10 Tips for First-Time Home Buyers
By Burt Carey
Back in 1986, I bought my first house with more naiveté than savvy. That is to say mistakes were made. There was nothing insurmountable about any of the blunders, and my wife and I learned along the way. Today we are in our third purchased home. We certainly made fewer mistakes the second and third times around.
- Don’t Be in a Hurry – Research!
There are dozens of decisions to make before you settle on a house. You’ll want to research neighborhoods, school districts, shopping, proximity to work, access to connector roads, traffic – things that affect day-to-day activities. Check on water, power and sewer utilities not just for service to the home but rights-of-way for future expansion, road widening projects or nearby properties zoned for commercial purposes. This research will ensure your first home is in a location that will remain comfortable for years to come, and that will be of value when it’s time to sell.
- Save, Save, Save!
You’ll qualify for a better mortgage rate if you save enough to pay at least 20 percent of a home’s cost up front. Most lenders will not require private mortgage insurance (PMI) for loans made at 80 percent or less of a home’s value.
- Pay Down Debt, Avoid New Debt, Get Your Credit Score Up
Mortgage lenders have incredible deals for people with outstanding credit scores. Unfortunately, the only way to improve your score is to have credit. That is, the ability to borrow money from a financial institution and pay it back. Some ways to improve your credit score are pay down debt, pay your bills on time, and use a variety of credit.
Lenders want their customers to show that all monthly debt payments, including a mortgage payment, total no more than 43 percent of monthly income. And as you prepare to buy a home, you never want new debt to show up on a credit report.
- Build a Home Repairs Account
Home ownership comes with responsibilities renters never experience. Appliances go on the fritz. Rooms need to be painted. Leaking faucets and other minor repairs might be necessary in the first few months of living in a house. Save now for these unexpected but inevitable incidents.
- Match What You Want With What You Can Afford
Young couples without children shouldn’t buy a four-bedroom, three-bath palace like I did with my first house. Sure, it was easy to sell, but we paid to heat, cool, clean and insure 2,600 square feet of living space when we really used about half of that.
The less-is-more mantra is always good advice: Buying less house than the mortgage company is willing to lend you will result in a smaller monthly payment and allow you to save for your next (bigger) home, while you pay off debt, school loans and save for retirement.
- Set Aside Money for Home Owner Purchases
You’ll need stuff — furniture, cooking utensils, pots and pans, and dinnerware – and outside will require yard tools such as a lawnmower, string trimmer and bush clippers. Set aside money for these items now, not after the thrill of move-in day wears off and the duties of home ownership become apparent.
- Shop Around for Your Mortgage
In the days of my naiveté, I simply relied on the real estate agent’s suggestion of a mortgage lender. Big mistake!
We didn’t have the Internet back in those days. Today it’s much easier to shop for the very best rate.
- Pay for Your Own Home Inspection
Real estate agents will tell you the seller is responsible for providing a home inspection. But there’s no telling if the inspector is a family relative or close friend doing his buddy a favor. Hire a reputable home inspector and go with them when they inspect the house and property. You don’t need any surprises.
If your inspector finds items in need of repair, use those as negotiation pieces. Seller concessions are a normal part of the process.
- Find a Good Real Estate Agent
You may have a second cousin, an aunt or a close friend who’s in the real estate business. It’s great if you’re comfortable with them and trust them to get you the best house and deal possible. Otherwise, ask around and get referrals. The best real estate agent will know the market and have sales/listings in the same neighborhood where you want to buy.
- Ask Questions
The worst un-asked question is the one that comes up after you’ve signed on the dotted line – and the answer isn’t to your liking. If you’re the least bit curious or concerned, ask!
Image: Mark Moz