Finances: Get Approved
First, get approved for a mortgage. Many individuals only consider the monthly mortgage cost when determining the type of home that will fit in their budget. There are many other items that make you qualified for a loan like outstanding loans and assets so get approved first. Many real estate agents will ask to see the approved mortgage before working with you to ensure you are looking at homes that will best match your budget.
Keep in mind there are other expenses to consider when budgeting for your first home. Theses other expenses can include: property insurance, taxes, special tax assessments, homeowners association dues, maintenance, electric and water bills. Property taxes and insurance can change year after year too. Typically property taxes and insurance increase year after year, so make sure to keep that in your budget. If you’re buying a home that needs some updating make sure to incorporate that into your budget as well.
Here’s a quick list of all costs to be considered:
- Property Insurance
- Property Tax & Special Tax (selected Properties)
- Home Owners Association
- Electric and Water
- Home Remodeling
- Additional Costs
- Sum up the Total $
TIP: Homebuyers who put 20% or more down don't have to pay for mortgage insurance when getting a conventional mortgage.
NerdWallet has an easy to use mortgage calculator tool
Find a Real Estate Agent
The process of purchasing a home can be overwhelming, especially for first time buyers so get some assistance. Find a real estate agent that understands what you are looking for in a home. To help you find the right agent try getting some references from friends and family. If anyone has a reference ask for a referral for a home inspection company too, you'll need this later on. If you find an agent on your own ask them for references.
TIP: Looking for a home inspector early on will save you time in the long run.
Make An Offer
Once you have found the home of your dreams it’s time to make an offer. Get advice from your Real Estate Agent for your initial offer. All offers are different depending on the market and area you are looking to buy a home.
Be Creative. If you meet the asking price ask the seller to include the washer and dryer.
Expectations & Inspections
Expectations are important. You should understand who is responsible for closing costs. If the buyer is responsible add that cost to your cost list. Closing costs are typically 2%-5% of the purchase price.
Inspections. You should be present on the day of the inspection and make sure everyone takes their time (do not rush this).
Before the inspection make sure you get a full disclosure from the seller. This will help you pinpoint some items that should be reviewed with the inspector.
Here’s a quick list of things that should be inspected:
What the condition, does it need to be replaced? If not, when will it need to be replaced?
FOUNDATION & LOT
Is the foundation in overall great condition? Are there any soft/ soggy areas? Does the drainage and gutters seem to be away from the house?
Do the electrical switches work? Have the outlets been grounded? Is the panel updated and expandable for additional appliances or a potential remodel?
Any unusual noises or malfunctions? Has the sewer line been scoped to check for potential cracks?
HEATING & COOLING SYSTEM
How old is the furnace and air conditioner? Do they work? If these were replaced did they use the old tanks?
Any weird cracks or evidence of leaks? Check all the ceilings and windows. How is the odor inside the house? Beware of musty odors!
What is the condition? How old are they? Will they need to be replaced soon?
Any signs of leaks? How’s the structure of roof?
What is the condition of the gutters? Does the house need to be repainted? Does the exterior need a lot of updating?
How’s the smell? How’s the insulation?
The home buying process takes a lot of planning and sometimes the unexpected happens. Maybe the home inspector missed some broken gutters that need to be replaced because it’s raining season. As much as you want to be prepared, sometimes the unexpected will happen.
Be Open Minded and Take Your Time
This is an exciting time in your life so take your time. This is most likely a long term investment so, don’t rush into anything that you may regret later. Find a home that fits your lifestyle and budget.
Many individuals have an idea of what they would like in a home, 3 bedrooms, 1 study, 3 bathrooms, 3 car garage, walk in closet and the list goes on. Be open and you might find something that works better for your budget but doesn’t hit every single item on your list.You'll be happier long term.