Buying a home is a big responsibility with a big payoff. Think of the stability and security you and your family will enjoy from owning your own home. But it’s one of the biggest projects you can undertake—there’s a lot of homework, research, calculating, and learning you’ll need to do before you buy your first house. We’ve put together a list of our top 10 tips for new home buyers that can help smooth the process.
- Determine Whether You Want to Buy: Buying a home is more than just a mortgage payment. Will you be able to afford to replace an entire air conditioning system if the unit breaks in your new home? Renters don’t have to worry about repairs to their home. Evaluate everything, and do the math. For some, renting is a better option.
- Prepare to Compromise: The reality is that you may not find your dream home in your price range. Also, your priorities and preferences will be different than any other home buyer. Determine which factors are deal-breakers and which you can be flexible with. Some may sacrifice an extra bathroom to live in a desired school district. Others may turn down any home without a gas stove. Knowing where your priorities are before you get started can help save you time and stress.
- Know Your Credit Score: If you’ve ever heard the saying “your reputation precedes you,” then you understand credit scores. Your credit score introduces you to a potential lender by providing a numerical value of your reputation for living within your means and fulfilling commitments by paying bills on time. Of course, you are more than your credit score—but that number is your first impression to a mortgage lender. Guard your reputation by keeping your credit score as high as possible.
- Start a Timeline: It can take months or even years to find the right home and the right mortgage. There are many steps to home ownership, and each step can take considerable amounts of time. Be prepared to be patient and flexible while setting your goals.
- Think Long Term: Will this be your house for the long term or just for a few years? If you are thinking this is a starter home, who will be your potential buyers when it’s time to sell? If you buy a house in a not so great school district or on a busy street, this could mean families with children may be off your list of potential buyers. If selling is in your future, think re-sale.
- Create Your Budget: All the steps in the home buying process are important, and creating and understanding your budget is absolutely, 100% the most critical. What your lender says you can afford and what you can comfortably afford may be very different numbers. Without a budget, you could purchase a home that is outside what your budget can support. You don’t want to end up in a situation where you are stretched beyond your means.
- Learn About Down Payment Options: The rule of thumb for down payments has been recommended at 20%. If you can put 20% down on a home, you’ll immediately have equity in your home, and lower your monthly payments. Don’t worry if you don’t have 20% to put down, though, there are mortgage products available that allow for as little as a 3% down payment. Your mortgage lender will help you find a solution that works best for you and your family.
- Get a Home Inspection: When you buy a home, you want to know exactly what you’re getting. You don’t want to be surprised with hidden damage after you’ve bought the home. Remember that no property is perfect. Even newly built houses can have defects that can cause costly damage in the future. Get a certified home inspector, who will cover all areas of the home, including but not limited to structural issues, electrical, HVAC, insulation, roofing, ventilation and plumbing. Be sure you know what areas the inspector will (and won’t) cover during the inspection. For example, not all inspectors check for things like rodents, mold, formaldehyde, or termites. You may need to schedule additional services or inspections for those issues.
- Additional Costs of Home Ownership: Additional home costs should be part of the budget we recommend in #6. Most of these are not costs that renters need to consider, so they may not be top-of-mind as you consider buying a home. Some of these home costs, in addition to your mortgage, can include, but are not limited to:
- Property Tax
- Utility Bills (electricity, water, sewer, trash, etc.)
- Homeowners Association (HOA) Fees
- Homeowners Insurance
- Mortgage Interest
- Additional Insurance (hazard, flood, etc.)
- Consumables (air filters, etc.)
We hope this list of tips will help you on your home-buying journey.