Buying a new home is arguably the most stressful thing a person can do. Not only are you spending hundreds of thousands of dollars but you’re locking yourself into a life of yardwork and maintenance costs. Here’s a primer on buying a home if you’re a first time homebuyer.
Decide What You Want
Unfortunately, first time homebuyers don’t always know what they want when they go house hunting. Without a clear idea in your mind about the house features you’re interested in or the location, you will find house hunting to be a very, very long and stressful endeavor.
Before you decide to spend a couple hundred thousand dollars on a place to live, look online at the houses available in your town. Spend some time on Pinterest or Google Images to find the features that you must-have and would like to have in your home.
Next, pick a neighborhood! There’s no sense in searching for homes in X neighborhood when you really want to live in Y neighborhood. Like the old real estate expression goes, location is everything.
Get Pre-approved and Get a Budget
Getting pre-approved should be your first step towards getting a mortgage. With hundreds of mortgage brokers both online and offline, competition is fierce to get your money. Looking for a great mortgage before you start looking for a house is essential for a few reasons:
- You lock in your interest rate – although less important in today’s low-interest rate world, making sure you secure a great rate is crucial before house hunting
2. It shows you mean business. Some Realtors will refuse to work with buyers who haven’t been pre-approved and in a hot market, an offer without a financing condition will be more likely to be accepted than an offer with a financing condition
3. The pre-approval amount can help you determine your budget
Just because you’re pre-approved for X amount of money, doesn’t mean you need to borrow the whole thing. In fact, depending on your tolerance for debt, you might find the amount you’re pre-approved for is disgustingly high.
Don’t focus on the monthly payment when figuring out your budget. Monthly payments can be manipulated in a dozen ways depending on the size of your down payment, the number of years you’re planning to have your mortgage and your interest rate. Focus more on your purchase price or, if you’re feeling a bit adventurous, your total cost of borrowing.
Finally, remember to budget for closing costs and must-dos around the house. Closing costs can cost well over $1 000, and can quickly escalate if your city has homebuyer taxes. Also, when you first move into a new place, you’ll need to buy a bunch of little things – shelves, hooks, curtains – plus big things like a lawnmower and patio set.
Find a Realtor
You might think you’re saving money by buying a house on your own but, chances are you’re not. The unfortunate reality of the real estate world is that sales data is a closely guarded secret. Without access to that data, you could end up paying more than your house is worth, even after the seller has given you a “discount” for not having to pay a Realtor commission.
As a buyer, and especially as a first time buyer, find a good Realtor and ask a million questions. Listen to his or her advice and rely on him or her to keep you grounded if the buying process starts to get emotional. Home hunting with a Realtor is also a million times easier since he or she will make all your appointments for you and can steer you way from the known lemons.
Being a first time homebuyer is an exciting time. Maybe you’ve saved up for years and lived with persnickety landlords and are looking forward to having a place to permanently hang your hat. Maybe you’re moving out for the first time and don’t want to waste time living in apartments when you could be paying off your mortgage. Whatever your case may be, buying a house should be fun and exciting, not stressful and nerve-wracking!