Without a plan buying a new home can easily become stressful and overwhelming. When you are prepared for the challenge, it can really help. Here are six tips to make the process smoother for first-time homebuyers.
1. Be Realistic
Before jumping into meetings with realtors and attending open houses, first-time homebuyers should be realistic about their budget. Taking a couple of months to closely track spending can give you an accurate idea of the amount of money you’ll be able to put toward a monthly mortgage. Keep that number in mind as you discuss home prices and bank loans. Get your finances in order.
2. Expect Some Extra Costs
While you’ll have a number in mind for the monthly payments you can afford, there are many extra costs that come with buying a home. Consider the cost of property taxes in your new neighborhood, utilities, renovations you’ll need to make, and closing costs at the time of the sale.
3. Save for a Down Payment
Being responsible first-time homebuyers means being financially prepared. Creating a budget is an excellent way to make sure you’ll be able to afford monthly payments, but you’ll also need to make a down payment up front. The higher your down payment, the lower your monthly mortgage payments. Depending on the terms of your mortgage, you’ll need to have in savings at least 5 to 20 percent of the home’s value as a down payment.
4. Get Organized
When it’s time to apply for a mortgage, you’ll need documentation of income and taxes. Being prepared with those documents will speed up the process and help move things along smoothly. Keep a folder with pay stubs, tax returns, and previous bank statements. Bring the folder along and be ready to offer copies of the materials during the application process.
5. Do Your Research
There are several factors that determine a fair price for a house. Be sure to look at other homes in the area, including those that are on the market and those that have recently sold. Take the condition of the house into account, along with any repairs you’ll need to make. A home inspection will pinpoint any issues that will need to be addressed.
6. Make a Smart Offer
When you’ve done your research, you’ll have a good idea of what your potential new home is worth. Consider the total cost of the house, along with your monthly mortgage payments and other monthly expenses, to determine the maximum amount that you’d be willing to pay. Start by offering a lower number, but don’t go so far below the asking price that you insult the current owner. The goal is to compromise and reach a figure that both you and the seller feel comfortable with.
Buying a home should be a life event to celebrate, not a task to dread. With planning and research, first time homebuyers can begin the process with confidence.