Tips for Buying Your First Home
Are you thinking about buying a new home? Good for you. Usually people are moderately overwhelmed as they start the new home purchase process. So what’s the best way to cut through “all the smoke and mirrors” and start with a sound strategy? That’s a great question.
Without a doubt, the best way to combat this “early homebuyer mental fatigue” is by starting with a foundation of proper research. Research involves considering the geographic area, determining your budget, calculating costs, and talking to reputable brokers.
Lets an in depth look at each of these areas.
New Home Purchase Tips
- Become an expert in the area. It is important to research and understand the selling prices of comparable homes in your area. Local MLS listings or online home listing search engines can give you a general idea of what you should expect to pay for a home in your area.
- Know What Type of New Home Purchase You can afford. The ideal price doesn’t always mean you can afford the home. Use an online mortgage calculator to see what your payment would be for the price you like. It is important to understand what the actual monthly payments will be for your dream home.
- But can you REALLY afford it? Now that you know your ideal monthly mortgage payment, you need to next check all the other homeowner costs. Don’t forget to budget for taxes and homeowners insurance. In some areas, what you’ll pay for your taxes and insurance escrow can almost double your mortgage payment. According to the Insurance Information Institute, the average yearly premium can range from $477 in Utah to $1,372 for unlucky Texans.
- Are you sure that’s EVERYTHING? First time homeowners don’t always know what is involved in paying for your first home. Not only are the extra monthly fees that owning a home costs, there are the additional up-front fees that are included when you purchase the home. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowners insurance or homeowner association fees.
- Stick to your budget. Know your budget and follow it. You might fall in love with your dream home, but going over budget might feel like small amount at the time, once the emotions wear off, you are left trying to make ends meet. Always look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs. Is your dream home going to push you past that? Think twice.
- Talk to reputable brokers and agents in the area you are looking to buy. Only the realtors who work in the area will know the inside scoop. What are they seeing? What do they know about your neighbors? The area? Ask around, you don’t want to wish you did later.
- Remember to look at the big picture. Making a new home purchase is a sensible way to build wealth, looking after your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there’s no landlord to turn to, and these costs can drain your savings.
Proper Research Prevents Poor Decisions
U.S. homeowners overall have a larger net worth compared to the alternative. Therefore, we understand the substantial benefits to owning a new home. However, you do not want to be stuck with a new home that was a poor decision. So, the rule of thumb here is to “always do your research” so that you end up making the best new home purchase decision.