Be A Smart First-Time Homebuyer

Are you getting ready to purchase your first home? Most people would agree that buying a home, especially your first one, is one of the biggest purchases a person can make. It is important to take the time to do in-depth research to make sure you know what you are getting yourself into and whether it is affordable. Shopping for your first home is exciting while at the same time a bit nerve racking. Everyone wants to find their dream home at an affordable price but people often get caught up in what their ‘ideal’ home is and lack focus on the important financial factors that come with buying a home. I have devised a helpful list that all first-time homebuyers should incorporate into their home buying process in an effort to save money and time as well as get what they can afford and what they want.

5 tips to being an informed first-time homebuyer:

1. Know what you can afford – the most important aspect of buying a home is knowing what you can realistically afford. The amount a bank says you can afford and what you are comfortable with may not be the same and this is when you need to be realistic. As a rule of thumb, you should not pay more than 1/3 of your monthly income towards your monthly mortgage payment.  If you don’t have a car payment or any other form of debt, you can explore paying a little more than 1/3 of your monthly income on a mortgage, but by most standards, you should stick to the 1/3 rule.  Thoroughly examine your budget of your monthly expenses, excluding your current rent. Once you have determined what 1/3 of your monthly income is, or less than ½ of your budget (remember only if you have no other debts and can still save money each month!), then it’s time to stick to looking at homes that are ONLY within your price range. Drifting outside your budget limits will have you lusting after things you simply can’t afford and remember budget stretching is a dangerous game.
2. Get pre-approved first – before even looking at homes or attempting to place an offer on a home, you need to be preapproved for a loan. Often times what people think they can afford and what the bank is actually willing to lend is very different. So rather than wasting everyone’s time make sure you are preapproved before you sign a contract.  Also, to get the best bang for your buck, you are going to need a down payment for your first new home.  Typically, FHA loans, which are the most common type of home loans for first-time buyers require 3% of the loan as a down payment on townhomes, 25% down payment on condos and on average and 20% down payment on a house.
3. Factor in additional expenses — Remember owning your own home is completely different than renting. You are now responsible for property taxes, homeowner’s insurance and maintenance costs. Your monthly payment isn’t the only thing you’ll be paying for, so you need to make sure you have accounted for that in your budget.  And if you decide to buy a condo, you will need to be prepared to pay condo association fees.  By openly communicating with a real estate agent, you can discuss all these factors that come along with buying your first home.
4. Be open-minded – it is important to have a wish list but don’t be too picky and stubborn where you will never find the ‘perfect’ home and end up renting forever. For example, if you look at a home that has everything on your wish list but one of the bathrooms has hideous wallpaper, this is when you need to be open-minded and remember it is only a cosmetic fix. You may have to live with it at first but in time you can change it and make it into your dream bathroom!
5. Inspection – it is so important that before you close on a home you know what condition the house is in. Hiring an inspector can save you lots of time, money and headaches. Also, do not become emotionally attached to the home until after the inspection, this will allow you to think from a financial standpoint rather than an emotional one.

Buying your first home is never an easy process but arming yourself with the right knowledge will ease some of the stress. Using the above tips when buying your first home will help you see that for sale sign come down much faster!