Buying a home is an exciting, often tiring and at times confusing process. Many venture into house-hunting without understanding the importance and intricacies of each stage and spend years searching for that perfect home. Here are a few tips that promise to make the buying process trouble-free and easy for a first-time homebuyer.
1. Are you ready to make a long-term commitment?
Buying a home is a huge personal and financial responsibility. Weekly trips to expensive spas and meals from five-star restaurants may not be on the menu much longer once mortgages, taxes and maintenance expenses come into the picture. You can no longer call your landlord and ask him to fix that leaking roof; it’s all up to you now.
You may also have to shell out a huge portion of your savings to pay for the down payment. Be true to yourself and find out whether you are ready to take on the responsibility even though it may require tightening up the entertainment budget.
2. Make a wish list
Before you start house-hunting, make a list of all the things that your dream house must have, such as space for a home office, a two-car garage and so on. Carry the list with you when you visit houses and note down whether the house meets your requirements or not. If the homeowner or realtor allows, click photos of each room. You may be visiting so many houses in a single day that it will be difficult to remember what each house looked like later. Once you have narrowed down your choices, visit the top three homes in your list once again to make sure that you see all elements that you might have overlooked on your first visit.
3. How much house can you afford?
Gather all your financial documents and visit a reliable mortgage lender or bank to find out how much house you can really afford. There is no point in looking at houses outside your price range and setting yourself up for disappointment. If possible, get yourself pre-approved for a loan or at least, pre-qualified. This will help you in speeding up the process once you have decided on a house. Sellers may also give you greater preference when there are mutliple bids if you are already approved by a bank.
4. Find the right realtor
To buy the right house, you need the right people on your team. Some real estate agents might try to sell you the first house that you see because they are only bothered about their commission. But a good real estate agent will truly be interested in what you are looking for in a home and try to show you houses that match your criteria and fall within your price range.
Finally, he should be able to guide you in placing a competitive bid that is not insulting to the seller. Don’t choose a real estate agent just because you know him personally. Find out whether he has the required knowledge and expertise to guide you towards your first home.
5. Choose the right home
Buying a home is a lifetime investment. If you do it right, it will bring your family happiness and comfort for generations to come. Don’t be pushed into saying yes to a home just because your realtor thinks it is perfect for you. Evaluate your decision wisely, ask for opinions from people you trust who are home owners and don’t overlook things like; is the neighborhood going to be a good fit for your family now and in the future and what will your commute be like.
My sister and her husband fell in love with a newly built home a few years back and they became hyper focused on all the positives that came with living in a brand new home. I pointed out that it was 20 miles further out then where they had previously been looking and advised them to drive out there in the morning and test that long drive into work during rush hour.
Shortly after that, they purchased a home much closer to the downtown, where they both work, and have been happy home owners ever since.
6. Make sure you understand the legal documents
Once the seller has agreed to the deal, a purchase agreement clearly stating the legal description of the property and zoning information, the terms of the contract, the purchase price, payment schedule and so on should be drawn up. It should also have the necessary clauses for you to withdraw from the deal in case of any contingency such as major issues during the home inspection. Don’t hesitate to ask your realtor for clarification on any and all items you are not perfectly clear about.
7. Your new best friend – the home inspector
Since you are a first-time homebuyer, you may not know that each home should be inspected by a professional home inspector before the deal is finalized. A good professional home inspector may charge anywhere between 400 to 600 USD depending on the size of the home. But he can help you appraise the value of the property correctly and also point out whether the home has any major structural faults or damages that you should be aware of as a future owner.
If he discovers any serious flaws, you can either try to negotiate the price further or withdraw from the deal altogether.
8. Do your house hunting homework
It is very important to do your homework carefully before you buy your first home to avoid being taken for a ride by the seller or the realtor. Find out the future prospects of the neighborhood your new house is located in and don’t get blindsided by the announcement of things like a new highway coming in close to your house two years later. What facility is going to come up in the empty plot next to your home? Will you have any trouble selling the house later? How safe is the neighborhood? Is it primarily a residential community? Will your kids find it difficult to travel to school daily? These are but a few points that you should clarify before finalizing any deal.
9. Get your new home insured
As a first-time homebuyer, you may be unaware that your lender will require a copy of your home insurance before closing day. The cost of home owners insurance is determined based on the cost it would take to rebuild your house if it was totally damaged and not on what you will pay for the property. The location of the house will also be considered while determining the cost of home insurance. On the other hand, title insurance can be purchased at closing to protect yourself in the event the title to the property is found to invalid.
10. What happens at the closing?
The big day has finally dawned and you are understandably nervous. In many parts of the country, the process has become automated that you no longer have to be personally present at the closing agent’s office to complete the deal. You can just make sure that your signed documents reach the agent in time.
As a first-time homebuyer, you may want to consider having your own attorney present at the closing to explain all legal papers that you will be signing, but in most cases a good realtor and mortgage professional can answer any questions and guide you to a legally sound transaction. Along with your certified or cashier’s check, make sure that you are also carrying a photo ID and proof of insurance with you.
Happy house hunting and good luck!