer your questions and guide you through the process that can otherwise be complicated.
Once you have found a property you desire, your real estate agent can assist with making an offer and the negotiations that follow. They'll be on your side to make sure you get the best deal on your new home and can make the process of buying for the first time much smoother.
You'll have to pay an earnest money deposit and add contingencies to your offer to make sure you can back out of the deal with your deposit intact if things don't go to plan. The buyer may want to negotiate over these clauses until they are happy, and your Realtor will help you through these negotiations. When your offer is accepted, it doesn't end there, however.
It would be best if you had the home inspected to make sure there aren't any serious problems. You will have a fairly small timeframe to have the home inspection carried out, as laid out in the purchase contract.
If the result of the home inspection shows the property is in need of repairs, you can renegotiate with the buyer to have them carry out the necessary work. It might be better to reduce your offer and this can be negotiated too.
You also have the option of walking away if the problems are too significant or the seller is uncooperative; your realtor's experience is going to vital here to help you make the right decision.
Closing on Your First Home
If there aren't any serious problems shown in the inspection, or if the defects are dealt with, you should be ready to head towards closing. Closing is the moment you have to take care of all the legal paperwork, and hope nothing goes wrong at the last moment to hold things up.
The home will need to be appraised so that your lender knows it is worth the money that you agreed upon with the seller. If the appraisal goes well and your mortgage is approved, you will have to pay the closing fees and sign on the dotted line.
Closing costs include title insurance, loan fees, and credit report charges, among other expenses. These fees can cost you between two and five percent of the purchase price, so you need to be ready to pay that amount when the time comes.
When closing is concluded you are now a homeowner. Unfortunately, the costs don't end there, with moving expenses, mortgage payments, property taxes, maintenance costs, and more to find going forward. Nobody ever said owning a home was cheap.
Final Thoughts on Buying Your First House
Buying a home for the first time is an awesome experience for most people. Of course, you need to avoid the pitfalls and mistakes that are all too common. But, if you can do that, you'll be more than pleased to stop throwing your money away on rent.
There are many things for first-time buyers to know which makes it helpful to read articles like this one and many others that have been published over the years.
Put your best foot forward, and you will be a proud homeowner for many years to come. Best of luck with the purchase of your first home!