Buying your first home is a huge decision, but it’s certainly an exciting time. In the midst of the excitement, however, it’s important to also focus on the practical things when it comes to your first home and not overlook anything important. The following tips can be helpful to anybody purchasing a home, but are especially beneficial for those who are doing so for the first time:
Check your credit
Credit is always important if you will need to finance your home purchase and take out a mortgage. Those who already own property or have a mortgage may have an easier time financing their next purchase, but first-time homebuyers will especially need to make sure that their credit is in great standing. Before applying for a home loan, be sure to pull your credit report and see if there are any areas that need improvement. You’ll want to take care of any past due accounts before applying, and if your credit score is poor, you’ll want to work on improving it first before you try to get a mortgage. Even if you are approved for a mortgage, you may end up with a high interest rate if your credit isn’t good.
It can be easy to get caught up in the moment and make an offer on the perfect house—or at least, what you think is the perfect house at this specific time in your life. Some first-time homebuyers end up regretting the home they purchased because they weren’t planning for the future. You’ll want to buy a home that you’ll grow into, and not quickly grow out of. You also want to make sure you’re happy with the city you want to buy property in, and that you don’t think you’ll want to move anytime soon. A good rule of thumb: purchase a home that you can see yourself in for at least five years, at an absolute minimum.
Save up for a down payment
First-time homebuyers sometimes underestimate how much money they need to save up in order to receive a home loan. Unless you’re eligible for a non-traditional mortgage that is more lenient with minimum down payments, you’ll need to have at least 10 percent of the home’s purchase price. However, it’s better if you can put down at least 20 percent. This will help lower your mortgage payments, you’ll have more equity in your home, and you won’t have to pay private mortgage insurance (PMI).
Consider all expenses
It can be easy for the first-time homebuyer to overlook all the different expenses that go along with owning a home because it is a new experience for them. There is a lot more than just the monthly mortgage payment to consider. As a homeowner, you’ll also be responsible for the closing costs, property taxes, insurance, potential HOA fees, and so on. You also have to think about the other things you’ll now be financially responsible for—the types of things that your landlord used to take care of, such as maintenance and repairs. When determining your housing budget, remember to take all of these different things into consideration so you don’t end up purchasing a home that becomes unaffordable.
Ask to see the HOA contract
If the property you want to purchase is part of an HOA (homeowners association), you’ll want to know ahead of time what types of rules they enforce before you sign on the dotted line. Ask for a copy of the bylaws and regulations ahead of time, so you know exactly what types of restrictions are set in place. There may potentially be a deal breaker in there, and you don’t want to find out about it after you’ve already bought the home and it’s too late.