Are you considering buying a new home? If so you’re in good company. Of all the people looking to buy homes right now, 32% of them are a first time home buyer. There’s a lot to consider as a first time home buyer and it can be quite confusing. In 2016, 14% of people who bought a home financed 100% of their entire purchase with the mortgage: what?s your mortgage plan? Should you get a conventional mortgage? The average price of a home in 2016 America was $186,000, but what that means for you depends entirely upon where exactly you want to live. Whether you?re looking at an investment property or a vacation home, here are five tips for the first time home buyer:
- Examine your budget carefully. Whatever you have in the bank right now, remember that buying a home means taking on an expense that will start draining that account. You should be making your budget not based on the chunk in the account right now, but upon what you can realistically expect to see coming in every month. Don?t forget that you?ll also be paying property taxes, homeowners association fees, and possibly more for utilities if you?re moving into a bigger place than you?ve been renting. All this has to be taken into account by the first time home buyer.
- What should you consider when it comes to paying for the home? When you look into FHA mortgage loans or any kind of loan, really, you first have to decide between fixed-rate and adjustable-rate mortgages. The latter can offer the lowest rates, but those rates can suddenly go higher. It may become difficult to predict your payments. However, if you aren?t planning to live very long in a particularly place, an adjustable-rate mortgage could be a better option. The length of the loan is also a consideration. Of course the shorter the loan period, the less you end up paying in total, but the higher the monthly payments will be, too.
- Make sure you?ve got a good credit score and money in the bank. People can and do buy all the time while still in debt and without at least 20% of the price of the home ready to put as a down payment. Your granddad would probably ask you at this point if you?d jump off a cliff just because everyone else is doing it! A first time home buyer is well-advised to pay down credit card and school debt and bulk up credit scores before looking at buying a home. If you are able to pay at least 20% of the home?s price up front, you?ll not only have smaller monthly payments, you?ll also probably be able to avoid having to pay for private mortgage insurance.
- Consider your neighborhood carefully. A home might seem like a great deal until you find out the local property tax rates. What?s the neighborhood like, and will you feel secure there? Beyond that, will you fit in? What are schools like, if you have kids, and if you don?t have kids do you want to live near a school at all? These are all important things to scout out as you consider buying your new home.
- Prepare yourself for a long process. Home buying ?reality? shows often portray the process of buying a home as a lot faster than it really is. In reality, people tend to see many, many places before they find the right one. The whole process can be extremely frustrating, and it will definitely be exhausting. You may think you?ve found just the right place only to have someone out-bid it from under you. If you?re mentally prepared to go through all this, you won?t find yourself throwing in the towel, or worse, springing for something you actually can?t afford just to make it all stop.
Owning your own home is rewarding, and nothing beats the feeling you?ll have when the keys are in your hands and it?s all yours. To get there, consider these tips, get a good realtor, and go into the process with your eyes open.