Buying a new home is the experience of a lifetime. It’s not just about finding a place to live, it’s also an investment in your future and has life-changing potential. But if you’re like most people, you may be feeling overwhelmed by all the details involved in such an undertaking. What should I do first? How much will this cost me? Where do I start looking for homes for sale? Will my family fit into this type of house? Do I need a real estate agent, or can I buy one on my own? Should we relocate closer to work or school, or stay where we are now? These are all compelling questions that deserve thoughtful consideration before you make any decisions.
Here are some helpful tips to help you buy a new home:
Start Saving Early
If you don’t yet have enough saved for a down payment, that’s okay. It may be possible to still afford to buy a home if you can save more. One way of doing this is to increase your monthly savings contribution. Ask your boss for a raise or find another part-time job to supplement your income. You can also decide to have a yard sale, sell some items on eBay or throw a big birthday party for all of your friends and family. Any extra money you raise this way is free money.
Understand What You Can Afford
Don’t stretch your budget just to buy a bigger house than you need. Before you sign up for any new credit obligations, sit down and determine exactly what you can afford each month after all of your other bills are paid. A mistake people often make is underestimating how much they spend each month on things like entertainment, dining out, or driving their car.
Use the Right Real Estate Agent for You
There are three main types of real estate agents: buyer’s agents, listing agents, and transaction brokers. A buyer’s agent is paid by you, so their job is to work with you to find your ideal home at the best price possible. On the other hand, a listing agent only works with the seller, and their legally binding commission is paid by the seller. A transaction broker is a large company that matches buyers with specific homes. They are not necessarily familiar with your needs, so it’s possible that you could end up paying more for a house than you should have or purchased a property that was beyond your means. When purchasing a house, it is necessary you find an agent or company that you feel most comfortable with. You can read up on the three types of agents, so you can make the right decision.
Have a Budget and Stick to It
Even if you’ll be using a mortgage to purchase your new home, that doesn’t mean you should spend so much. Use a budget calculator to compute how much you can afford each month based on your pre-approved mortgage options and other obligations such as car loans and credit card bills. You might also need to factor in private mortgage insurance (PMI) for homes with less than a 20% down payment.
Check Your Credit Score
A good credit score will help you land a nice low interest rate on your mortgage. This means you can afford to spend more each month and still stay within the confines of your budget. When applying for a loan, check that everything is in order with your credit report and then pull a free copy of your credit score to see where you stand. A new house is a perfect time to begin making smart financial decisions that will benefit you for years to come.
Explore Mortgage Options
If the housing market in the area you’re looking to buy isn’t competitive, consider getting a good interest rate on your mortgage to make it more appealing. You can visit several different lenders and compare rates as well as loan options such as fixed-rate versus adjustable-rate mortgages (ARMs), 15-year versus 30-year mortgages, and balloon loans. If you purchase a home that is part of a community of homes, or condos, it will be necessary to pay homeowner association fees. These monthly fees often include items such as the cost to maintain the common areas and upkeep of shared amenities such as pools and tennis courts. Also, don’t forget to pay attention to things like taxes, insurance, and HOA fees when you are figuring out your monthly expenses.
Pick the Right Type of House and Neighborhood
If you’re still renting, do some research on the area before you buy to determine whether it’s somewhere you’d like to live long-term. Many parents would like to buy a bigger house with an extra bedroom or two, so they can offer their grown children space of their own. That doesn’t mean you should try to stretch your budget just to get more space than you need. Remember, bigger isn’t always better. You’ll also want to look at the surrounding neighborhood and find houses of similar value. Homes in lower-income neighborhoods will cost less, but the quality of the homes and schools may be of concern.
We hope this article has given you some helpful tips on buying a new home. You should now be able to make an informed decision and purchase the property that’s right for you, your family, and your budget.