Originally published on HiCharlie.com
Buying a home is an exciting time in anyone’s life. It’s easy to get caught up on HGTV and drool over beautiful homes and imagine what it’d be like lounging by the pool in your new backyard.
However, purchasing a big ticket item such as a house is no small task. You’ll want to be as prepared as possible so you can understand what your rights are, how to ensure you find the perfect home, and make sure the entire process goes as smoothly as possible.
Make Sure The Home is Suited For Your Lifestyle
Here comes the fun stuff — dreaming about your new home! Take some time to sit down and determine what it is you really want in a home.
If you’re unsure, think about your lifestyle and tour some neighborhoods. For example, are you really into outdoor activities? Do you want to be in the best school district? Or close to where all the hip restaurants are?
Then consider what you want in your home. Maybe you want an extra room for office space or a big yard for gardening your own veggies. Go on, make the list as big as you want.
The bad news is that you may not tick off every item on that list. In many cases, you’ll need to make some compromises and prioritize. That way, when it comes time to decide between a few places, you can refer to that list to see what’s most important to you.
The Numbers Don’t Lie
When my husband I decided to purchase our first home, I’ll (sheepishly) admit I got swept up in Zillow listings. While there’s nothing wrong with that, I was only wasting my time looking at homes I couldn’t afford.
You already know that a home is a major purchase. If you stretch yourself too thin and struggle to make your mortgage payments, you’ll be at risk of losing your home. Regardless, it’s essential to get clear in your budget and financing options will give you a view of what you’ll need to set aside even before you make an offer on a home.
Most realtors will recommend you get pre-approved from a mortgage lender before you look at homes to help you determine how much you can afford and the types of financing you qualify for. The preapproval process will look at factors such as your income, credit history and your other loans to determine how much you can borrow. In some cases, you may be eligible for different financing options — many states offer assistance programs for first-time home buyers.
Once you get clear on the numbers, you can determine how much you’ll need to save for a down payment. It’s common to put down 20 percent because your loan costs could be lower.
You can also determine whether the numbers work in your favor, AKA whether it’s cheaper to rent or buy. Your budget will also be useful for a realtor because he or she can then help you find homes that fall within your budget and have the qualities you’re looking for.
By the way, it’s perfectly OK to shop around at different lenders to compare rates. It’s also a good time to get your financial house in order like making sure your credit report is accurate and that you’re not applying for any additional, new loans.
Budget For Future Costs
Your mortgage isn’t the only cost you need to worry about. There are closing costs — fees you’ll need to pay the lender to close your loan which can include your homeowner’s insurance and property tax — which typically run between 2% to 5% of your loan. There are also moving costs. Even if you’re going the DIY route, renting a truck, purchasing moving supplies, etc. can add up.
Then there are maintenance costs — what you’ll need to pay to keep your new home in good shape. These costs can include getting your HVAC system inspected, yard work, and pool chemicals. You’ll also want to budget for other costs like new paint, furniture, or contractors if you intend on doing renovations before moving in.
Find a Buyer’s Agent You Can Vibe With
Don’t trust just anyone with this big of a decision. If you’re going to shop around for a lender, you can also shop around for a realtor. This person has a fiduciary duty to you, meaning they have to act with your best interest in mind. From making recommendations to reading over closing documents, your realtor needs to be a good fit.
When my husband and I started working with our first realtor, he tried to pressure us to increase our budget and suggested we put down an offer for a home after we toured a few. Overall we felt uncomfortable and ended up working with someone else who answered all of our questions and took our budget seriously.
Consider speaking with a bunch of realtors before deciding who you want to work with. Remember this person will represent you in your transactions, so make sure it’s someone you can trust.
There’s No Such Thing As a Dumb Question
Ask as many questions as you need to understand each step of the home buying process. Everyone from the mortgage lender to the home inspector is there to help, and many will expect questions from the home buyers.
If there are any terms in a document you don’t understand, ask. Ask your home inspector to break down the information or take a closer look. Ask your insurance agent what your home insurance really covers.
If you’re overwhelmed, it’s perfectly natural. In many places across the U.S., you can find homebuyer education classes to attend for free. These classes can help you understand each stage and prepare you for the steps to come.