It’s part of the American dream: the perfect house.
But if you spend every night thinking, “I can’t wait to buy my first home!” don’t go out and purchase quite yet.
There are a few things you need to know before you jump off the deep end and invest in the house you’ve always dreamed of. Here are 7 things to keep in mind if you’re a first-time home buyer.
1. Ask If You’re Ready to Buy
Before you call a single real estate agent, you need to ask yourself one simple question: are you ready to buy your first house?
To be clear, just because you can buy a house doesn’t mean you should buy a house.
First things first: take a long, hard, honest look at your finances.
For example, do you have the money for a down payment? Or rather, do you have the money to realistically afford a down payment in your area?
Examine your monthly expenses and determine whether it’s cheaper for you to continue as you are or to make mortgage payments.
Also, take a look at your neighborhood. Are you ready to move to a new neighborhood, either because your current one is going downhill or because the cost of living is too high?
Finally, take a look at why you want to buy. Are you truly committed to buying a house, or do you just want to live somewhere new?
2. Start Saving Early
If you do think you’re ready to buy a house, then the best thing you can do is start saving early.
Some homebuyer programs allow for a down payment as little as 3%, but you should aim to make a down payment around the common amount of 20%.
Here’s the thing: while a lower down payment might seem cheaper initially, you may deal with higher insurance rates, and you’ll have to pay a higher mortgage amount.
If you need ideas, tinker with this down payment calculator to figure out a goal down payment.
You should also look into other financing options in the meantime. For example, this Great Start Grant QLD is a great option for first-time homebuyers in Queensland.
3. Get Approved for a Mortgage First
The right mortgage can seriously reduce your stress when buying a house. Alternately, the wrong one can make your home buying process a living nightmare.
With that in mind, get approved for a mortgage before you start shopping. This will give you a clear idea of the maximum sum you can afford when shopping for a house.
That said, use the mortgage as the upper limit of your budget. Remember, a smaller mortgage means you’ll own your home faster, so you want to keep your mortgage lower if you can manage it.
4. Decide on Location versus Space
Once you’re approved for a mortgage, it’s time to start looking for a house.
But before you get excited, consider what your priorities are.
Let’s say you have a choice between a house in an area you love or a house that’s larger and cheaper but further away from your favorite haunts. How do you decide?
Think about whether you care more about proximity or the space itself. If you figure this out in advance, you can make informed decisions about where you make an offer and what homes you’re genuinely interested in.
5. Consider Your Long-Term Plans
You should also consider your long-term plans before making an offer on a home.
For most people, buying a house is the single largest investment they will ever make in their lives. You want to make sure you make the right one.
Are you planning on staying in your current job? How secure is your current job? How long do you plan to live in this area? Do you plan on getting married? What about children or pets?
If you’re not sure this is the house for you in five to seven years, then keep looking.
6. Buy the House You Know You Can Afford
Along similar lines, invest in a home you know you can afford.
Remember, this is most likely the largest purchase you’ll ever make. So buy a house you know you can afford, not the house your mortgage company thinks you can afford.
Your approved mortgage amount is the uppermost limit of what you can afford to buy. Ideally, you should go for a home well below that actual sum.
That way, if your job changes, or you lose your job, or any of life’s many unexpected roadblocks occur, you can still afford to make your monthly mortgage payments without stressing over every penny.
7. Use a Trusted Real Estate Agent
The thought of working with a real estate agent might drive you nuts. The thing is, your home search will be much more stressful without one.
Think about all of the searching that goes into finding a single home. It takes hours of digging to find exactly the right fit for you, on top of finding the time to see the house, check for any issues, and figure out whether the asking price is worth it.
Chances are, you have a full-time job and a life to worry about. A real estate agent looks for houses as their profession. They know what they’re doing, and they know how to separate a great house from a money pit.
Once you’ve found one, here are a few tips to make the most of them.
Buying My First Home, Made Easy
If your dreams have included the words “buying my first home” for years, we’re here to help make that dream a reality.
Check out our blog for more helpful posts like this one to help you find and maintain the house of your dreams, like these five things you need to check during your property inspection.