For a first-timer, purchasing a home is an exciting experience. However, the process of buying a house can be very complicated. It is because there are many requirements, tasks, and steps involved. You have to deal with down payments, property taxes, mortgage rates, interest rates, etc.
A home is arguably one of the most expensive things you are likely to buy. Most first-time homebuyers are afraid of making a costly mistake.
Fortunately, the process becomes easier if you understand what it takes to purchase your first property beforehand.
Here are some steps to follow if you are buying a home for the first time.
Have a Realistic Budget
Having a realistic budget will ensure that you don’t overspend or consider expensive homes that are not within your budget range. To confirm whether you can afford to purchase a particular home, calculate your debt-income ratio. Divide your monthly expenses by your gross income.
Most first-time buyers only budget for the home. You should be aware that there are other expenses that you are likely to incur. For instance, if you are buying your first home using a mortgage, you will need to pay a 20% down payment. Additionally, you will have to pay documentation fees, property taxes, repair expenses, etc.
If you do not have a budget for other expenses, you will likely face hardships when purchasing a home for the first time.
At times, when you can’t afford the 20% down payment, the lender will insist that you take a private insurance mortgage (PMI). Since it is riskier for the lender to give you a loan without the down payment, PMI protects him or her when you default the mortgage.
It also helps to find the right lender when considering buying a home, as the right lender can save you thousands of dollars over time.
Private mortgage insurance is costly and is dropped immediately after paying the required mortgage’s principal.
Check Your Credit Score
The chances are that you will need a mortgage when purchasing your home for the first time. It would be best if you have a good credit score. Your credit score shows how good or bad you are at repaying loans. It also determines whether you are eligible for a loan.
Failing to pay off your credit cards and student loans can negatively affect your credit score. Before approving your loan, the lender must confirm your credit score.
You qualify for a mortgage if you have a credit score of 740 and above. On the other hand, a poor credit score will result in high-interest rates or no loan at all.
First Get Pre-Approved
Unless you are purchasing a home with cash, it is advisable to wait for a lender to approve your mortgage before you start looking for one.
Lenders examine your financial background to determine what amount of money to loan you. They also calculate your debt-to-income ratio to determine how much money you earn monthly. The lender wants to know if you have a consistent income source to repay your mortgage loan.
After acquiring a mortgage loan, it will be easier to choose a home from a variety of homes within your budget range. You also have a better chance of bargaining.
Hire a Good Realtor
Once you have acquired a mortgage loan or have the cash to buy property, the next step is to find a realtor if you are purchasing a home for the first time, going into the real estate market can be a terrible idea. It is why it is advisable to hire an excellent realtor.
The primary purpose of a realtor is to help scout for a property that suits your needs and wants. In real estate investing, there are a lot of real estate agents. It can, therefore, be challenging to identify an excellent realtor. Here is what makes a good realtor.
Good Negotiation Skills
The realtor you hire must be a good negotiator. When buying real estate, it is always an exciting experience to acquire the best deal. When negotiating, three factors are essential. They include the initial listing price, the selling price, and the realtor’s commission.
A realtor will make sure that you get value for your money.
Good Communication Skills
Becoming a realtor means that you are going to spend most of your time communicating with potential clients. For instance, realtors can spend most of their time answering questions, building networks, and engaging with their fellow real estate agents.
However, having excellent communication skills does not necessarily mean talking. You have excellent communication skills if you are a good listener, ask questions, and maintains eye contact.
It will be easier to tell a realtor with proper communication to prioritize your needs and preferences.
Honest and Expert Communicator
An exceptional realtor must be reasonable and an expert communicator. It means that the realtor should follow up with you and regularly give detailed feedback to their clients. You are likely to feel frustrated if you keep asking the realtor for a progress report but in vain.
In your search for a real estate agent, ensure that you hire the one with a great attitude and one who pays close attention to your needs as a client.
An excellent real estate agent must be intelligent and well informed about the ins and outs of real estate investing. He or she should stay up-to-date on the latest trends and topics in real estate. By doing so, the realtor will have a better chance of serving you better and effectively.
Request an Inspection
After identifying your potential future home, make sure that you hire someone to conduct an inspection. Your realtor can refer to one. The reason for the inspection is to identify any hidden problems with the property before deciding to buy it. Below are the types of home inspections that you can request.
The inspector confirms whether the chimney has flue liner, the cap is in good condition, and whether it discharges smoke properly.
The purpose of this inspection is to confirm whether the electrical box of the home you intend to buy complies with the current city codes. Additionally, the inspector will recommend a better alternative.
Before buying your ideal home, it is advisable to confirm that itis not infested with pests such as termites and beetles. They destroy wood, which can be costly to repair.
This type of inspection aims to determine whether the home is built on a raised foundation or a slab. The presence of cracks is an indication that you need to repair the foundation before moving in.
It confirms whether the roof of the home you intend to be is in good condition or requires replacement.
The document inspection is arguably one of the most critical inspections. An inspector helps you confirm the square footage of your home. You can also visit the city planning department and request to see the necessary permits.
Identifying the above issues before buying the property can help you negotiate for a lower price. It is because you are likely to incur more expenses because of repairs.
Know Your Market
Knowing your market before buying a new home is essential, especially if you are looking to relocate to a new city. You need to be in the buyer’s market where there are many choices, financing is easy, and the prices are reasonable. There is a lot of competition in the seller’s market.
Following the above steps will ensure that you make a successful real estate investment. Make sure that you compare the prices of various homes before you can settle on a particular one. Understanding the market will help you identify the homes that are currently in demand. As a result, you will purchase a home you love and that you can afford.