Are you planning to buy your first home? Contrary to popular belief, buying a new home can become a liability rather than an asset. The real estate market can be a boom when you purchase and collapse when you wish to sell. Buying a house for the first time can also be intimidating. There are many things to consider, like understanding the market, securing a fair bank interest rate, finding a real estate agent, etc. All these things can sound complicated and time-consuming. However, making an informed decision can help first-time homebuyers to reduce risks and win a great deal. In this article, you will learn about the step-by-step home buying process & checklist.
Without further ado, let’s get started!
First Time Home Buyer’s Guide &Things To Sort Out Before You Buy A Home
Here are things to sort out before you decide to purchase your first home!
1. Take a Good Look at Your Budget
The first and foremost thing to include in your home buying process checklist is to look at your budget.
Buying a house may be the biggest and most significant investment you’ll ever make. What you don’t want to do is go into a tremendous amount of debt making it. The average annual income in America is $60,000 which is a pretty decent amount.
However, records state that as of 2019, Americans owed 9.4 trillion dollars in mortgage debt, which is a whopping $162 billion higher than the previous quarter.
You’re likely going to have a mortgage, but you want to be sure you’re a chunk of the debt owed is no more than 28% of your gross income to avoid foreclosure and demolishing your credit.
That’s a pretty popular rule of thumb, but I’d stick to 25% just to be on the safer side.
So, see what it is you can comfortably afford and be sure to stick to that budget as you search for your new home.
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2. Do Your Market Research
It’s important to know the market and what fits your budget before you start taking significant steps for buying your house for the first time.
Look at the areas you want to live in and compare them to what your budget looks like. It gives you the advantage to know the housing market and how it’s doing before buying your home.
It also would be useful to learn about special laws and requirements where it is that you want to live.
You could find there’s an area that would be best for you financially that you may not expect or had previously thought of.
Basics For Analyzing The Real Estate Market
- Find out if its a “buyer’s market” or “seller’s market”. If the conditions are more favorable to the buyers, then its a buyer’s market, vice versa.
- What’s the Return of Investments – ROI of the area of the planned purchase of your home.
- Neighborhood analysis, meaning if there is a good rate of occupancy in the houses.
- The overall economy and job market, if there are expected economy crashes that can bring the housing market down.
3. Get Yourself a Real Estate Agent
You want to get some expert help even after doing your research.
An internet search is not field experience, and you want to have someone who knows exactly what to do and how to do it to get you your dream home.
Make sure that you look at a few real estate agents because you want someone you like with whom you get good vibes.
Your real estate agent should be someone you’re happy to reach out to and to hear from because you’ll trust that person to have your best interest at heart.
3. Start Saving Lots Of Money
Even though this may not directly impact your home buying process checklist, putting aside money for the down payment is perhaps something that you must start a year before you start looking for a new home.
Save as much money as possible so that you don’t owe a lot for the mortgage.
Moreover, paying a good downpayment can help you secure better bank interest rates.
Stay prepared so that you are not moving into a home where you can’t afford to put a couch, just because you’ve given every last penny to the down payment.
Try to save at least 20% of the budget you’re planning to spend on the home.
Most places in the US actually require only 5% on your down payment.
But paying the 20% you’ll pay significantly less on your home monthly, and you’ll get a much lower interest rate. This applies to most countries in the world.
So, spend the necessary time to save so that you can pay the maximum amount.
Here are more resources on saving money:
4. Know and Improve Your Credit
One of the important first time home buyer tips is to improve your credit score. The lower your credit is, the harder getting a house will be. If you get a house while having low credit, the interest rate will be obscene. The higher the credit, the lower the interest rate.
It’s always important to know where you stand credit-wise, and once you know what it is, start working to improve it.
There are many ways to improve your credit:
- pay off debt
- get a new credit card
- keep up with payments
There are companies that can help you with your credit scores and give you advice on the best steps to take for buying your house. Even if you have average credit, you can always improve to excellent credit.
Nevertheless, improving your credit score comes under the most significant steps of buying a house for the first time.
6. Know Your Deal Breakers
One of the essential steps to buying a house for the first time is to know your neighborhood standards, requirements, and factors that can be a strict NO for your new home.
As I said earlier, this is your home. It is the place you may raise your family and perhaps settle down at this home for your entire life.
So, within reason, have a list of deal-breakers and things you know you must have in your home.
You will have to be prepared to compromise for certain things, but you should never spend thousands of dollars on the house you don’t want, no matter the price of it.
Take all the requirements for buying a house into account!
- Parking facilities.
- Check if the neighborhood amenities like hospitals, schools, gyms, malls, and grocery stores, etc are in close proximity.
- When was the building constructed?
- Check how long is the commute from the home to your workplace.
These factors are important while buying your home and will save you from daily hassle.
7. Get a Professional Inspection Done
Getting a professional inspection done is one of the primary steps to buying a house for the first time.
A lot of people pass this important thing by which can cause a lot of unhappy homeowners. Yes, all the toilets may flush, and the water seems to run, but you could miss some big underlying problems that the seller didn’t want to mention or may not even be privy to themselves.
Read also: Things to sort out before buying a car
Get a professional to look at your entire home from the pipes to the walls to the attic.
If there is rotting wood, termites, or lousy plumbing you’ll want to know before purchasing the house.
Home Buying Inspection Checklist
The requirements for buying a house
- Exterior/Interior Walls
- Heating/Cooling system
- Central air
- Electrical system
8. Be Patient
Finding the right home for you can take a longer time than you expected. You’ll want to be adequately prepared for it, right?
Saving takes time. Improving your credit also takes time.
All of these things, however, are necessary for you to get the home of your dreams that you can be happy with and not go into stressful debt forever. So do not rush or force the process. Make sure you tick over all the home buying process checklist and then decide which is best for you.
Committing to a house with debt that cannot be managed can only add regrets. So be patient in saving, creating a good credit score, and finding the right apartment that caters all your needs.
Getting a house is actually pretty exciting. You get to find the place you’re going to build your life in. It sounds like a lot of steps involved in buying a house for the first time.
And therefore, it may seem a little stressful.
But with our first time home buyer’s guide, you can learn the process easier and the outcome will be much better!
On successfully buying your new home, here are tips to renovate your house on a budget.
What are your main requirements for buying a house? What do you think is the most important step to prepare for buying a home? Share your thoughts in the comments below!
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Key Takeaways On How To Buy A Home For The First-Time: Step By Step Guide
- Step 1: Look at your budget, or how much money you can afford, and be sure to stick to that budget as you search for your new home.
- Step 2: Do market research and check if it’s a buyer’s market. Research, if there are any expected economy bubbles that can bring the housing market down.
- Step 3: What kind of neighborhood do you see yourself in? Get that checked out from the home buying process checklist.
- Step 4: Get pre-approved for a mortgage. Check with more than a couple of banks on which bank has the right interest rates for you.
- Step 5: Get yourself a real estate agent. Finding a good real estate agent is crucial for getting your dream home! These agents can guide first time home buyers to secure the deal.
- Step 6: Save lots of money. Save at least 20% of the budget you’re planning to spend on the home. This goes without saying as one of the basic requirements for buying a house.
- Step 7: Improve your credit score. A good credit score is one of the most important things that a first time home buyer must be guided with. Close unwanted credit cards and also make sure there aren’t any open invoices that are unattended.
- Step 8: Know your deal-breakers. Do you want a school nearby or a good parking place? Understanding your deal-breakers is one of the most essential requirements for buying a house.
- Step 9: Get a professional inspection done. From pipes to the attic, get a thorough inspection done.
- Step 10: Close the deal and move in.