If you’re considering buying your first home— congratulations! Purchasing a house is a big decision, and one that’s undeniably a cause for celebration. But before you break out the champagne, there are a few lessons to keep in mind that can help you on your journey to becoming a homeowner.
Here some tips that will make you feel like a purchasing pro:
1. You’re Going to Have to do A LOT of Paperwork
Gathering all the documents you need to purchase a home might not be the most glamourous part of the process, but it’s something that everyone has to plan for.
Taking time to get organized will save you time and energy in the long run, so as you start to turn your home-buying dreams into a reality, start gathering your:
- Tax returns – You’ll need your returns from the past two years.
- Pay Stubs – Most lenders require proof income from between the past two to three months. This can be difficult if you’re self-employed, so get organized ahead of time.
- Bank Statements – This includes both checking and savings accounts. Lenders will want a complete overview of your financial situation, so the more money you can prove you have access to, the better.
2. There’s More than One Kind of Mortgage
Most first-time home buyers know they’ll have to get a mortgage, but many don’t realize that there are several different kinds of mortgages, all of which offer different advantages and disadvantages.
When choosing your mortgage, look into options like:
- ARMs – Adjustable rate mortgages (ARMs) have interest rates that fluctuate throughout the lifespan of the loan. These are generally considered good options for buyers who plan to pay down their debt quickly, and who can afford to handle changes in the interest rate.
- Conventional Mortgages – Conventional (fixed-rate) mortgages, have interest rates that are determined and set by national standards. These mortgages not only offer stability, but they can also come with low down payments.
- VA Loans – VA (Veteran Affairs) loans are reserved for those who are either former or current service members. The major draw of a VA home purchase loan is that they offer mortgages with little to no down payment, as well as competitive interest rates.
3. It’s a Marathon, Not a Sprint
As a consumer, you’re used to making purchases. However, as a first-time home buyer you probably aren’t used to making purchases that are going to have such a significant impact on your life for years, or even decades, to come. As you search for a home, don’t try to rush the process. Timing the real estate market is less important than discovering the home that’s perfect for you. So, spend plenty of time finding a house that offers the amenities you want, in a location you’re happy with, at a price you can afford.
4. Stick to Your Budget
You might be surprised at how much money you’re eligible to borrow, but just because a lender is willing to provide you with more funds, doesn’t mean you should take them.
First-time buyers often make the mistake of being lured into purchasing ‘more house’ than they can actually afford. Plus, there are a lot of costs associated with investing in real estate that you may not be familiar with. When determining your budget, be sure to factor in:
- Closing costs
- HOA fees
- Unexpected home maintenance and repairs
- Property taxes
Helpful Hint: If you need help calculating what you can actually afford, try using a home affordability calculator.
5. Not All Inspections are Created Equal
If you already know you’ll need to have your potential new home inspected, that’s a great first step. But beware—not all home inspections cover everything you need to check for prior to purchasing a home. In order to ensure you aren’t purchasing a house that’s doomed to become a money pit, make sure your home inspection covers pests, mold, structural issues, roofing, crawl spaces, and water damage.
Your New Home Awaits
If you keep these lessons in mind, you’ll be well on your way to purchasing your first home. If you hit any bumps in the road, remember—this is a learning process. Soon, you’ll be building out your move-in checklist. A couple blinks later, you’ll be opening that bottle of champagne in your new kitchen!