The transition from being a renter to a first-time home buyer is an exciting time full of questions and possibilities. What order does a buyer need to do things? How quickly do buyers need to decide?
Here are some suggestions to help first-time buyers make the best choices:
Get pre-approval for a mortgage
When buyers are pre-approved, they have a better idea of how much home they can afford. It also saves them hassle when they find their dream house and want to keep the process moving along. And it shows the seller they are serious buyers, ready emotionally and financially to make a deal.
Shop for a lender to get the best mortgage
Home shoppers might want to start with the banks where they already have established relationships. Or they can begin searching online; sites such as Zillow allow shoppers to anonymously shop for mortgage rates.
Decide how much to spend
Just because the bank will lend a buyer $300,000, doesn’t mean spending that much is the right financial decision. A buyer might have plans for early retirement or a trip abroad. Consumers need to consider their lifestyles, how much they can allocate to a mortgage each month and how much debt is comfortable for them.
Home buyers can calculate mortgage payments online. They should remember they’ll also pay monthly fees for utilities, insurance, taxes and garbage pickup.
Keep it current
Mortgage pre-approvals have expiration dates. Buyers need to keep the approval current with the lender if their house search continues longer than expected.
Enjoy the process
Looking at one more pink bathroom can be a drag or amusing. A purchaser with a sense of humor and some imagination can find home shopping fun. It’s a little like playing house, picturing different furniture and paint colors in every room. Try to embrace the possibilities.
Don’t rush into a purchase
Falling hard for a house can lead to big problems. Buyers shouldn’t hurry through the process because they’re afraid they’ll lose a house. There are other houses. Slow and steady buyers take the time to learn the shortcomings of each home and think how to remedy them.
Don’t outbid the competition for more than the home is worth
It’s easy for buyers to get caught up in the moment and get into a bidding war for a house. Smart consumers decide at the outset what they are willing to pay, so they don’t let emotions overrule logic later.
Consumers who buy more house than they can afford are setting themselves up for challenges down the road. A comfortable house with manageable payments is a happier home than a mansion where the owners are stressed about paying the mortgage.
By researching comparable properties a home buyer can understand what a house is worth. Use Zillow to see estimates for other houses nearby.
Get a professional inspection
Some states require inspections, but regardless of laws, buyers in every state should invest in home inspections. A good inspector can uncover leaky roofs, termites or mold – all things a buyer would rather know about before signing contracts. Buyers should look for inspectors who belong to accredited associations. Don’t panic if the inspector finds problems; there’s still time to withdraw the offer or negotiate for repairs.
Negotiate with the seller
If the home inspection reveals something unsavory (such as mice) or unsafe (such as a loose banister or piece of the sidewalk) a smart buyer uses the issue to negotiate. The buyer can either ask the seller to fix the problem or decrease the cost of the house so the issue can be fixed later.
Anticipate expensive closing costs
Sure there’s a down payment, but there are many other fees on the closing day from lender and title fees to taxes and processing costs. Closing costs generally range from 3 to 4 percent of the cost of a house. A mortgage lender should inform buyers approximately how much money they’ll need at closing.
Buyers need to keep enough set aside to close the deal, plus some extra. They’ll also want cash for moving trucks, paint, garden hoses and all sorts of other things in the first few months.
Diana Fishlock has researched and written articles on a wide variety of subjects for newspapers in New York, Pennsylvania, and Maryland. She lives near Harrisburg, PA and writes for Zillow.