When you are ready to buy a house, it can be an exciting but stressful time. There is so much to be done before you can make your new home truly yours! From the endless cycle of house hunting until you find your perfect match to the financial drudgery of mortgage loans and homeowners’ insurance, there is a lot to learn along the way.
If you are starting from scratch without a real estate or mortgage background, this process can become intimidating and overwhelming. But with a little research, you can gain the knowledge you need to make buying your home a simplified, streamlined course to get you ready for your new life as a homeowner!
Here are 9 essential tips every new buyer needs to know when they are in the process of purchasing a house.
9 Things to Know Before You Buy Your New Home
1. Planning early can help you get a much nicer home for a much smaller monthly payment.
It happens all of the time – someone decides they want to buy a home, so they start shopping around the next day. They get excited about the ideas in their heads, but then the problem becomes that their budget can’t support the home they were imagining. Instead of a fun, exciting time, it becomes a stressful process of crunching numbers and getting in over their head financially.
To avoid this, you should plan ahead and not jump into the home buying process. Save up a substantial down payment; 20% is recommended by most lenders, although 3% is a common amount. The more of a down payment you put down, the higher the shopping bracket you can browse through or the lower of a monthly mortgage payment you will have.
2. Know your mortgage options.
Before you start looking at homes, research your mortgage options and know what you will be approved for so you have a range. There are multiple different financing avenues available depending on your circumstances.
You may be approved for a commercial mortgage, government-sponsored loans, or even Veterans Affairs assistance. Whichever way you choose, contact a bank agent before you get in touch with a real estate agent. With a guaranteed loan backing you up and an idea of your monthly payments already in mind, you can confidently start home shopping.
3. Find the right real estate agent.
For a while, your buyer’s agent is going to be as close to you as your best friend. They will know your hopes and dreams for your house and your future and will be scrounging all of the best homes available that would suit your needs and communicating with you about them.
They should be working in your best interest, and they should be skilled and knowledgeable about the area you are shopping in and each aspect of home buying. You can read more about what to look for in a real estate agent here.
4. Carefully consider your ideal home and neighborhood.
Don’t just throw a limit out there to your agent. This is going to lead to you having to weed through a lot of unnecessary homes before your agent understands what you are really looking for.
Think about the aspects of your home you are not willing to compromise on. This may be something like the number of bedrooms, the neighborhood it is in, a school district, the size of the yard, or other amenities. Come prepared to your agent with this list and let them do the work for you to narrow the available options down.
5. Don’t forget about closing costs.
When you are preparing financially for your big purchase, your down payment is not the only big cost you will have to deal with ahead of time. Your home’s closing costs will be somewhere between 2 and 5% of your total loan, on an average. While some sellers offer to pay part or all of the closing costs, prepare ahead to plan for closing expenses like homeowners’ insurance, title searches, inspections, and other potential costs upfront.
6. Be careful not to put all your money into the purchasing.
A common mistake that happens to many buyers is that they save, save, save and then use every drop of their savings to buy their new home. There are many unexpected costs that creep up after you purchase your house – from repairs and renovations to expenses like property taxes or running cable through the home. Keep a nest egg aside for anything that may need to be fixed throughout your first year as a new homeowner.
7. Pay attention to that homeowners’ insurance policy.
In the excitement of the purchase and the scramble to get your dream home to fit into your monthly budget, one of the items that are manipulated is often the insurance policy.
Instead of looking for the cheapest rates, find a good company that can give you comparable rates but covers everything that may be necessary and has a decent deductible. If you go for the cheapest without looking at what it includes, it may end up a major expense later when you need to file a claim only to find out your policy doesn’t cover that particular problem.
8. Utilize the home inspection to your best interests.
Once you have gone through your potential home a few times, you may think you know it inside and out. But an inspector is trained in spotting things that are not necessarily a problem…yet. They will go over all of the details of the house, including things you can’t see.
The inspection report may bring up problems like a faulty air conditioning unit or a leak. Instead of running for the hills and starting over with the shopping process again, use these issues to try to negotiate a better price or have the sellers fix the problem before you buy.
9. Have a back-up plan.
Any seasoned real estate agent will tell you that a home buying process is never smooth. There are a million and one reasons why a perfect sale might fall apart at the last minute. Maybe the title check doesn’t clear or the inspection comes back with a problem that the bank won’t approve.
For whatever reason, you need to prepare mentally and financially to have a back-up plan just in case your dream home can’t become a reality. Remember, it’s better to deal with the problems before you have a hefty financial responsibility in fixing them than to end up stuck with them down the line.
Now That You’ve Prepared, It’s Time to Go Buy Your New Home
With enough knowledge to prepare you to know what you are getting into, you should be able to confidently navigate the waters of a home buying experience now. It’s an exciting time – go full speed ahead!