Buying your first home is like signing your first marriage certificate; it may turn out to be the best decision of your life, or you may find yourself strapped to a bad investment for the next 30 years. That once beautiful house which promised to fulfill all your hopes and dreams can turn out to be a money sucker with structural issues, and you’ll quickly learn that a pretty face does not a good house make.
We get it. Buying your first home is a wild and crazy time; lots of numbers and big dreams being tossed around. It’s easy to get caught up in the fantasies of quickie purchases and love at first sight, but before diving head first into the home buying process, let’s review some important tips and tricks to make buying your first home a wise investment into your future.
Don’t wait to start saving for your down payment. First time homebuyer programs may offer tempting low down payment offers, but remember that putting less money down usually adds up to higher payments later and possibly paying for higher private mortgage insurance. From the moment home ownership becomes a little seed in your mind, start looking for ways to save up as much as possible for your down payment. You wouldn’t start saving up for your kid’s college in their senior year. The sooner you start saving, the better.
Check your credit and pause any new activity. Credit is a crucial factor in purchasing a home. It factors into your interest rate and potentially your loan terms. Resist opening any new lines of credit like credit cards or auto (no matter how good the deal is at the car dealership). Dispute any errors on your credit and renew activity on outstanding debts. These steps may give your credit score a much needed boost.
Maybe you’re not typical. Before you reach for the typical 30-year fixed mortgage, weigh your options. If your budget has wiggle room for larger monthly payments, you may opt for a 20-year or 15-year fixed loan at a lower interest rate.
Research local and state assistance programs. Each home buyer’s needs are different, and your state and local government may have a program that fits your needs and makes the homebuying process more accessible. Many offer down payment assistance, closing cost assistance, tax credits and discounted interest rates.
Budget for closing costs. Whatever the amount of your loan, know that 2% to 5% of that amount will be spent on closing costs. Don’t get caught with an empty wallet at closing time. When saving for your first home, be sure to factor in the costs at closing.
Don’t be an empty nester. You know how some people overspend on their wedding then spend their first year of marriage living off love and ramen noodles? Well, if you don’t budget for the expenses of homeownership, you may find yourself living off air mattresses and busted toilet. Be sure to budget for after the move-in expenses.
Polish up your negotiating skills. Maybe haggling with Bob at your local garage sale may not be worth the discomfort, but negotiating during your home buying process could save you thousands of dollars. You might ask the seller to pay for major repairs or give you a credit for the expenses at closing. You may even ask the seller to pay for closing costs.
Not all home inspections are created equal. Be sure to attend the inspection, pay close attention and ask necessary questions. Know the parameters of your home inspection. Does it cover pests, mold, or radon? Be sure not to leave out any areas of the house during the inspection, like the attic, roof, and crawl spaces. Don’t be shy to ask the inspector to take a closer look at any areas of concern.
Keeping these points in mind will help you secure the best possible first home. Let us help you make your dream of homeownership a reality.