Buying a home for the first time is an incredible feat. But the process could become a defeat if you go into it with blinders on.
It’s important to understand the pivotal considerations needed as you make preparations.
985,000 homes became residences to first-time home buyers this year. A positive victory for the home-buying market. Sad to say, hundreds of thousands of those same owners have buyer’s remorse. 51% percent to be exact.
What you don’t know before the sale may put you in a home you don’t want. Or, you could lose the home you’ve dreamed of.
If you have your heart and wallet set on your dream home, here’s what you need to know. Consider these five first-time home buyer things to know as you approach the process.
1. First-time Home Buyer Things to Know: Finances
Never go into a homebuying option financially blind. That means you need to know how much house you can afford.
Financial institutions have their own method of qualifying buyers for mortgages. More than often, what they calculate as affordable doesn’t match what your comfortable paying.
Basically, you can’t pay what they say you can but they’ll give you the mortgage anyway.
Be proactive. Access your own financial situation, establishing your budget. Calculate the income you have coming in versus what debts you’re obligated to. Switch out the rent payment for a proposed mortgage amount.
If it’s tight, you know you need more disposable income. Pay off some debts first-credit cards or a car loan-then reaccess your financial situation.
2. Location vs. Location vs. Location
Don’t buy a home just because it looks pretty, especially if it’s out of your way. So many buyers purchase nice homes in inconvenient locations.
Never choose aesthetics and space over convenience. It’s okay to search for the home you want where you want it. If location is important to you, make it a priority. Choose a real estate company that will keep your interests first.
Knowing this in advance could keep the process straightforward.
3. Don’t Misunderstand Prequalification
All potential home buyers have something about their credit profile that would prequalify them for a home loan. But a prequalification is not a guarantee for a mortgage.
So never go out a make an offer on a home with one.
Prequalification gets the process started. It’s a way for lenders to get a snapshot of your financial situation before actually pulling your credit report. From there, a lender may present different mortgage options that could suit you.
Once you make it past prequalification, a lender may preapprove you for a loan. Don’t make any offers until you’ve been approved.
4. Build or Buy As-Is
People shy away from custom-built homes because they fear cost. But sometimes building new costs the same as remodeling an older home.
Remodeling a home comes with pros and cons, the disadvantages outweighing the positives at times. Remember, once you buy a home, everything you do to it comes out of your pocket.
When it comes to hiring contractors or buying the tools to do it yourself, expenses can add up.
After you gauge your finances, do some research. Decide if it’s more profitable to build or buy.
5. No Advice
If you’ve never purchased a home before or have gone through the process with someone else, get advice.
Buying a home is not like picking between cable and direct tv. You can’t just cancel it if you don’t like it and leave. Real estate is a life-long investment and you should prepare yourself before you sign up.
Consider taking a first-time homebuyer’s course. Then sit down with a financial expert and get professional advice before you start your search.
Buying a home for the first time can be very gratifying. But before you do, there are first time home buyer things to know.
Get your finances and priorities in order. Then take some time to educate yourself and speak with a professional.
Take a look at our finance archive to learn more about finances and home buying.