First-time homebuyers are happy people. They have rented forever and have finally saved enough money to consider buying. Of course, they are too excited to breathe, but there is a reason for the adage, "Look before you leap." They don't want to put down all their hard-earned cash and sign a mortgage only to find out that they purchased a "money pit."
Finances also come into play with a first-time home buyer's homeowner's insurance policy as the mortgage is reflected in that policy. Here is a brief to-do list for you to peruse before saying "yes."
19 Tips for First-Time Home Buyers
Not too bad considering the size of the purchase YOU are considering making. All are vital, but the first six are essential as well.
- Credit score. If your credit score is above 800, you are ready to go! If it isn't, take some steps to increase your credit score. The higher the score, the lower the cost of your policy.
- Monthly Bills. The mortgage you are worried about is not the only cost you will have. Now that you are a homeowner, you will have property taxes, homeowners insurance, and homeowner's association dues.
- Home Loan Search. Get approved for the home loan before you start looking for the home. When you get pre-qualified for the loan, you know the price range the bank will accept. You don't want to fall in love with a house to only have your hopes shattered.
- Skip the Listing Agent. If pre-qualified, do not need a listing agent. Instead, get a buyer's agent. They act as an advocate for you. A real estate attorney to go over the paperwork and help make recommendations.
- Think PMI. Don't push yourself to make the 20 percent down payment just to avoid pre-mortgage insurance (PMI). Take the PMI to retain savings in the bank for future unexpected expenses. Keep yourself in the black.
- No Celebrating Until After Close. Be aware that lenders check your finances a second time once you are in escrow to make sure the loan can still go through. So, don't celebrate the purchase until AFTER the close.
- Home Type. A fixer-upper or a brand new home built this year? The fixer-upper costs less but leaves you will have to do the work or pay someone to do it. The new home requires more up front, but there will likely be fewer repairs needed in the first year or so.
- Police Report. What are the crime statistics on the street and neighboring streets? Do not trust the neighbors as they have a vested interest in your purchase of the home. It raises their home value, so do the research yourself.
- Home Inspections. Pay for a proper home inspection! The money you put down to hire the right inspector will save you a fortune on your home insurance down the road. Don't believe a recently built home is free of pests and well-built? You will be asking for trouble. Home builders build quickly to get paid quickly, so there may be mistakes you will have to pay for in the end.
- Comps. Check the comparables (comps). Know the market for the street and the area. Check for foreclosures, REOs (given back to the bank) and short sales.
- Time on Market. How long has the home been on the market? The less time on the market in a hot market means you will have to bid quickly and higher than the offer due to the bidding war among potential buyers. If the home has been on the market for a while due to sluggish demand, you may get away with a steal.
- Flexibility. Ask how flexible the seller is on price. If the demand is low, the seller may be willing to sell for less than asking.
- FSBOs. Look for any For Sale By Owners (FSBOs). You might get a bargain but be careful; the seller may sell it 'as is.'
- Negotiate. Negotiate for credits on repairs not yet done against closing costs.
- Paperwork. Get the paperwork on any contracting work done on the house since the owner purchased. That way you can ask the contractor about warranties.
- Permits. Make sure everything the owner did is permitted correctly. Check with the city permit department for the paperwork. Without it, that part of the house cannot be insured.
- Walkthrough. Do a final walk-through. Without the furniture and carpet, the home is bare. Look for anything off.
- Kids. If you already have kids, you will also need to know where the schools are located.
- Bundle. Bundle your homeowner's insurance and car insurance. It's an easy way to save a lot of money.
Finding Your Perfect Home Takes Patience
Do not expect to find your dream home right away. There are too many variables that play into that decision, too much money at stake and too many feelings of insecurity for you to make that decision quickly. Buying a home takes time, energy, willpower, and patience. Take the time to find the right home for you. Welcome to homeownership!