Buying a home is a huge milestone that most Americans have dreamed about at one point or another. But the recession put that dream on hold for many people. Now a decade later after years of recovery, many people are considering the possibility of becoming first-time buyers.
Home buying is a complex, time-intensive endeavour. You want to take advantage of the near-record low-interest rates and avoid rising rents, but buying a home is a decision that requires planning and forethought. Today’s first-time homebuyers face a number of unique challenges, like low inventory levels that stifle buying, and those challenges have to be accounted for.
If you’re thinking about buying a home, here are five things that must absolutely be considered before the home search begins.
How the Homebuying Process Works
Before you jump in headfirst you should know what you’re jumping into. Get a better idea of how mortgage lending works and what steps have to be taken to go from an offer to getting the keys.
Read up on the basics of mortgage loans and the different types. You may only qualify for one type of loan and therefore need to find a lender who is a specialist. There are also title services completed by a title company, which few people are familiar with before buying a home. The company verifies that the title to the property is legitimate and insures against any errors. You can use a national title company or one that is only based locally.
The home buying process is complex. You don’t want to have to learn as you go or it the entire process will quickly become overwhelming.
Who You Want to Act as Your Agent
A great way to learn about the home buying process is to hire a buyer agent. They are a great source of information on local issues, can help you compare home prices and understand the legalities of closing on a home. The best part – it won’t cost you a single penny since the seller pays the agent’s commission.
The agent will play a pivotal role in whether you’re able to get the home of your dreams and the price you pay for it. Any agent you consider should be a market specialist who is active in your target areas. It’s perfectly fine to interview several real estate agents to get a better feel for their knowledge level and expertise.
Where You Want to Live
Another big consideration that needs to be hashed out before the home search begins is where you want to live. You can change everything about a property except where it’s located. It’s always highly advisable to identify three target areas where you want to live.
Things to consider when you’re choosing target areas include:
- Proximity to work/commute time
- Types of neighbourhoods in an area
- General home prices
- Safety and crime rates
- School performance ratings
- The demographics and age ranges
Once you identify your target areas you can focus your home search to specific neighbourhoods. In big cities where there are hundreds of homes on the market, this is a real time-saver that can help you catch new homes as soon as they hit the market.
What Affects Home Values
At the end of the day, the house you buy will be your biggest investment. It can not only provide shelter, a house can provide significant wealth in the form of appreciation.
There’s no guarantee a property will gain in value, although given enough time most do. But it helps to know the factors that affect property values. Some are universal, like having highly-rated schools nearby. Others are hyper-localized, such as the distance to a specific landmark.
What’s Happening With the Local Real Estate Market
If you follow the news, you’ll hear information about the real estate industry as a whole. Namely, whether markets across the country are generally strong or struggling. But national statistics could be wildly off from your local market.
Start paying attention to the monthly statistics in your city. This information can give you a better idea of whether your area is currently a buyer’s market, seller’s market or balanced. Pay attention to the inventory levels and days on market, which tells you how long homes stay on the market before they’re bought. If these numbers are low that indicates a buyer’s market. You can get this information from the local board of realtors. Your real estate agent is also an invaluable resource for gauging the market before you start the home buying process.