Buying your very first home is equal parts exciting and daunting as you step into uncharted territory. For most people, their most expensive purchase will be their house. This decision can be emotional most of the time – proximity to your job as a marketing manager, the local school district, closeness to a certain highway, location within the city of Boston, Massachusetts, etc. It also depends on your financial status – what’s your target price, as a quality assurance test engineer, how much home can you afford? What down payment are you going to pay? What’s the tax rates in the city where you want to buy etc. Many people make this decision on impulse, and the home that should give them peace and make them happy will end up being a source of financial struggle for them, hurting their financial goals, and keeping them paying mortgage well into retirement.
1. Pay Off All Debt and Build an Emergency Saving
As stated earlier, homes are costly. The total cost of homeownership includes much more than the price you paid when you bought your house. There are other costs that you must be aware of, and also ensure that you can afford. Homeowners insurance, HOA fees, taxes, maintenance cost & upkeep cost – A/C repair, roof leak, are just but a few. All these other expenses make Owning a home more expensive—much more expensive than renting. Although in the long term, owning your own home will be beneficial because it can be an excellent wealth-building tool, doing it right will ensure you reap the benefits of homeownership.
2. Save a Down Payment
I know it can be exciting to buy a new home, but don’t let the excitement get in your way and prevent you from saving a down payment for the home. In America today, you can bring as low as 3% and still be able to get a home mortgage. However, you must know that the higher you can pay towards the home, the better it is for you (not your bank).
Making a higher down payment will mean having a lower monthly mortgage payment. Experts recommend having 20% down payment in order to avoid private mortgage insurance (PMI). The PMI is protection against default charge by your lender to protect them in case you default on your mortgage.
3. Research state and local assistance programs
In addition to federal programs, many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.
4. Get Pre-approved & Compare mortgage rates
Once you have your 20% saved up, and you have established the value of the home you can afford. Then you need to get pre-approved and compare mortgage rates: Many home buyers get a rate quote from only one lender; this is not a good practice because you may be leaving money on the table. Comparing mortgage rates from at least three lenders can save you more than $3,500 over the first five years of your loan, according to the Consumer Financial Protection Bureau. You should endeavor to get at least three quotes and compare both rates and fees.
As you’re comparing quotes, ask whether any of the lenders would allow you to buy discount points, which means you’d prepay interest upfront to secure a lower interest rate on your loan.
5. Make an offer & Prepare for closing
By now, you must realize that the home buying process is nerve-racking. Look at everything you have to do before you can get to the final step. But you’ve got to do it right so that you can enjoy the house because you and your family will be spending a lot of time in the house. We want to make sure it’s the right one for you. So now, you need to request a home inspection. I know you’ve seen the outside of the property, you have familiarized yourself with the neighborhood, but you still need a professional home inspector to examine the structural conditions (inside and out), of the property.
The home inspection will include foundation check, roof, attic space, exterior checks, electrical panels, light switches, power outlets, water heater, thermostat and heating, cooling, and ventilation.
6. Hire a professional
If you are going to need a doctor, you go to a qualified one, not a quack. So also, when you want to buy your home, why trust a non-professional to do the job for you? Again, your home is one of the most expensive investment for most people; it is, therefore, reasonable and beneficial to ensure you have people with the right knowledge on your side when shopping for your home. Make sure you get an experienced real estate agent to help you find your dream home and negotiate with the seller on your behalf to ensure you are getting a good deal. Your real estate agent should represent your best interest, helping you make informed decisions and refer you to other professionals like title companies, home inspectors, or any contractor you may need to ensure that the property is in good condition before you can finally move in.
Buying a house is a useful option to consider for anyone managing their loans but one that should be carefully considered. For more information on buying a house, speak to our team today! call us (02) 8188 1088.