If you’ve never owned a home, you may spend time dreaming about your ultimate abode. Does it include a white picket fence, a game room, or a restaurant-grade kitchen? If you have reached a point where you are ready to make the leap to becoming a homeowner, make 2019 that year.
Owning a home is very costly. You not only have your mortgage payment but you also have the maintenance of the home and the costs associated with it. For this reason, the ideal time to look into buying your first home is when you are debt free and you have an emergency fund stocked with at least three to six months of expenses.
With a nice emergency fund in place, you will feel better as any unexpected expenses pop up. Because they will..it is inevitable. Now that you are debt free, focus on staying that way. It is exciting to think about furniture shopping but you want to keep in mind your budget. This means you may wind up with some empty areas in the house for a bit as decorating one room at a time may be what is going to keep you from racking up debt.
Look closely at your monthly income and your spending. Would you feel comfortable making a mortgage payment every month? If so, how much would you feel comfortable spending? Hopefully you have a budget already set up to make this easy. Keep in mind, financial experts say that your housing costs (which includes your mortgage payments, insurance, property taxes and any condo or association fees) should not be more than 28% of your monthly gross income. You may be able to extend your mortgage payment by cutting out some luxuries like weekly restaurant meals or your shoe-shopping habit. The key here is to be honest honest with yourself about what you can truly afford.
20% of the cost of the home is the usual amount you need to put as a down payment. With that being said, many lenders are allowing much less. There are also programs for first-time home buyers that ask for as little as 3% down. If you happen to find yourself in this situation, take note that the lower your down payment may wind up costing you in fees as well as needing private mortgage insurance. Not to mention, even something like a 5% down payment on a $250,000 home for example, is $12,500.
Put some numbers into a down payment calculator so that you have an idea of what you are working with. There are lots of ways you can start to save money. Any windfalls of cash like a raise, tax refund or work bonus can be put towards your down payment. There are also lots of everyday expenses you could be cutting back on too. Starbucks trips, lunches out, dinners out. This all adds up to quite a bit of money. Get started by setting up an automatic savings plan and using a financial app to track your progress.
Do you currently have credit issues? Your credit report is one of the most important numbers associated with your name. By law, you have free access to your annual credit report from the three major credit reporting agencies. AnnualCreditReport.com is authorized by Federal law so you can feel secure accessing yours from here.
Even if you’ve finally gotten your spending under control, you’ll need to tackle your credit first. Consider working with a credit repair service to address issues on your credit report. On the flip side, if your credit report just needs a boost, there are ways to help bring it up fairly quickly. Once your credit report is as clear is it can possibly be, you can get pre-approved for a home loan before you even start looking at properties. Pre-approval will designate you as a qualified home buyer.
If you’re a single person who’s hoping to buy a home, you may want to consider buying a home that’s slightly larger - and then getting a roommate. Even though the initial cost will be higher, you’ll end up saving money in the long run by charging your roommate rent.
To get a better idea of how much rent you could charge a roommate, check out the rental listings in the town where you’re thinking about living. Look at comparable properties to discover how much similar rentals cost.
The home-buying process can be overwhelming for anyone, even for people who have purchased a home before. As a first-time home buyer, you likely have a lot of questions about the process and the costs involved. For this reason, you want to spend some time researching buyer’s agents so that you choose one that is the right fit for you.
To start searching for a buyer’s agent, you can ask your friends and family for recommendations and referrals. You can also visit sites like Zillow to see reviews of agents in your area. Once you find the right agent, compile a list of questions, including “How will my credit score impact my ability to buy a home?” Your agent will also be able to explain the mortgage pre-approval process.
Before you start worrying that you’ll never be able to buy a home, realize that the dream of home ownership is attainable. If credit repair will help you achieve your dream, start by reviewing our credit repair resources (https://www.creditmarvel.com/resources/) today.
When it comes to getting a rate quote, make sure you are not just getting one. This can leave money on the table. You want to compare quotes from at least three different lenders and see which is the best.
While you are in the process of gathering quotes, ask whether the lender allows you to buy discount points. This means you would prepay the interest up front in an effort to get a lower interest rate. Keep in mind you need to have the money handy in order to go this route. Plug your numbers into this calculator to see if this is something that would work for you.
A single family home may be your ultimate goal when it comes to purchasing your first place but if you are willing to give up a little space, a condo or townhouse may be for you. Regardless of what type of place you choose, you want to make sure you are aware of the type of neighborhood the place is in. Here are some things to consider:
Area schools do have an affect on home value, so whether you have school aged kids or not, you want to research this.
Look at the crime rates in the area as well as what type of local safety is in place.
See where the amenities are located. If you love to shop at a certain grocery store, you don't want to be traveling 30 minutes to the nearest one.
Take time to drive around the neighborhood to see how things are during different times of the day. Look at noise and activity levels as well as the amount of traffic.
A down payment is not the only thing you are going to need to save for. Closing costs on a mortgage loan can be quite steep. They typically are about 2%-5% of your loan amount. The costs can vary so you do want to shop around and compare prices for closing expenses like title, homeowners insurance and home inspections. Keep in mind that the cost of the home is not the only amount you can negotiate on. You can help offset closing costs by asking the seller to pay for a portion or you can try negotiating your real estate agent's commission. Calculate your estimated closing costs so you can budget accordingly.
Once your offer has been accepted, you are going to have to pay for a home inspection. This involves examining the property’s inside as well as outside condition. Keep in mind though, that the results will not give you details on the following:
Most of the time inspections do not test for things like mold or pests so be clear on what yours covers.
Ensure that the inspector has access to every part of the home, including the roof as well as any crawl spaces.
Don’t be afraid to speak up. If there is something you want the inspector to take a closer look at or you have question, say something. Once completed, carefully review the report and if anything needs fixing, see if the seller is willing to take care of it.
Deciding to become a first time home owner can be both exciting and scary at the same time. It is probably one of the most significant purchases you will make in your life. For this reason, you want to make sure you do it right by being as prepared as possible. The above tips will help you get your check list started so that you have your ducks in as you start your search. Here's to finding your dream home!