Buying a home for the first time is never an easy thing to do. It is also one of the biggest financial decisions that one could make. With lots of things to consider, it is most likely that you will find a home that fits your needs and your budget easily. It is important that you know what your wants are, what your needs are and how much you can afford to pay for it.
The average price of a home in the United States is around $200,000. If you are a first-time home buyer, the first thing you need to do is secure a mortgage. Meeting with a reputable and experienced lender is a great way to figure out which type of loan is the right fit for your needs.
The last thing you need to do when attempting to buy a home is rush through the mortgage application process. Ignoring details of the loans offered to you can put you in a compromised financial situation.
The following are some financial tips to use if you are buying a home for the first time.
1. Choosing the right location to save on transportation expenses
As a home buyer, it is very important that you consider your needs before buying a home. After all, there are good reasons why you want a new home and your needs must be your first priority.
You can do this by identifying your activities from day to day as well as the day to day activities of the people that will live with you.
Do you (or other people who live with you) go to work? Do you work at home? Do you have kids that go to school? Is the house near a mall or a store where you can buy the basic needs of your family?
A good location can help reduce transportation expenses and it makes traveling to different places more convenient.
2. Know what you can afford
Knowing what you can afford will give you an idea about which houses you can buy and which houses you cannot buy.
There are 2 factors that will affect your decision
- Your lifestyle and
- The cost.
To be able to make a wise decision, track your previous records of savings and expenses. Were you able to put some of your income into savings?
How much were you able to save and how long did it take you to save it?
How much money were you able to put into savings on a monthly basis? This could be a good basis on how much mortgage loan you can afford.
A key component of having a successful home buying experience is figuring out how much of a monthly mortgage payment you can afford.
Luckily, there are a number of free mortgage calculator apps and programs online that can help you find this information out.
After all, your money goes only into either savings and expenses. If you think you will not be able to buy the house that you need.
Evaluate your expenses and see if you can remove some of your unnecessary expenses. This will also help you lift up your budget to pay for your future mortgage payments.
3. Get a pre-approved mortgage loan
Finding the best home loan is the most important first step. Getting a pre-approved mortgage loan will give you more credibility to the eyes of the sellers.
This will give them the idea that you are serious about buying your first home. It is also important that you are aware of the different mortgage loans that are available to you.
There are fixed rate mortgage loans and there are also FHA loans which are recommended for first time home buyers because the down payment is minimal.
Getting a pre-approved mortgage loan may take a couple of days to a couple of weeks depending on the company that is handling your mortgage loan.
Accomplishing this as early as possible can save you from waiting for its approval.
The biggest mistake most new home buyers make is thinking the loan amount they are pre-approved for is what they can actually spend on a home.
Before you get excited about being approved for a high dollar amount on your loan, you need to wait until the lender completes their verification process.
There may be factors that surface during the income and debt verification process that can lower the amount of money you get approved for.
While it may be hard to be patient during this verification process, it is essential when trying to make smart financial decisions.
4. Talk to real estate professionals and seek help
The advantage of talking to real estate professionals is that you can get professional advice on how to get your first home. You can get ideas such as prices and locations of the house that you will buy.
They should be able to provide you with a list of houses that will fit your needs and budget.
5. Choose a home that matches your needs and budget
Now that you already know the houses that are available to you and how much mortgage payment you can afford, you can now choose the right home for you.
It is necessary that you ask for a list of payments from the very first day up to the very last payment that you will make.
This is the very best way to create a clear picture of how much money you will need and when. Check if taxes are already included in the computation.
Taxes will also add up to the total cost of the house and it is very important to take note of this as well.
6. Save for emergency and avoid overspending
With enough knowledge of what your needs and wants are and enough basis on the amount of money that you can spare for the mortgage payments, buying your first home should not be a problem.
The only thing that you should avoid is overspending because if continued over a long period of time, it can lead to unpaid mortgage payments. Saving some money, on the other hand, is a smart thing to do.
This will help you cope up with unwanted expenses such as emergencies, unwanted expenses from medical bills and the likes.
Get Familiar with the Proposed Mortgage Terms
Before you sign off on a mortgage, you need to read over the repayment terms and fine print thoroughly.
Understanding terms like variable and fixed rate are important and can save you a lot of financial stress in the future. There are some loans that will require your property taxes and homeowners insurance to be escrowed.
Getting this information ahead of time will allow you to prepare yourself financially for the payments you will be required to make.
The last thing you want to do is sign off on a mortgage without getting clarification on what will be obligated to you financially.
An experienced mortgage lender will go over your loan paperwork with you thoroughly to ensure you understand every detail.