After you have weighed the benefits of home ownership versus renting, you may be ready to purchase your first home.
To determine whether you’re ready to buy a home at this time, check out these 100 Questions & Answers About Buying A New Home from the U.S. Department of Housing and Urban Development (HUD). You’ll find everything homebuyers need to know — from start to finish — there.
Summarized, these are the most important things that a first time homebuyer needs to be aware of…
Top Tips For First Time Homebuyers
#1 Know what you can afford.
Have this figure in mind before you even start looking at houses. As a first time homebuyer, it took 2 years of on-and-off searching for homes before I truly understood the market and chose a house that I liked and could afford. Do your homework before you start searching, and don’t expect more than you can afford. In fact, you should shop for your mortgage before you shop for your home!
Depending on the current market, some banks may loan much more than you can truly afford, while others might not be willing to loan you as much money as you really need. Only you know what you could actually afford if times got tight. You should base the amount of your loan on the salary of one working adult in the home — not both. That way, if you lose your job or fall on hard times, your home will be easier to afford (…and keep).
#2 Take a camera and notebook when you are home shopping.
Without using these tools, you will not be able to view more than 2 or 3 homes at a time without getting confused as to which house had what. When I was shopping for my first home, I had to ask to see the same homes over and over again just to keep the homes separate in my mind. We have digital technology now. Use it!
#3 Have a sizable down payment, but don’t borrow money to make it.
The larger your down payment is, the less your monthly payments and your interest rate will be. However, borrowing money (even from private sources) to put a down payment on your home can get you into a financial bind that you will regret later.
Here are some helpful tips regarding down payments:
#4 Don’t let anyone talk you into getting a bigger house or a non-standard mortgage.
While most first time homebuyers will be able to afford a bigger home in just a few years, it is probably best to wait until later to buy the bigger home.
Interest-only loans and arm loans that allow you to buy a bigger home now in anticipation of a bigger salary later foreclose more than any other loans. Interest-only loans are not magic, nor are they smart.
#5 Do not use a lender referred to you by your realtor.
Don’t use your realtor’s inspector or attorney either. When realtors, bankers, and other home-buying services work closely together, it is rarely to your advantage.
Kickbacks and shady deals have done more damage to new homeowners than structural problems have. Of course, there is a big difference between a casual referral and saying, "I want you to work with this banker."
#6 Get your new home inspected.
It doesn’t matter if the home is new or not. It doesn’t matter you are handy and could probably repair any existing issues yourself or not. It doesn’t matter if the home you’re buying is bank owned and being sold "as is" or not.
There are horror stories all over the Internet by people who skipped this step and lived to regret it.
Taken a step further, you also mustn’t get too attached to your new home until after the inspection. Why? Because you must be willing to walk (or run!) away if the inspector finds a serious issue with the home. Don’t let your attachment to a house and its features make you overlook a serious (or expensive) problem.
#7 Purchase mortgage insurance.
PMI will not only to cover defects with the home and appliances, but it will also to cover your mortgage should you die. That way, your spouse wouldn’t lose the house in the event of your death. Make sure both spouses are covered with the mortgage insurance.
#8 Be patient, but firm.
Closing dates will be mov
ed. Banks will ask you for the same information over and over again. Some of these things can be avoided by doing a little research ahead of time and staying in close contact with the parties involved.
Changes are inevitable when you’re buying a home. But at the same time, you can’t allow the bank, homeseller, realtor, inspector, or attorneys to walk all over you.