Buying a new home might be the single largest purchase an individual makes in their lifetime. After all, the most common type of mortgage is a 30-year term loan, and outside of marriage I can’t think of anything else that we commit 30 years of our lives to. This is precisely why all first-time home buyers should be aware of as much information as possible before making the leap into homeownership. Below is a checklist for first-time home buyers that they should listen to and heed.
It’s been said that owning a home is the definition of the American Dream. That is probably why so many people automatically feel like it’s the first thing they should do when they leave the nest. This is also why many people will take the plunge into homeownership before they are financially ready. While it is true that you can obtain a mortgage before you have 20%, but that doesn’t necessarily mean that you should. When you take out an FHA loan it usually means that you don’t have much money saved up in reserve, which could lead to problems later on if your furnace, roof, or windows need replacing. Also, paying PMI is a waste of money that is typically not tax deductible. You should exercise some patience and simply wait until you have saved enough money before taking on a new home.
When shopping for a new home you need to get pre-approved before any homeowner will even consider an offer you make. They need to make sure that you have the necessary funds and credit score to obtain a mortgage, otherwise the offer won’t mean much to them. What most people usually don’t know is that you don’t have to use the same mortgage company that provided your preapproval. While it might be easier and quicker, you can often times go online and rate shop lenders and bounce them off of each other for the lowest rate. You are going to have this mortgage for many years, and pay lots of interest over that period of time, so it only makes sense to get the lowest possible rate.
Know Your Budget
It’s absolutely vital to know the ins and outs of your budget in full. When potential home buyers create their budgets to see what they can and can’t afford, they often leave out some important aspects of said budget. While you are probably figuring your monthly mortgage payment into the budget, have you considered the cost of your monthly utilities? You might not be used to paying gas, electricity, water, and cable bills. These costs can add hundreds of dollars to your monthly financial obligations.
Pay attention and heed these tips and it will help you be a successful and happy homeowner. Good luck in making the most important purchase of your life, and enjoy!