Buying a first home is one of the most exciting times in a person’s life. But it’s also a huge decision and it can be overwhelming for potential homeowners who don’t know the steps to take to get them from “thinking about buying a first home” to “time to move in”.
Here’s a first timer’s checklist for purchasing property to help homeowners manage the buying process for the first time:
Before homeowners start thinking about purchasing a home, it’s important to take a look at finances.
Pay Down Debt
The first thing that potential homeowners will want to do before looking for homes is to pay down any outstanding debt, especially credit card debt. Credit card debt typically has a high interest rate and paying down large balances can be a drain on finances. Credit card debt also has a big impact on credit scores, which will directly affect the interest rates homeowners will secure on their home loans.
It can be a challenge, but paying down high-interest debt before purchasing a home is the best long-term strategy for potential homeowners.
Know The Numbers and Gather Documentation
It’s also important for homeowners to have a solid understanding of their financial history before they apply for loans and looking for homes.
It’s important that homeowners know their credit score, and the credit score of their spouse, partner or co-purchaser. They should also plan to review their credit reports to look for any errors or discrepancies; even minor dings on a credit report can cause higher interest rates on a mortgage.
Potential buyers will also want to gather the documentation they’ll need when applying for a mortgage. This includes copies of credit reports, paycheck stubs, copies of federal tax returns and documentation outlining any student loan or credit card debt.
There’s no way around it – owning a home is an expensive endeavor. In order to purchase a home that won’t put them under financial strain, homeowners need to take a close look at their budgets and figure out how much house they can afford.
Homeowners should track their expenses, see where they can cut expenses and then figure out a realistic and comfortable home budget. It’s also important to factor in all home-related expenses when creating a budget. Obviously, there will be a mortgage payment, but homeowners should also factor in things like property tax, any HOA fees and utilities.
Once a budget has been decided, it’s time to determine what type of mortgage will be the best fit. Most homeowners elect for a 30-year mortgage, but there are shorter term mortgages available (like 15-year mortgages), which typically carry lower interest rates.
Homeowners should also determine whether they’ll be applying for a fixed rate or an adjustable rate mortgage. While adjustable rate mortgages can save money on the front end, they can cause higher payments down the line should interest rates increased. Fixed rate mortgages guarantee a fixed interest rate throughout the life of the loan, which offers homeowners security in knowing their mortgage payment won’t change.
Homeowners should speak with a mortgage specialist to determine the best fit for them and get pre-approved for a mortgage before beginning the home buying process.
Choose An Agent
Choosing the right agent is essential for first time home buyers. The process of purchasing a home can be overwhelming, and having the right agent can help homeowners navigate through this new territory relatively stress-free and find the home of their dreams.
When choosing an agent, homeowners should consider:
Does this agent have experience working with first time buyers?
Ideally, potential homeowners will want to work with an agent who has experience working with first time buyers. First timers typically have a lot of questions and, having never been through it before, need additional support, guidance and reassurance throughout the buying process.
A real estate agent who has worked with several first time buyers will expect these additional questions and concerns and will make room in their schedule to accommodate it.
Does this agent specialize in the desired market?
First time and seasoned buyers alike should always work with an agent who specializes in their desired market. Every area is different and working with an agent who understands the ins and outs of an area gives buyers an advantage over the competition.
Start Looking At Properties
Once an agent is in place, the fun can begin: it’s time to look at properties. Before homeowners look at properties, they should set clear expectations with their agent about what they’re looking for, share their “must haves” and their “nice to haves” and let the agent know any potential deal breakers.
Many first timers wonder how many properties they should view before making a decision. And again, there’s no magic number. Some homeowners may jump on the first property they see, and some may view 100 before finding a home that feels true to what they’re looking for.
When viewing homes, homeowners should consider whether the property is a place they could see themselves comfortably and happily living for the foreseeable future. Other considerations include:
- How much work will need to be done on the home before it’s move in ready?
- What will be the cost of necessary repairs and renovations?
- How is the neighborhood? Does it feel safe?
- If children will be living in the home, how is the school system?
- Is the area noisy?
- Does the property feel private? If not, is that something that’s manageable?
There’s no formula to follow for finding the right house as a first time home buyer. But following this checklist will get homeowners a few steps closer to finding their dream home.