Buying a house can be a daunting task especially for first-time home buyers. You can be easily overwhelmed by the processes involved as well as the current state of the market. That is one reason why many would-be buyers end up renting instead. But buying a house does not have to be that difficult. Here are some simple tips that you can follow as a first-time home buyer:
1. Set your budget.
Before you go shopping for a home, you should first know how much your budget is. It seems to be like a no-brainer, but you may be surprised that many interested buyers don’t set their budget first before showing up during open house. By failing to do this simple step, you may end up wasting your time checking on houses that are out of your price range. And it can be frustrating finally identifying your dream house only to realize that it is way out of your budget.
Banks normally will allow you to borrow up to 28 percent of your gross monthly income (GMI) for your mortgage. FHA loan is even higher at 42 percent. But it is important to note that just because a lender is willing to lend you more does not mean that you have to borrow it. Remember that the bigger amount you borrow, the higher your interest will be. When you set your budget, make sure that you can afford to pay not just the principal amount but also the taxes, interest and insurance payments associated with your borrowing.
2. Make a realistic wish list.
Based on your budget, you could now make a realistic wish list of what you like your first house to be. It would be helpful if you can do some research online about the houses within your price range. Consider the location as well because prices differ depending on location. However, be ready also to compromise in case the houses in the listing do not meet all the things you have in your wish list.
3. Get pre-approved for a mortgage.
Without a pre-approved mortgage, your deals which may be depended on your financing could fall apart. To avoid this problem, start shopping for a lender as soon as you decide to buy a house. You should have at least three options which may include banks, local lenders or mortgage brokers. Compare the different loans these lenders are offering and see where you can get the best deal. There are lenders that charge for pre-approval, so be sure to inquire about it up front. If you have all the necessary documents that support your income, tax, credit and other assets, you may be able to get a pre-approval faster.
A pre-approved mortgage is normally effective for up to 90 days. If you are not able to find your desired home after that period, you may have to re-qualify with the lender.
4. Find a reputable home inspector.
Having a knowledgeable home inspector with good reputation is very important in home buying. They can help you save thousands of dollars when it comes to getting a home that is worth your money. If you don’t know of anyone, you could ask a referral from people you know. If you already have one, don’t be afraid to ask questions about matters that you may not know about, such as the processes involved in inspecting a home, the paperwork needed after the inspection, and other important matters about buying a home. Moreover, if your home inspector finds any red flags in the house you are eying, be sure to follow it up by hiring experts on this matter.
5. Understand the costs involved in owning a home.
Apart from mortgage payments, there are other expenses associated with owning a house, such as property tax, maintenance cost and insurance, which you also have to pay on a regular basis. Be sure to know them so that you can include these payments in your budget.
Are you a first-time home buyer? Be sure to know the tips mentioned above for a smoother and easier transaction.