Tips for First-Time Home Buyers

If you are contemplating buying your first home, I am sure someone has already told you that “this will be one of the biggest purchases of your lifetime. You have no doubt garnered advice from lots of well-meaning friends and family members... and they have either scared the bejeezus out of you or made you extra excited about the prospect of being a homeowner. Whichever the case, it is important to know that there are many things you can do.... and should do... to prepare yourself for that big first-time purchase of a home to call your own.

Save, save, save!

Even in the most affordable sections of the country, buying a house demands a good deal of money. Although there are some creative financing plans where you can put down as little as 3%, which buyers often view as a good way to enter the real estate market with minimal cash output, the more money you save, the better. So, if you start saving early, say perhaps when you get your first “real” job – you can amass quite a bit of savings to put towards your first home. It’s never too early to see a financial planner and talk about saving for a house. That person can help you draft a savings plan that will get you to your goals faster.

Remember, the more money down, the lower your payment. Also, you can save money on PMI – private mortgage insurance – if you put down at least 20 percent against your purchase. That’s a substantial savings each month. And, of course, you will also need additional cash for other things such as closing costs, and home inspections.

And save some more!

Remember, you are going to need lots more than just money for a downpayment, closing, and other incidentals associated with the actual purchase of your house. Owning a home is expensive in comparison to living in a rental. You are now responsible for that house! Things go wrong, appliances break, basements flood, grass grows and needs to be cut. The list goes on.

As you enter the home market, it is a good idea to have a stash set aside for the “other” costs associated with home ownership, including emergency situations like replacing that water heater or removing that fallen tree. While it is impossible to plan for everything, prepare for these extras before you buy by putting additional monies in an account earmarked for this kind of thing.

Do not rush the process

Some potential buyers set deadlines for their first home purchase; i.e. by the time we are married for a year before the first baby arrives, when I get that promotion. Those are all good goals, but sometimes they just do not work out, and it is important to realize that. If you are expecting, for example, and want to move before the baby is born, you are going to rush the entire process and may not wind up with the house that is best suited for you. Instead, you will “settle” and have a good deal of buyer’s remorse when you move in. It is okay to relocate with a baby in tow, or after the kids have started school, or any time other than that which you had set as a goal. No need to hurry!

…but do know what you want

The words “I’m not in any hurry to buy” can be frightening to your Realtor, conjuring up thoughts of weeks of Saturdays spent in a car with you, ushering you to one neighborhood after another while you try to decide what it is you want. Older or newer? One story or two? Townhouse or detached? City or suburbs? Having the answers to all of these questions before you pick up that phone or walk into that realty office will save plenty of time and aggravation. If you share these answers with your realtor, he/she can line up showings that will put you in touch with houses that are a good match for your ideal home.

Get Pre-approved for a Mortgage

It saves a lot of people much time and money if you know how much you can buy before you begin to search for a house. That means mortgage pre-approval is essential. That said, you should take the time to shop for the best possible mortgage rates and be very careful about reading all the fine print.

If a loan officer has suggested a variable rate mortgage to help you enter the market, for example, be sure you know how many years it will stay at that interest rate and know how much it can increase. That rise can throw you if it is more than you can handle. Think about what is more important to you – buying down the rate or saving cash up front. There are many mortgage options and a loan officer from a well-known company can help find the one that is right for you and your situation.

Get a home inspection and listen to the inspector’s suggestions

Depending on where you will be buying, you may or may not be required to have a home inspection, but you should. Home inspections protect you – the buyer – but do protect the seller as well. If all problems are disclosed at a home inspection, everyone in both parties is aware of any issues to be worked out before going to settlement.

Ask your Realtor to recommend a home inspector they trust and one that will do a thorough job. Every piece of the property should be examined, including the exterior, which often holds the secrets to things like cracking foundations or potential basement leaks.

You should also plan to be there on the day of inspection. It is very important that you follow the inspector from room to room and take notes. If he tells you not to bother attending the inspection, hire a different company.

All of that said, the inspector will then tell you what is essential to fix, what could cause a problem in the future, and what things are minor but you might want to consider repairing them anyone. Do not expect the sellers to offer concessions for everything. Houses experience regular wear and tear, and that is part of the expense of buying – and owning – a house.

Slow down and take a big breath!

New home owners get in trouble financially because they think they need to fill up their home with new treasures as soon as they leave the settlement table. So, some go out as soon as the ink is dry on the contract and order a house full of furniture to be delivered on settlement day. Later, most new homeowners find that was a mistake.

Got some old stuff from your apartment? Move it in. Did Mom offer you her kitchen table? Take it. Buying all new items for your house not only can strap you financially but, often, you just need to settle into the house and live there awhile before you can deem what would work best as far as furniture goes. Also, if you want to paint the walls, it is easier to do that either before you get furniture or when the old stuff is in place.

Take your time. If you have chosen the right house, the chances are that you will be there for years to come and will have plenty of time to hone your personal style. Just enjoy the fact that you have saved enough to make your first major life purchase and revel in the satisfaction that, if you did it correctly, you are on your way to a healthy financial future that includes investment in real estate.