Understanding a home equity line of credit (HELOC) is important knowledge for every homeowner. Described as a...
Buying a home may signify different things for many different people. However, the most common of those things is the dream of owning a home, a place where memories are made. Of course the financial implications are perhaps the most obvious concern, however the emotional side of buying a home is often overlooked. These seven tips can help you manage the financial and emotional aspects of buying your first home.
1. Don’t Rush Things
There are many different factors to consider when buying a home. Making a list of all your requirements before you go house hunting is a good place to start. Also take the time to broaden your research on the real estate property, as it can save you time and undue stress down the road. The more time you invest in the research phase, the happier you will be with your home purchase.
2. Check Your Credit
Most consumers tend to underestimate the financial stress of big purchases such as buying a home. You can alleviate at least a small portion of this stress by knowing where you stand from a credit perspective. If you don’t have a strong credit score it can be very difficult to buy a home, especially at a good rate. Start by checking your credit score. You’re entitled to one free credit report every year from each of the three credit reporting agencies, Transunion, Equifax, and Experian. The best way to obtain your credit report is to visit annualcreditreport.com. There are numerous websites that advertise free credit reports, but this is the only website endorsed by the Federal Trade Commission. Or you can visit the credit reporting agency websites directly.
3. Prepare a Realistic Budget
Look at your income and expenses to develop a realistic plan. How much can you afford to spend on a house payment? Using a payment amount that comfortably fits your budget, determine how much you can reasonably afford to spend on your new home. Use the online Mortgage Calculator tool to help you estimate payment amounts.
4. Reserve Some Savings for “Extra” Expenses
Be prepared for the extra expenses that come with buying a home. In addition to actual home purchase costs, such as the appraisal and other closing costs, some “normal” expenses can increase sharply, including utility bills and home maintenance costs. Plan for additional expenditures such as Home Owner Association (HOA) fees, lawn maintenance, and property taxes. While allocating monetary reserves towards your new home, allocate a sufficient amount to savings to cover those extra expenses.
5. Shop Rates and Fees
Every basis point in a mortgage rate matters. Even a quarter percent lower rate can save you thousands of dollars over time. Also, mortgage closing costs can be very expensive, so be sure to consider additional fees that will be charged. Look carefully at the disclosures provided by the lender and ask questions if there is anything you don’t understand.
6. Be Attentive at the Time of Inspection
It is a smart decision to hire a professional home inspector, but take the time to do a walk-through of the home yourself. If you have concerns, address them with your home inspector before he/she completes the report. Make sure your home inspector is thorough. If possible, inspect under the carpets and behind picture frames to look for anything out of the ordinary. Ensure that your concerns are addressed before finalizing the deal.
7. Buy for Long Term
Buying for the long term is an investment strategy that will eventually build up equity on your initial investment. Carefully consider the options of renting vs. buying, and what works best for your situation.
7 Tips for Buying Your First Home