Buying your first home is exciting. It’s like punching a ticket that reads, “Welcome to adulthood.” However, there’s nothing simple or easy about the process and it’s highly risky to go into it unprepared or misinformed.
Here Are 6 Things You Need to Know
“Most first-timers think buying will be a perfect scenario where it all happens like it does on HGTV,” realtor Ken Pozek says. “They see three houses. They pick one, and it all works out beautifully. That never happens, unfortunately.”
Buying a home is a rewarding process, but it also tends to be pretty messy. And while you can’t avoid certain issues, you can prepare yourself by understanding the following:
- Your Emotions Will Be On High Alert
Few people realize how emotional home ownership is until they find themselves touring properties. The key is to be aware of your heightened emotions and avoid letting them dictate your choices.
“You’ll get vibes from the homes you visit—both positive and negative—and you’ll get a good feeling when you enter a home you can see yourself living in,” Green Residential explains. “This can be helpful, but if you allow your emotions to completely rule your decision making, you could end up passing over a logical choice or jumping into a bad choice too quickly.”
If you’re buying a home with a partner, let them know that your emotions may play a factor and ask them to be a voice of reason. If there’s no one else involved, ask your real estate agent to fulfill this responsibility.
- You Need an Agent
Speaking of agents, you need to have one. While you technically don’t have to work with an agent when buying a property, there’s no reason to go about the process alone. In most cases, the seller actually pays their commission, so their services are free of charge. But even if you do have to pay the commission, the time, money, and stress an agent will save you is invaluable.
- Get Preapproved
Before any agent will actually begin working with you, they’ll ask that you get pre-approved. This shows that you’re a serious candidate and reduces their risk of working with clients that won’t end up qualifying for a loan.
Getting pre-approved is a relatively simple process, but there are certain things lenders want to see. The four most important categories are credit score, income, current loans, and down payment percentage.
Ideally, your credit score should be above 600 and your credit utilization rate should be on the lower end of the spectrum. As far as income, most banks like to see that the monthly mortgage payment, insurance, and taxes account for no more than one-third of your monthly income.
Having existing loans is not necessarily a bad thing, but lenders will want to be sure you don’t have too much debt. And, finally, down payment percentage comes into play. If you can pay 20 percent or more on the down payment, you stand a much better chance of being approved than if you can only pay 3.5 percent.
If you don’t feel like you’ll qualify on one or more of these factors, still make it a point to speak with a lender. They’ll be happy to run your information and let you know if they have an offer.
- Figure Out a Budget
Just because you get preapproved doesn’t necessarily mean you can afford to buy a house. Lenders are simply looking at a paper trail, they can’t be 100 percent sure that you’re in a healthy financial situation.
After getting preapproved, you’ll have an idea of exactly how much house you can buy. Hint: You don’t have to spend the total amount. If you’re approved for a $275,000 loan, there’s nothing wrong with buying a house for $200,000. Figure out a budget that works for you and then calculate how much house you can actually afford.
- Consider Buying a Foreclosure
If you can find a quality house that meets all of your criteria and fits in your budget, then great! If not, you may consider taking an alternative route. While a fixer upper is always an option, that requires a lot more elbow grease than you may like. A better option is to look for foreclosures that banks are looking to unload at good prices. You may find a diamond in the rough.
- Look Beyond Cosmetic Flaws and Decorations
One mistake that first-time buyers – and even some seasoned homeowners – often make is saying no to a house based on surface level issues. For example, you may see a house with wood paneling in the living room and decide that it looks dated. Or perhaps your wife doesn’t like the landscaping in the backyard. Neither of these are good excuses. Wood paneling can be replaced or painted and landscaping can be fixed with a couple trips to the hardware store.
There are certain issues that you should stay away from – such as foundation and roof problems – but cosmetic flaws and decorations shouldn’t move you in one direction or the other.
Just Have Fun
The home buying process can be intimidating. You’re making the biggest purchase of your life and it’s an investment that could theoretically be in your family for decades to come. And while you need to recognize the importance of the decision you’re about to make, don’t shoulder the entire weight of this burden.
Do your due diligence and enjoy the process. If you surround yourself with the right people and information, you’ll find success.