Buying your first house is a time filled with excitement, nerves, and apprehension. It is a big decision to commit to buying a home as it is a long-term investment. A house is a permanent place for you to live, it is something you can call your own, and it will be the place that many memories are shared. It is a wonderful and stressful event that is bound to happen for many. The question then becomes, what do I need to know when buying my first home?
There are many parts of owning a home that are not taught to us growing up. Unless you have been involved in our family or friends’ own home purchase, you will likely have no experience dealing with realty and the numerous aspects associated with purchasing the home. With a relator there to help, you wont need to worry about all of the details, scheduling, and documents, but there is still a lot of decision making that needs to be done on your own. So, what do you need to know before buying your first home? You can breathe easy now, because I have listed the things you need to know beforehand so your home-buying experience can be a more fun and less stressful time!
What Are You Approved For?
Many individuals believe that buying a house is the same as buying a car or purchasing a big screen television. The misunderstanding that many have is not realizing that you need to be pre-approved to get a house. Very few people have large sums of money lying around to pay off a house in full. Purchasing a home means you need to get a mortgage from one source or another. Most go to the bank or a mortgage broker (whoever can get the best interest rate) and get a loan for their mortgage, allowing them to slowly pay it off over the years. What you might not know is that before you find your perfect home and make an offer, you must first speak with your borrower and find out just how much you are approved for. This will vary from person to person (even with the same income), as everyone has different credit ratings, employment, etc. The place you are borrowing money from will have specific guidelines and will determine just how much you are pre-approved for when looking for your home.
Do You Need a Cosign?
[one_half]If the mortgage you are pre-approved for is not enough for what you are looking to buy, you may want to look into a cosigner. This is a secondary signature from someone you trust (and who trusts you) who can cosign on the mortgage for you to make you look more credible (and who is willing to pay on the off-chance you default on a payment). This is a good option for those who are still in school, are in the process of transferring jobs, or perhaps have a credit rating that just hasn’t had time to improve. Once you have cosigned with someone you will be qualified to get a higher mortgage rate. Just keep in mind that the person who cosigned for you will be added onto the mortgage and title, so make sure it is someone you trust![/one_half]
How Do You Avoid Becoming House Poor?
One thing that many people do not think of is that the building/structure itself is not the only thing you have to pay for. When buying a house, you need to consider all of the other aspects involved, besides the mortgage. There are property taxes, insurance, utility bills, savings for replacements, electricity and gas bills, and other living costs – not to mention closing costs at the time of the sale (lawyer, commissions, etc). If you are spending the majority of your income all on the house and not able to afford other things (groceries, clothing, other necessities), then you have become house poor. The standard rule that many people follow is that a home should be ¼ of their monthly income for the mortgage payments. This will allow you to have money leftover for ‘living’.
What Part of the City Can You Afford?
The location of the house you want to buy will also determine how much it will cost you. Most cities are divided into quadrants and areas, some with larger homes than others. There will be areas that are high concentration and closer to downtown, and therefore will be more expensive. Moving further away from the core of a city will usually cost you less. It is a good idea to consider what you need to be close to so you can determine just what part of the city you can afford. Ask yourself the essential questions: are you willing to have a longer commute? Will you be taking transit? Are you close to schools for children? Asking all of these questions will help you decide where you will most likely want to be in the city. Be sure to always stick to your budget and use that to help you consider what you need to splurge on and what you need to sacrifice.
What Kind of House Do You Need?
[one_half padding=”0 20px 0 20px”]No matter what type of home you are looking for, it is important to know what kind of house you need. Finding a home is not as simple as flipping through a catalogue and finding the prettiest one. You need to look for certain aspects of a house that fit your lifestyle. Do you have kids? Do you need access to parking? Have you factored in condo fees and utilities? How much home insurance will you need to purchase? The questions are endless but are good to know just what you need to consider. Buying your first home needs to be approached seriously and with the mindset of going through all the scenarios. Your lifestyle has a lot to do with the home you buy. For example, if you are newlyweds, you may be considering having children in the next few years. If this is the case, you will probably need a home that has enough room for them to grow up in. Whatever you end up choosing, a condo, house, townhouse, etc., be sure that the home fits your needs and that you can afford it after factoring in all other costs.[/one_half]
Buying your first home will be a good experience if you have done the work, and looked into what you need to do. Being prepared and seeking answers for the questions you have is the best approach you can take – so don’t be afraid to reach out to me. May your home-buying experience be fulfilling, and be the perfect home for you!