4 important things that first-time homebuyers must know
Planning to buy your first home? Buying a house is a significant milestone in one’s life. Hence, one needs to take some vital steps and consider various factors before looking for their dream home. Some of these factors that a homebuyer needs to consider are selecting a favored location or area and looking at the financing options. The essential steps homeowners have to follow are choosing the right real estate agent, getting the mortgage approved, and searching for the perfect home that fits the budget. Here are some common mistakes every new homeowner should avoid.
What financial factors must one consider before investing in a new house?
- Most people decide to invest in a house when they feel prepared for handling the mortgage payments.
- However, one cannot purchase a home just because they can afford the mortgage payments.
- One may have an idea of how heavy their mortgage payment is going to be, but often they do not account for other expenses.
- Taxes, property insurance, maintenance charges, association dues, water bills, and electricity payments are some of the costs that homebuyers overlook when shopping for a house.
- Even if someone can afford the insurance and property taxes now, they need to remember that these costs tend to increase every year. So, prospective homebuyers should ask themselves if they will be able to afford the higher prices later.
What is more important, looking for a home or getting the mortgage pre-approved?
- The process of buying a home does not begin with looking for the perfect home. Unless a prospective homebuyer has the cash to pay for their dream home, the first step would be qualifying for a mortgage.
- First-time homebuyers are hesitant to get pre-qualified for a mortgage. They fear that the bank agent may tell them they have not qualified for a mortgage or they qualify for a lesser amount than expected. So, most first-time home buyers randomly pick a price range and begin by looking for a house.
- The best approach is to get a mortgage pre-qualified and pre-approved before looking for a house. In that way, the buyer is sure about which houses fit into their budget.
Should a first-time home buyer get professional help?
- If you are buying a home for the first time, you will need to meet a credible real estate agent, a mortgage broker or officer, and a lawyer.
- Unless you are familiar with how the real estate market works, it is not a good idea to purchase a home without professional help.
- Also, first-time homebuyers should avoid dealing with a listing agent directly.
- If you are meeting an unfamiliar agent without any referral from friends or family, ask the agent to give reviews from previous buyers. Do the same for mortgage brokers or loan officers. In this way, you can be sure about the fact that you are dealing with qualified professionals.
- Once you have short-listed some houses, it is best to hire a lawyer. They will advise you about the legal aspects that you need to consider before purchasing a house.
Is it wise to spend all your savings on the down payment?
- Spending all your savings on the down payment is one of the greatest mistakes you can make as a first-time homebuyer. Lack of savings could leave you unprepared for unforeseen expenses.
- However, if you can make a 25% or more down payment, you may not have to pay mortgage insurance while receiving a conventional mortgage. This would mean a sizeable saving on the monthly mortgage payment.
- If you do not have such a large sum for down payment, then you can search for a mortgage that requires a low down payment.
What are some steps a homebuyer should take before closing the deal on a new home?
- You may have pre-qualified for the mortgage and found the house you wanted. You may have also signed the contract. Usually, it takes 30 days to close the deal. So, you must make sure that you don’t make any big purchase in the next 30 days.
- This is because the agents collect the credit reports just before the closing to ensure the homebuyer’s financial status has not changed since the mortgage was granted.