Purchasing a home can be an overwhelming experience. You have to weigh multiple scenarios in order to make sure that you are making the right decision. Here are some tips to guide you through the process of purchasing a home for the first time.
1. Prepare By Saving Money
It’s important to set up a budget based on the amount you’re willing to spend on your home. This is especially important if you are staying in an area with high property values. In the second quarter of 2020, the median home sale price was $290,380, which is an 11.7% increase from 2019. You’ll have to plan for your down payment, closing costs, and move-in expenses.
Your down payment requirement is based on the type of mortgage you have as well as the lender. If you have good credit, you’ll qualify for a lower interest rate on your mortgage. Your closing costs are the fees and expenses you are obligated to pay in order to complete your mortgage agreement. You have the option to ask your seller to assist with the closing costs, which helps you save money. You will also have to plan for potential move-in expenses. Perhaps there is a minor repair you need to handle or an upgrade that you plan to make.
2. Assess Your Options
Different mortgages have different payment and eligibility requirements. Most mortgages are not guaranteed by the government. You can apply for a mortgage through the Federal Housing Administration. Loans are also available through the U.S. Department of Agriculture and the Department of Veterans Affairs. Some states offer assistance to first-time home buyers. You will also have to figure out a mortgage term that you are comfortable with. Most home buyers opt for 20-30 year fixed rate mortgages. You can contact the Consumer Financial Protection Bureau to research different loan estimates from various lenders.
3. Consult With a High-Level Real Estate Agent
The top real estate agents analyze the market to find properties that align with your needs. They will also assist you through the final stages of securing your mortgage. Try to speak with a few agents before making a decision. Ask some of your loved ones if they have any references. As a first-time home buyer, it is important to work with an experienced agent who understands the market.
4. Assess Your Potential Neighborhood
In the United States, most houses need remodeling and improvement because around 80% of them are at least 20 years old. Perhaps you don’t have the time or energy to invest in a project like that. Your best bet is to purchase a townhome or condo. However, you will be asked to contribute association fees.
5. Look Into the Home Inspection
Your home inspection is important. Your home inspection is an assessment of the property’s structure. The inspector will check to make sure that all the systems are functioning properly. They will also notify you of potential issues in the future so that you can make an informed decision on whether to purchase the home. Be aware that 50% of homes listed in the DC Metro Market did not sell the first time they were listed, as this trend may be the same in other cities, too. Once the inspection is complete, you can try to negotiate a different price with the seller. Perhaps they will agree to cover more of the repair costs or assist with the closing costs.
6. Purchase Home Insurance
Purchasing a strong home insurance policy is extremely important. Your lender will require you to purchase coverage in order to finalize the mortgage. Home insurance covers the physical structure of your property if it suffers damages as well as your personal items inside the home. The policy also covers you if a potential liability dispute arises. Home insurance helps cover you if you are sued due to someone getting injured at your home or if you accidentally damage your neighbor’s home.
As you can see, buying your first home is a lengthy process. Consider these tips before you start the process.