Around 28 million Americans plan to buy a home in the next 12 months. Are you one of them?
If so, is this your first time buying a home? If you are thinking about buying a first-time home, you probably have a lot of questions. It can be overwhelming, but it doesn’t have to be.
Keep reading to learn the steps to buying a house and what you need to know as you start your journey to homeownership.
How to Determine if You Are Ready
Before you get too far in the process, you need to figure out if you are ready to buy a house. Buying a house is much more expensive than renting because you are responsible for additional costs like repairs, maintenance, utilities, water, and trash pickup. You also will have to pay taxes and insurance for your home.
These costs can add up quickly, so you need to make sure you have enough money set up for an emergency fund. You should also create a budget to make sure you have enough financial room to pay the bills and have money leftover.
You also need to be completely honest with yourself about how much home you can really afford. You want to keep your mortgage, taxes, and insurance expenses to about 25-30 percent of your income as a general rule.
Start Loan Shopping
Not too many people can pay cash for a home, so before you start searching for a house, it’s important that you get preapproved for a mortgage. This gives you an idea of your home budget and how much home you can afford.
There are several types of loans and payment options available. You can decide what term you want such as a 15-, 20-, or 30-year loan. Typically, a 30-year loan is the most popular since the longer-term typically gives you a lower monthly payment. You may have a little higher interest rate with this option.
It’s also important to do your research. There are programs available that offer first time home buyer benefits. In addition, there are also veteran programs if you were in the military.
Make sure that you do your research with several lenders including banks and credit unions to make sure you find the best rate and terms to meet your needs and budget.
Save for a Down Payment
Do you have money for a down payment? Having money saved can really help you reduce your costs. If you have less than 20 percent to put down, you will end up paying private mortgage insurance (PMI), which increases your mortgage payment.
Be sure you are ready. Talk to your mortgage company about other creative financing ideas to cover the down payment. Be careful that you don’t overextend yourself with crazy options.
Get a Real Estate Agent
After you figure out the financial side, it’s time to start searching. It’s best to talk to a real estate agent to find out what homes fit your budget. This person should listen to your needs and wants and give you recommendations on what homes and locations you can afford.
Your agent can then show you some homes and work with you on the negotiating portion when you find the right home. Be sure to listen to their advice and always get a home inspection before you finalize your purchase.
Buying a First-Time Home Should Be Fun
Following these steps to buying a house and you are on your way to homeownership. It’s important when you are buying a first-time home that you make sure you are financially ready. Work with a real estate professional and stay within your budget so you don’t strap yourself later on.