Most Important Things to Consider as a First Time Home Buyer
As exciting as it may seem, the purchase of a first home will also be really confusing. Emotions are strong, some first-time buyers have financial difficulties and they commit a range of serious mistakes.
Relying on the right professionals during the process and trying to take the emotions out of the equation will be very important when planning this major investment. First time home buyers need to dedicate enough time to doing their financial homework, researching options and identifying the ones that offer the best price to quality ratio.
How Much Property can You Afford?
Before moving on to exploring any other aspects of buying real estate, you’ll need to ask yourself one really important question – how much property can you afford to buy?
Do you already have some savings to use towards the down payment? In order to get a loan, you’ll typically be asked to have anywhere between five and 20 percent of the property’s value. The percentage will vary from one financial institution to other.
There are numerous down payment calculators you can use to answer this first important question. These calculators take in consideration your credit score, the location of your dream house and the typical price of properties in the area.
How Much Mortgage can You Qualify for?
There’s one more financial thing to consider and it focuses on available mortgages. Knowing how much money you’ll be capable of obtaining can give you even more clarity and help you pinpoint suitable houses.
Lenders will determine mortgages on the basis of your credit score, the number of years you’ve been employed by your company and the monthly income you earn. A good credit score and a history of being a timely payer (bills, loans, credit card debt, etc.) will also be determining when trying to qualify for a loan.
To qualify for a mortgage, you’ll also need to maintain a certain debt to income ratio. The number is typically 43 percent.
Getting pre-approved for a mortgage prior to getting started with the property search process is important. Many sellers will not even consider your offer, if you’re just about to get started with the mortgage approval process while already shopping. Don’t waste your time and deal with the basics first. You may otherwise end up missing a lovely opportunity.
Exploring Options for Low Income Families
If you can’t qualify for a mortgage or you worry about the amount of money you can dedicate to the house purchase, it will definitely be a smart idea to explore alternatives.
Rent-to-own homes provide excellent possibilities for people who have limited income or a bad credit score. The idea is simple. You rent the property for a certain pre-determined period of time. During this period, you also have the option to buy the house at a fixed price.
The rent-to-own option typically features a rent that’s higher than the market value of the property. The extra money is used towards the down payment in the future.
Looking for reasonably priced rent-to-own options makes a lot of financial sense. The locked price can give you a chance to buy the house cheaply if market prices go up. You also have a longer period of time to save some money and finalize the deal when you’re ready.
Rent-to-own properties also give you a chance to improve your credit score and eventually qualify for a mortgage. In essence, this option gives you a home and gives you enough time to get your finances in order. There’s no pressure, which is why many young families and first-time home buyers opt for the possibility.
Location and Other Property Considerations
Now that you know how much money you have, it’s time to start thinking about the most important property considerations.
Obviously, the first one is the location. The location determines the convenience, the lifestyle you’ll get to enjoy and the price of the property. The safety of the neighborhood, landscaping and the availability of facilities (schools, parks, medical clinics) all have a direct correlation to an increase in the price of the house.
You should also consider the importance of additional facilities. Would you need a garage? A swimming pool? A home office? Sustainability features? Think about such extras because they increase the price of the property, as well.
When going through these considerations, you have to think long-term. A house that’s right for you now may not be the best pick in a few years. Do you plan to have kids? If so, you may want to invest in a larger property. Do you plan to sell the house in a couple of years? In this instance, you’ll need to do a bit more thorough market research.
Items You Need to Check
While buying a home is an emotional process, you will have to also be rational during the inspection. Many first-time buyers commit the grave mistake of falling for a first impression and immediately loving a house that may have serious faults. Having a checklist of essentials to inspect before buying will reduce the risk of committing a major mistake by being impulsive.
The condition of the kitchen and the bathroom are both telling when it comes to the way in which the house has been maintained. This is the main reason why these two rooms are the first that experienced property buyers and professional inspectors look at.
Plumbing, wiring, the insulation, the ceiling (look for wet floors or any other sign of moisture), signs of corrosion, the insides of the cabinets, the integrity of the walls and the external roof lines should all be included in your checklist.
Very often, first-time property buyers have absolutely no idea how to prioritize items during the inspection. In such instances, it’s best to benefit from the experience of a professional. A real estate inspector will take a look at all of the important aspects and provide a conclusion about the adequacy of the price.
Avoid the Other Common Mistakes
First time buyers are known to commit several other common mistakes. Try not to fall in such traps, regardless of the fact that this is easier said than done.
Many buyers are so eager to get their first property that they don’t even consider renting as an option. That’s a huge mistake! Sit down, be rational about it and list both the pros and the cons. Based on this information, you can decide which option is more rational at the current stage of your life.
First-time home buyers are also likely to refrain from educating themselves about the realities of the real estate market. While relying on an experienced agent is a good idea, it’s also essential to understand trends, current values and expected future developments. Based on this information, it will become a whole lot easier to choose an adequately priced property.
Finally, dedicate some time to shopping around (even if you’re confident that the first house you’ve seen is the one). Don’t waste too much time because you may miss on the opportunity and regret it in the future. Still, acquainting yourself with other options that the market has to offer will give you a much more realistic idea about your ability to buy.