Buying a first home is a long, complex process.
The process of buying a home for the first time can be overwhelming, even for the best prepared buyers. Each step of the process; from getting preapproved for a mortgage loan, to selecting a home in the right price range; presents decisions that can drastically effect the outcome. Most new home buyers need advice or guidance from someone with knowledge of real estate.
Reasons for Buying
Buying a first home shouldn’t be a decision you take lightly. Instead, make a list of the reasons you’re interested in buying. A home represents a major responsibility, but it’s also a chance to build equity as you pay off your mortgage. Buying at a time when the market has driven home prices down, can make a first home into a smart investment, increasing the likelihood of being able to sell it for more in the future. Finally, owning a home gives you control of your own living space, with the ability to make improvements and changes to your liking. Our main reason for buying our little home in Spain is because it is ideal for the outdoor life, but of course your reasons may differ.
New home buyers should also be aware of the potential drawbacks of home ownership. A home is a major commitment, both in terms of money and effort. Once you own a home, it will be in your best interest to spend time and money improving and maintaining it. It may also limit your options for relocating, since you’ll want to wait to sell your first home until its value has time to increase. Every home purchase also carries the risk that the home will actually lose value instead of gaining it, especially if the local economy declines and the demand for housing falls.
Every buyer navigates the home-buying process slightly differently, but it usually involves some of the same basic steps. One of the first and most important tasks is getting preapproved for a mortgage. This means visiting one or more banks and lenders and submitting personal financial information. The results of your mortgage applications will let you know what your price range is, and also what to expect in terms of a monthly payment and down payment amount. The next step may be contacting a real estate agent and describing the type of home you want. Shopping for homes and submitting an offer comes late in the process, and still leaves the paperwork involved with closing the deal.
Buying a home for the first time involves more than just making a down payment and taking on mortgage debt. First-time buyers need to consider the other costs, which can otherwise come as a surprise. Your mortgage lender should provide a good faith estimate of the closing costs, but these may vary, based on the value of the home you select and the real estate agent’s charges and policies. Budget for several thousand for miscellaneous fees that constitute closing costs and pay for an appraisal, deed and real estate agent fees.
No single resource can provide a comprehensive, accurate list of dos and don’ts for buying your first home. Seek out information as you need it and always double-check dubious information or deals that seem to good to be true. The U.S. Department of Housing and Urban Development is an excellent resource for everything from avoiding predatory lending to seeking out government-backed mortgages that can help you get a home without a large down payment. Your real estate agent should also be a primary source of information, and should be willing to answer your questions, even the most basic ones. Finally, consider your mortgage lender an additional resource. Ask about any confusing terms to avoid taking on debt you aren’t comfortable with or might be unable to repay.