Buying your first home is an exciting milestone and is one of those big “firsts” that you’ll always remember. But once the initial excitement dies down and you start to do your research (because you’re going to do your research, right?), it can get a little overwhelming. No one taught you how to buy a home in college – how are you supposed to know what you’re doing? Don’t fear! Delta Community is here to give you the tips and the support you need so that this can really be an exciting milestone.
Tip #1: Consider the budget for your big purchase. You might be rolling your eyes and thinking “Duh.” But you’d be surprised how many people start by looking at their dream house, falling in love and then trying to figure out a way to make it work. You’ll save yourself a lot of heartache – and money – if you start by first figuring out what you can spend and looking for houses within your price range.
The standard “suggestion” from most lenders
to figure out how much you can spend is to calculate 28 percent of your gross monthly income (GMI) – you can spend up to that number on your mortgage, taxes and homeowners insurance premium. That number is a good guideline to use, but it’s also a good idea to closely track your income and expenses for a few months to really figure out what you would be comfortable spending. This will also help you figure out how long it will take for you to save for
the down payment, closing costs and everything else that is required up front.
It’s important to do this to see what you can spend without feeling strapped for cash. If you wouldn’t have any wiggle room in case an emergency pops up (and believe us, something will pop up) then you’re trying to buy too much house.
Tip #2: Decide what you want in your house. Now that you know how much you can spend, it’s time to prioritize your biggest needs and wants for your first home. Maybe you have a specific area or neighborhood that you want to live in, or maybe you HAVE to have his and her bathroom sinks. Everyone is different, but the key is to figure out what you want and what you’re willing to compromise on.
Start researching the price range for the area(s) you’re considering on websites like Zillow.com. Get an idea of what you can get for your budget so you’re prepared and don’t set your hopes too high when you really start looking.
Tip #3: Get pre-approved! When you’re shopping for a house, you should also have already started shopping for a lender. Deals often fall through because the potential buyer can’t find a loan in time. See what your options are and get pre-approved so that you’re the ideal buyer when you put that offer down on your dream home. Pre-approvals typically last for 60 to 90 days but you can often talk to your lender to re-qualify if you haven’t found a home within that time period.
Tip #4: Consider the costs of ownership after closing. Even if you know you have enough money to cover your down payment and the closing costs, consider how much you’ll be putting into the home on a monthly basis. In addition to your mortgage payment, you’ll owe taxes, insurance and possibly even home owners association fees. Your mortgage payment will be a big part of your monthly expenses, but it shouldn’t be the only payment you’re considering. If you don’t have extra cash to take care of maintenance (because you won’t have a landlord to do that anymore!), then it’s too expensive for you. And remember, you should always put some funds aside each month to save for your future.
Tip #5: Find a home inspector that you trust. Talk to your friends, family or even your real estate agent to find a home inspector you can trust. Getting a proper home inspection done when you’re considering a home can save you thousands of dollars down the road. If they find anything questionable, send an expert in to look into it.
Tip #6: Research the neighborhood and do a trial run. Talk to your potential neighbors and see what their opinion is of the area. Try eating at some of the restaurants or shopping nearby. Get a feel for the environment. Good neighbors can be a huge plus when you’re a first time home buyer! Take a “test drive” from the house to any other place you would normally be driving or running errands to – work, the grocery store, dry cleaners – and see how bad the traffic is. Again, it’s all about preferences and prioritizing what’s important to you.
Being a first-time home buyer is a big deal and you should be proud of yourself for being at a point in your financial life that you’re able to consider this milestone purchase! Delta Community is always available to help you figure out exactly how to get everything in order so you can make your big move.