If you’re a first-time homebuyer, there are probably hundreds of thoughts and emotions running through your head. This is such an exciting time filled with possibilities, but it can also seem a little stressful when you’ve never bought a home before and don’t have guidance on how it works. Here are some tips that you can use throughout your first buying experience to make it as pleasant and pain-free as possible.
Buying a home takes more than a simple exchange of money for property. There are several costs that go into the process of buying a home that you will need to account for before you make that decision – especially if you want to save yourself from stress later on.
A down payment can be one of your largest upfront expenses, no matter what type of mortgage you decide on. You might opt for a conventional mortgage with a 20% down payment or a loan insured by the Federal Housing Association (FHA) with as little as 3.5% down. But no matter what you have to pay upfront, it’s best to start saving early and prepare for a large expense. Even a 5% down payment on a $200,000 home, for example, is still $10,000 – that’s nothing to laugh at. If you aren’t sure how to start saving, think about the small steps you can take, whether it’s setting aside tax refunds or not going to Starbucks as often. The little things can really add up!
It’s also important to save for those monthly payments that come after the down payment. Whether you decide on a loan that has a shorter or longer term, monthly payments are an ongoing expense that you need to account for. If you have a conventional loan and didn’t put down 20% upfront, your lender will likely require you to pay private mortgage insurance (PMI) as part of your monthly payment. Annually, this expense may make up 0.5-1% of the cost of your loan and serves to protect your lender if you stop making payments. But no matter how much you put down initially, you want to feel confident that you have the means to make a full payment every month.
Don’t forget closing costs! This chunk of money will go toward all of the important steps that ensure your home is ready to live in. According to Realtor.com, closing costs account for anywhere from 2% to 7% of your home’s final price.
These are all expected expenses, but what about those unexpected costs? Unfortunately, homes don’t have superpowers and are always prone to unforeseen issues. The garage door could suddenly stop working, your oven could die on you or a big storm could damage your roof. These are all problems that might need a quick fix, and if you don’t have any emergency savings that you can contribute, you’ll be left scrambling.
Even if you’ve started saving up to pay for your home, it’s still important that you really understand your financial state before deciding to buy. Do your own research to learn about the different types of loans available to you, but also work with a trusted lender who can help you make the right choice. HomeSmart agents have access to a network of vested companies, including lenders, like Minute Mortgage, that can provide you to understand your financial state, what kind of home you can afford and what type of loan would work best for you.
Before starting your search, make sure you ask for a preapproval letter that states all of this information in writing. By getting preapproved, you’ll stand out to sellers and they’ll see you as proactive and trustworthy buyers. In addition, you’ll be more organized and more successful in your search once you have confirmation of your financial state.
Even if you know your budget, it’s easy to let your imagination go wild once you start looking at homes. Your list of needs and wants can quickly add up, especially as you do more research and imagine more possibilities. While this is very common, you might have trouble finding a perfect match that still fits within your budget if your expectations are too lofty and specific. You can make your search easier by narrowing down your deal breakers as well as what you truly need in your first home, rather than focusing solely on what would be nice to have. Also, try to imagine what each home will look like after you move in and make it your own. This can help you feel a more personal connection to the properties you see.
While some buyers struggle with wanting too much, others are tempted to move too quickly and make rushed decisions. Adrenaline is at an all-time high when you’re buying your first home––who wouldn’t be a little excited? Just be careful to not let these feelings get the best of you. It’s better to take your time and find a home that really works for you rather than rushing into a decision just to say you did it.
It’s hard to manage all of the excitement and stress of buying your first home by yourself. From the beginning steps to signing your closing documents, you’ll feel a weight lifted off of your shoulders if you have a trusted agent by your side to help you every step of the way. At HomeSmart, our agents take this responsibility seriously and truly care about their clients. Their job is to let you feel the excitement that comes with buying your first home while they handle the parts of the process that might stress you out. By working with one of our agents, you’ll find the home you’ve been waiting for. So don’t wait any longer! Connect with an agent today.