Buying a home can be a daunting process. I’ve been through it twice now so I figured it would be good to share some of the things I learned along the way to help you first time home buyers keep your cool while waiting for the transaction to be completed.
Let’s begin with a few things you should do before you even start to look at homes and then take you right through the process.
Check Your Credit Score
It’s shocking how many people have no idea what their credit score is and then wonder why they can’t qualify for a loan. Your three digit credit score is based on several factors including your length of credit history, payment history, and debt to credit ratio. Lenders use this number to determine how likely you are to repay the money you borrow. A low score means you either won’t qualify for a loan at all or you’ll be stuck paying a higher interest rate.
Figure Out How Much You Can Afford
There is no sense looking at or bidding on homes you can’t afford, so it is wise to use one of the many free mortgage calculators to figure out how much you can afford (Bankrate has an easy to use one here). Don’t forget to include property taxes and homeowner’s insurance in your calculations.
You’ll want to leave yourself some wiggle room here. There will inevitably be things you’ll need to do to your new house and property taxes only go one way…up. Don’t spend your last dime on the house itself or you may quickly find yourself in financial trouble.
Get Pre-Approved for a Mortgage
Having a pre-approval letter from your lender will show that you’re serious and ready to make a deal. Many realtors and home-owners won’t even be bothered with buyers who aren’t pre-approved because there is no guarantee that they will actually be able to get a loan.
Shop around with a few different lenders and compare their interest rates and closing costs. Many lenders offer special programs called first time buyer mortgages which will allow you to put less money down, though there may be increased fees for that. A fee-based mortgage broker may be able to find you the best loan possible. Take the time to educate yourself on the nomenclature so you’re fully understanding the terms and context of the documentation you’re reviewing.
Find Yourself a Realtor and an Attorney
While not required, you will be glad to have these knowledgeable professionals on your side. They’re likely been through dozens or hundreds of real estate transactions and they will help guide you and answer your questions along the way. Ask friends or relatives who have bought a home for referrals.
If you’re lucky you’ll find an attorney you can use for years to come. The attorney I used to buy my house also set us up with wills and handled the estate when my father-in-law passed away.
Be Prepared to Compromise
We looked at close to 50 houses before we found the one we are living in now. It was tough trying to find everything we wanted for a price we could afford. In the end we got pretty close. Our house has almost everything we wanted, and there is the potential to add the few things that were missing.
It’s likely you too will have to compromise and decide which features are “must haves” and which are just “would be nice”. One bit of advice…almost anything can be done to a house, but the one thing you can’t change is location. Keep that in mind if your dream home is located on a busy street or next to a bowling alley.
Be Patient, But Persistent
Once you have made your offer and the contract is signed, many of the details will be out of your hands. There will be title searches, appraisals, surveys, and a million other things for your attorney and realtor to coordinate. You don’t want to lose too much sleep over all this and you should definitely be patient and let everyone do their job. At the same time, you have the right to speak up and demand action if they seem to be forgetting about you. In the end it will be your home and no one will care about it as much as you.
Get the Home Inspected
Some home-buyers skip this step thinking they can save themselves a few hundred bucks but they almost always regret it. Even if the home appears to be flawless there is no substitute for having a trained professional inspect the home. If serious defects or hazards are discovered during the inspection you will be able to back out of the deal rather than getting stuck with a giant headache.
Shop Around for Movers
Ask your friends for referrals and get written quotes from at least a few moving companies before making your choice. We got several quotes and the range from highest to lowest was over $1,000! In the end we chose the second cheapest company because a friend had used them and we were very happy with our choice.
If you’re a homeowner, do you have any tips for first time buyers? If you’re buying your first home, what are your biggest concerns?