Tips for Buying Your First Home

Buying your first home will most likely be your most significant purchase thus far in life and will be a moment to remember. Since it is such a large commitment, you must put a lot of thought into how you will go about this. You want to avoid getting into a mortgage you cannot afford, agreeing to things you do not want to agree to, or purchasing a home that wasn't right for you. Buying your first home can be one of the riskiest and most rewarding things you have done. Here are some helpful tips for the steps involved in purchasing a home.

Timing Matters

Are you truly ready to purchase a home? Homeownership is often more expensive than people assume, even after things are said and done. Homeowners must stay up on home repairs, utility costs, garbage pickup, water, and electricity. Also, you will have to cover your bases on taxes and homeowners insurance needs. These expenses add up quickly, so it is crucial to be financially prepared. Before purchasing a home, it is advised to have little or no debt. You should also have a good emergency fund savings. Never feel pressured to buy a home before being financially stable and ready for the costs that will come; otherwise, you will dig yourself into a deeper hole. You can determine a realistic budget for expected home payments to create habits around and build confidence for saving. This can help you see if a home purchase is practical for you right now.

Understanding the Loan Process and Payment

More often than not, people need a loan to purchase a home. Typically, the first move you should make is to get a preapproval letter for a mortgage to know how much you actually qualify for and what price range you can shop in. Next, consider using a mortgage broker for access to several loan companies and programs. The goal is to land the best rate. However, your bank or credit union may have options that make sense for you. It is worth your time to find the best payment option for your mortgage. It is recommended to do some research because what works well for someone else may not be best for you. There are term options for a 15 or 20-year loan, where you may be able to secure a low rate. A 30-year loan term is popular as it usually has a lower monthly payment. Are you looking for more manageable payments or a lower interest rate? Will an adjustable-rate or fixed-rate mortgage better suit your situation? With an adjustable-rate mortgage, the initial rate is lower, but the rate will fluctuate with the market, which results in a higher monthly payment. On the other hand, a fixed-rate mortgage is what the name implies; regardless of what is going on with the economy, it will remain the same. This offers stability in your monthly payment but with the risk of missing out if rates fall, and refinancing to a lower rate may not be an option.

Be Prepared with the Down Payment

Your down payment can significantly help lower the costs. Keep in mind, with less than 20% of the cost of the home down, you may have to pay for private mortgage insurance and, therefore, need to factor that cost in when making the purchase. The way you decide to finance should help you build wealth with your home purchase. A poor financing decision could make or break you.

Be Honest About What You Can Afford

What price range is realistic for you? The sum of a mortgage, taxes, and insurance, should be somewhere between 25 and 30 percent of your income. Another way to help you determine what you can afford is checking that the home cost does not exceed two and a half times your annual salary. Too high of a mortgage could lead to not being able to meet other daily obligations, and you still want to be saving for retirement. A realtor or mortgage calculator can help you get a sense of what a monthly mortgage payment could end up being.

Find a Good Real Estate Agent

A realtor should carefully consider your wants and needs to make recommendations or explain the market. Their job is to find a home that suits your needs and what you can afford. When an offer is made, your agent’s job is to negotiate terms that work for you and guide you through the process to hopefully close successfully. Make sure that you are using a buyer's agent instead of a seller's agent who will be working with the seller’s best interest in mind.

Request a Home Inspection

When you find the home you want, be sure to have a home inspection done to check for the less obvious issues that the home may have. This could highlight problems such as mold, termites, foundation, or roof issues that could cost you thousands in repairs. You can consider negotiating a lower price or decline completely if the repairs are too major for you. With an independent home inspection, you can likely pull out of the deal without losing your earnest money.

Escrow and Beyond

When you have an offer accepted, this is when escrow begins. The escrow holder will ensure that the documents, money, and all necessary information are properly prepared before a close. Escrow protects the buyer, the seller, and the lender. It could be quite some time, sometimes even about five weeks out. Mentally prepare for this so that patience can be on your side. When it is time to officially close, you will need to sign the final papers so that the escrow agent can release the funds to whomever it is owed. Remember to change your address with your bank and other accounts. You will also need to switch over or cancel and set up your new utilities. Then it is time to unpack and enjoy your new home!

About David G. Sayles Insurance Services

At David G. Sayles Insurance Services, we help our clients decide which of these options is best for them based on their current situation and risk factors.  Contact us at 1-855-977-1842 or insureme@dsayles.mysites.io for a consultation!