Buying your home for the first time can be a very exciting and fun experience. However, there are many things that you need to consider while you are going through the process. As a first time home buyer, there are certain things that you may not be aware of.
It is important that you conduct the research necessary in order to make a good quality decision on the home that you are purchasing. Below are the top ten things that you will need to consider before making your first home purchase.
- Think about how much home you can afford. You should already know how much money you will be able to borrow, but also compare this with the amount of money that you can actually spend each month on a mortgage.
- Getting Pre-approved. Remember that pre-approved and pre-qualified are two different things. A pre-approval requires more information, like a credit score, in order to determine the approval amount.
- Learn your credit score. It is important that you keep track of your credit score and understand the items that are on your credit report. If you have little to no credit or bad credit you will probably not be able to qualify for a home loan.
- There is more than one type of mortgage. It is a good idea to review the different mortgage options and decide which works best for you. Most require a down-payment and you should be aware how much money you will be required to bring to closing based upon the house you are considering.
- Documentation is important. You will be asked to provide lots of different types of documentation. It is a good idea to ask your banker about these well in advance because this could speed up your loan process. You should also start considering homeowners insurance. If you already have rental insurance, you can most likely transfer it over easily. However, you may be able to find a better price elsewhere. Regardless, homeowner’s insurance is required in order to obtain a mortgage on a home.
- Learn about reasonable offers. You should also understand what a reasonable offer looks like in your area. You realtor should be able to guide you on this journey, but you should research the area that the home is in to see what others have sold for in the nearby area.
- Understand the purchase agreement. When you make an offer, you will be signing a purchase agreement and it is important that you understand the items that have been listed in it. Make sure that you list additional items here that you would like to be included with the home, such as certain appliances or furniture. This is also the place where you would ask the seller to pay closing costs on the home.
- Home Inspections. Make sure that you add a contingency clause in your purchase agreement regarding a home inspection. Some homes may have costly repairs that are needed, some of which are required before your bank will sign off on the loan. If something comes up in the inspection that the owner is not willing to fix, you may want to have the opportunity to walk away from the deal before you purchase the home.
- Closing Costs. You should understand what the closing costs are before you begin the loan process. Your lender is actually required to provide you with an estimate in writing regarding your closing fees. You should review these items carefully so that you will not have any surprises when it comes time to close on the home. This amount will be due at the time of closing, so it is important to make sure that you will have the cash on hand at that time.
- First Time Homebuyer Credit. You should also talk to your accountant to see if you qualify for a tax credit when tax season rolls around. Typically, there is a first time homebuyer credit that is available, but you can learn more about that from the person who prepares your taxes.
If you are ready to buy your first home, be sure that you complete plenty of prep work up front. This will allow you to make your purchase with ease and help you to avoid any surprises or hiccups that may come up throughout the process.