The real estate world can feel like a big and scary place; this is why we always offer the first time home buyer help. Going in guns blazing will only cost you a lot of money. It’s great to have enthusiasm, but it’s even better to some knowledge and research to back your every move.
Here are some tips that will help any first time home buyer seem like an expert and get you a great deal in the process:
Home Markets, Where Are They?
“This home is only $300K? That’s great! We were considering spending much more. Where do I sign?!” Stop, breathe, let’s go about this slower.
Had you researched the neighborhood, you would have realized that this home is only worth $225K and you were about to overpay big time!
Do your research.
Have you ever been looking at homes in an expensive area, such as the Hamptons, and then compared the same size houses in the middle of rural Ohio? You might not be shocked to see the price difference to be several million dollars, but they are in entirely different states, so the price difference makes sense.
The same thing happens between bordering cities, and even neighborhoods within the same city for reasons such as accessibility to freeways and malls, nearby schools, or even the crime rate of the area.
Doing some research will ensure that you don’t make a huge mistake and overpay for a home in an unsafe neighborhood.
Can You Even Pay That?
First, you want to figure out what your mortgage would be; you can easily find a mortgage calculator online to help you determine what your monthly payment would be.
Next, you want to factor in the closing cost, depending on the home, it is not unusual to pay upwards of $15K on closing costs. If you weren’t expecting to pay this on top of the price you agreed on for the home, you might just be in big trouble.
Then figure out what your monthly expenses as a household would be. In other words, add up the internet, gas, electricity, expected grocery bill, and any other monthly expenditures you incur and add them to your mortgage payment.
Now you’re getting much closer to what you’ll be spending every month, of course, try to have some financial wiggle room in case of an emergency.
Last, figure out your budget. With all of the expenditures added up, what will you have left over? Is it enough to live comfortably, or will you be risking a missed mortgage payment every time you take the family out to a monthly dinner?
If you can barely make everything work and don’t have much leftover for savings and fun, you might want to consider a different home. There is no shame in choosing a different home in order to avoid a foreclosure down the road. In fact, the smart move is to take this into account and travel towards the more affordable home.
You can always sell your home and upgrade down the road!
Get Your Money!
You likely don’t have the money for the house upfront, so you’re going to need to get a mortgage to be able to afford it. Well, you should take a few steps first.
Checking your credit is ground zero in the loan process, if you don’t know it, find out immediately. If your credit is good, move forward, if it isn’t you might want to consider taking some action over the next few months to raise your credit score.
The interest rate a good credit score can get you will save you tens or hundreds of thousands of dollars. It is crucial to try to have your credit at its absolute best when applying for a loan.
After you get a better credit score, it’s time to choose a lender and get preapproved. You actually have several options. Big banks, most credit unions, and even the government offer mortgage loans.
Each of these institutes will have its perks and pitfalls, so be sure to shop around and try to get the best interest rate you possibly can. If you’re able to take your time, between an increased credit score and some careful shopping, you can easily save yourself $100K over the next 30 years of your mortgage.
This just happens to be one of the most overlooked tools for first time buyers, don’t be like the rest of them. Take it slow and push for the absolute best deal, your bank account will thank you some day.
If you’re a first time home buyer and need help that will get you into a great home quickly, please contact us by calling us at 949-350-0146 or emailing us at Debrakovacs@cox.net or email@example.com and we can help you today!
Photo Credit: Shutterstock/Jirsak