Buying your first home is one of the biggest financial steps that you will ever make. It is important to take this decision seriously.
You’ll also need to take the time to prepare yourself for this important milestone. Follow these steps to ensure you’re ready to purchase your first home.
Determine If You Are Ready to Buy a Home
First, you should determine if you are ready to buy a home. Homeownership is a lot more expensive than renting since you’ll be responsible for added costs like home repairs, utility costs, garbage pickup, even water, and electricity. You’ll also need to pay for taxes and insurance related to your home. These costs add up quickly, and if you are not financially prepared, you may end up in a bad position.
Start Shopping for a Loan
Before buying a home, you’ll need to shop for a loan. In fact, you’ll need to get pre-approved for a mortgage before you can even begin shopping for a home. This will help you to look within your price range.
Find the Best Payment Options and Loan Types
When it comes to your mortgage you may be surprised at the different loan types and payment options available. It can be baffling when you think about ARMS and PMI.
Be Honest About What You Can Afford
You also need to determine how much home you can really afford. A good rule of thumb is to keep your mortgage along with your taxes and insurance between 25 and 30 percent of your income. Other experts advise that your home cost be limited to two and a half times your annual salary.
Barry and Diane Evans
Find a Good Realtor
Once you have determined how much you can really spend and are pre-approved you should find a good realtor. Your realtor should listen to your wants and needs carefully. She may make recommendations or explain the market to help you find a home that suits your needs and that you can afford.
Request a Home Inspection
Once you’ve found the home for you, you’ll need a thorough home inspection. This is different from an appraisal. You should pay for the home inspection. The home inspector will look for hidden problems with the home before you purchase it.
Be Patient During Escrow
Once you have bid on your home and the offer is accepted, you will go into escrow. The escrow holder will work to make sure that all the documents, money and other necessary information is together before you close. Escrow is set up to protect the buyer, the seller, and the lender. It can take time to complete escrow, although the time really depends on circumstances around your purchase.
Close and Move In
Once you have closed on your home, it is time to move in. You can paint, unpack and enjoy your new home. Be sure that you change your address with your bank, and other accounts. You can set up your utilities and cancel your old ones as well. This will save you time and money because you will avoid late fees. Some companies will waive installation fees if you transfer your old account to your new address.
- It is important to realize that you need to include the cost of taxes and homeowner’s insurance into your monthly housing cost. With the insurance and taxes, your monthly housing costs should not be more than 30 percent of your monthly salary.
- Additionally, you should be prepared to pay for all of your closing costs out of pocket. This will save you money over time. If you are finding it difficult to save up for closing costs you may not be ready to purchase a home.
- Be sure that you can afford your mortgage payments. If you are not sure you can afford a home, try sticking to a budget with what you expect your home payment will be and put the extra money in savings. This can build your confidence and your savings so you can move forward with the home purchase.