First-Time Home Buyer Guide
Buying a home is everyone’s dream. It is a good decision to make as getting one is an investment. Unlike a car, the value of a property or house appreciates, making it a good asset to have. Unfortunately, buying a house is not easy as it involves a huge amount of money and requires several documents. If one does not have enough savings and a stable job, then getting one may not be a good idea yet.
Although buying a home is considered a dream come true for some people, making it happen can be a nightmare. The requirements involved may compel someone to keep on renting or get a house without carefully assessing it as long as it is within the budget. Both obviously are not a practical and good decision to make. Buying a house cannot be done without going through the requirements carefully and spending some time to inspect houses that are for sale.
By definition, a first time home buyer is someone who meets the following definition below:
- A person who has not possessed a primary house for at least 3 years. This item also applies to the spouse. If you have owned a residence but not your spouse, then you can buy a house and be treated as a first time homebuyer.
- A solo parent who only owned a house with a previous spouse while they were married.
- A displaced homeowner who only owned a house with a spouse.
- A person who only owned a primary house that is not permanently attached to a permanent foundation as stated in the applicable regulations.
- A person who only owned a place that did not comply to the state when it comes to local or required building codes – and if it cannot be reconstructed to become compliant by spending lesser than the amount to build a permanent place.
To help first time home buyers out there, some helpful information about buying a house has been gathered and presented below. Several considerations that need to be reviewed prudently have also been consolidated below to ensure that a first time home buyer will be able to go through the activity smoothly.
- Assess what your goals are both long term and short term. Once you have your goals identified, assess how buying your own home for the first time can affect your goals and where it would fit in them. Some individuals get the idea of getting their own home just to stop their rent and put their money to something they can call their own. However, there are those who look at owning a home to display and enjoy their independence. It is important to have a clear evaluation of how you want your future to look like. This will not only allow you to decide whether you really need to get a house, but it will also help you buy the right one for you.
- If you plan to get your own home for the first time, knowing what type of house to get is important. Keep in mind that it involves a big investment, hence a trial and error system will not work here. You have to be sure of what you want and what you need based on your future plans. If your future includes you having a family, then you have to highly consider it in the process. There are various types of homes to choose from and they normally serve different purposes depending on the lifestyle of an individual. Each also has a list of advantages and disadvantages so it is very important to understand each type and how each type of home can meet your lifestyle and goals in the future.
- Aside from the different kinds of home and several advantages and disadvantages, a first home buyer should also be familiar with the features or amenities of each one of them. This is where proper planning and knowing your long term plans will become crucial. This is where you think about the kind of neighborhood you want to have, the size of your house, interior design, and even the layout. Do you need your house to be near schools, a church, commercial establishments, and the likes? You have to take all these into consideration before finally deciding to get a house.
- Apart from the items above, budget is another important factor to consider. As mentioned earlier, buying a house is a big investment. While it can be financed by a bank by getting a mortgage, you still need to have some savings as the loan that you may be qualified for from your bank may not be sufficient to cover for all the costs that the real estate company would require such as the down payment, processing fee, and other fees. Paying a big down payment and having some money to pay for the other costs would mean that you do not get a big loan from your bank.
- Also, before saying yes to buy a certain house, be sure that you will qualify first for a bank loan. It is highly recommended to work with various banks and lending institutions to inquire about their home loan programs. Each bank may offer differing interest rates and payment terms. Make sure to discuss all the loan details to get the best bank or lending institution for you.
After you have decided to work with a certain bank, it is time to make sure that you are financially ready to get approved for the loan that you need. As you know, banks will conduct a review of your finances including your source of income, existing credits, and the likes. Because of this, you should guarantee that you have a good credit standing, a stable job, good history of paying your bills, and the likes. You need to have a satisfactory rating for all of those, otherwise your loan might be disapproved.
And because you would be applying for a bank loan, you will need to make sure that you have all the required documents that both the bank and real estate company will ask from you.
