Ask any real estate agent – given the chance to do it all over again, most first time home buyers would do things differently. Planning ahead could mean the difference between finding the perfect home for your budget and making a poor emotional decision. At United Faith Mortgage, we want you to get it right the first time around. Before you start your search, consider our ten tips for first time home buyers.
1. Know what you want.
More first time home buyers break this “cardinal rule” than you think. However, a few hours today – creating a basic plan of action – can save you days and even weeks down the road. Even small decisions can save you the hassle of huge headaches. Here’s some food for thought:
- Location, location, location. Live close to work or close to the night life? That is the question.
- Apartments and clusters and freestanding houses, oh my! Know the type of property you’re searching for – before you start searching.
- What’s more important – security or space? Sometimes, you need to choose.
- Full basement, eat-in kitchen, two-car garage, etc. Bump your favorite features to the top of the priority list.
- Finished product or fixer-upper? Figure out your preference.
Forget about the details for now. This simple checklist gives you a surprisingly good idea about what you want to begin the search.
2. Know your budget.
How much can you afford to spend on a down payment or monthly bond repayment? It’s a number most banks and first time home buyers disagree on. However, budget is a reality in which no bank is willing to bend or budge.
Even as a first time home buyer, chances are you already know your budget. Here’s a quick lesson from Accounting 101.
Start with your take-home salary. Subtract your monthly expenses – including your credit cards, car loans and insurance, student loans, health insurance, groceries and anything else you spend month over month. Include annual expenses, too – vacations, school fees, insurance payments, etc. Forget about your monthly rent (it’s going towards your mortgage).
Knowing your budget is going to save a lot of wasted time and energy searching for perfect first home.
3. Rent until you’re ready to stay long term.
Buying isn’t always the better financial decision. Sometimes, it makes more sense to rent. Between the property itself, closing and bond costs and real estate agent commissions, buying is expensive -so make sure you’re ready to stay. There’s a point where renting a property becomes the more expensive option. According to studies, it’s between six and eight years.
If you’re staying for less than six years, then renting may be the better money move until you’re in a better financial position. If you plan to stay for eight years or more, then you can more easily justify spending the extra money. Obviously, it all depends on your financial situation and the local property market – but it’s a good rule to follow.
4. Know the numbers.
Almost half of first time home buyers regret paying too much – or not putting enough money down – for their property. Nearly 40% were very surprised to learn how much it actually costs to maintain a house.
From closing costs and homeowner’s insurance to regular repairs and maintenance, there’s more to financing a house than making a simple monthly bond payment. It’s always wise to gauge your future expenses as a homeowner – from the beginning.
5. Size matters.
Two out of every three first time home buyers regret not buying a bigger home. The kitchen turned out to be too small. The bedrooms looked bigger from the beginning. Whatever the case – the buyer just wanted more living space under one roof.
Does the size of the property fit into your five-year plan? You may be a young married couple now – but in a few years, you might be a family of four. As a medium-to-long term investment, you definitely want a property large enough to evolve with your needs.
Ask yourself if your home has the extra space to accommodate those “larger than life” changes.
6. Research the neighborhood.
There’s more than one way to research a neighborhood. You could surf the web for home values and neighborhood information. You could check the recent sales for similarly-priced properties. Of course, you could take matters into your own hands and stake out the neighborhood.
Park near your prospective home on a Monday morning to gauge the traffic. Is the prospective street quiet during rush hour or does it serve as a shortcut? Do the same on a Friday night. Maybe the block becomes a party scene on the weekend. A little amtaeur detective work goes a long way in getting honest answers to your important neighborhood questions.
7. Scope out the parking.
It’s only natural for a first time home buyer to overlook something like parking. Maybe we’re too focused on the property layout, the features and even the defects. Still, the numbers tell the story. One in every six first time home buyers regrets their current parking situation.
The same is true for yard space. Whether it’s too big, too small or too much to maintain, one in every four first time home buyers regrets their yard. Ask yourself, are you happier with a smaller parking space or a smaller yard?
8. Show a record of savings.
Consumer debt has grown by 25% in the last five years. If you’re a first time home buyer with excessive student loan debt, then saving money for a down payment can feel a lot like shoveling snow while it’s still snowing. It’s frustrating – and it keeps many first time home buyers from buying their dream home.
Debt-to-income ratio is also a critical factor in lending out money. Recently tightened credit standards make it harder than ever for first time home buyers to secure loans with less-than-perfect credit. One way to tip the scale in your favor is by maintaining and showing a record of savings.
9. Keep your emotions in check.
Few things in life are as emotional as buying your first home. Is this the right decision? Is this the perfect home? Have we seen enough properties? A million questions run through your head. Emotional first time home buying decisions tend to fall into one of two categories.
The first is the home buyer who finds their dream home, priced considerably higher than their budget. Emotions set in, logic goes out the door and the buyer ends up with a home outside the scope of their financial means. It happens all the time.
The second is the first time home buyer searching for the perfect hidden gem to fix up into a developer’s dream. The problem – those “once-in-a-lifetime” properties are usually below market for a reason. Besides, renovating a home is expensive – even if you do it yourself.
The lesson is simple – don’t make an emotional decision.
10. Have a contingency investment plan.
In the mid-2000’s, first time home buyers learned the hard way never to put all their eggs in one basket. It’s a mistake to buy a home under the assumption its value will appreciate.
We all buy property as an investment – but the property market can rise or fall dramatically over the next decade. It’s the reason first time home buyers need contingency investment plans – including retirement savings accounts.
In the end, all we can do is follow the basic rules. That means choosing a good location and paying fair market value. As for the rest, it’s out of our hands.
United Faith Mortgage
Buying your first home? United Faith Mortgage knows two things you need: simple answers to seemingly complex questions and accessible information for decisive decision-making. As always, get in touch with us today to purchase a new house or learn more about our services. Our loan officers are only a phone call away.