Getting pre-approved for a loan is what you need before even starting to work with real estate agents. But keep in mind that even if you have received pre-approval for a loan, you can still get disapproved in the end if there is something that will disqualify you or damage your credit score. Purchasing a car could be one factor that can lead to your loan getting disapproved.
- In relation to the item above, be sure to carefully asses how much you can afford. What is the value of a house that will be acceptable to you? Do not just go with the loan that a bank will give you. Remember that banks would want you to get more money so they can earn more from interest. Do not get a loan that is more than what you can afford as you may end up having some financial difficulties.
Some people fell into this trap and ended up losing the house due to failure to pay. Some are able to sustain the monthly mortgage, but end up struggling to get funds to support their other needs such as vacations, utilities, clothing, great food, entertainment, and the likes. So before making a decision to buy a house, conduct an honest assessment of your financial status and see how it will look as soon as you have a monthly mortgage fee in the list.
- Aside from the cost of the house or the monthly payment for the mortgage, you will also need to consider the other costs that may come with the purchase of a house. If you bought a condominium unit, for example, there are association dues that you need to pay on a monthly basis. The said cost is required by the home owner’s association to allow the condominium administration to keep the building clean and organized all the time. There are also the real estate tax, utilities, and maintenance costs that you have to include in your budget regardless of the type of house that you have decided to get.
- In buying a house, especially for first time buyers, working with someone who understands how it works is recommended. Experts and most homeowners say that working with a real estate agent will make your home buying activity easier. They are familiar with the industry and know everything there is to make sure that your home buying experience will be a memorable one instead of a nightmare.
They can help you look for a house or property that will meet your needs in terms of location, price, size, layout, and many others. They can help you coordinate with the owner and schedule a day when you can view the place. And as soon as you have chosen a property, they can help you negotiate the cost and go through the overall buying process up to the end without too much hassle on your part. These real estate professionals have the skills and experience to help you get the house of your dreams that is within your budget and can meet all the requirements you shared with them previously. They can also help you prevent possible problems along the way.
Benefits of Owning a House
As mentioned earlier, owning a house is a dream come true for many people. It is an investment and could certainly affect your lifestyle and spending habits because of the financial responsibility it will teach you over the years. Many individuals look at it as a huge step from being a happy go luck person to becoming a mature and more responsible individual.
The benefits of owning your own home can be further assessed depending on the situation you are in right now. If you are only renting a house, then buying your own can be a good decision to make considering the monthly rental fee that only goes to the landlord. It is an obvious waste of money as the said rent can go or make up the monthly mortgage you have to pay should you decide to buy your own home. A proper assessment of how much you are renting versus how much you would need to pay if you get your own house and your monthly income and expenses should be made.
Aside from the items above, another main benefit of owning a home is it can help you shape your finances better. It is a big possibility as you will be able to develop a certain level of discipline that you may not have before when you did not have a financial obligation yet.
Below are the other advantages of getting your own house.
- Unlike other things you may be putting your money in, a house is a real investment. Cars and other material possessions that you may have reduce in value. A house or a property does the opposite – its value appreciates over the years. It is a good investment even if you will get it by getting a loan as paying it over the years will lessen the loan amount whereas the value of the property continues to go up.
- Gaining equity is another benefit one will get from homeownership. When it comes to owning a home, equity and investment are directly related. In paying your monthly mortgage, part of the said payment goes to the interest while a portion is deducted from the actual cost of the house. In the earlier years of your mortgage plan, the interest gets the bigger percentage from the payment and it goes down in the subsequent years. Equity is the part of the principal cost that you already paid which is equivalent to a certain portion of the house that you own by that time. Hence, as you pay your monthly mortgage, you solidify your ownership of the house until it becomes fully paid and becomes yours 100%.
- Owning a home also makes a person qualified for some tax benefits and this is true for some countries or states. This is being done to promote owning a home which has a positive impact on the economy. The tax benefits could mean deducting the interest coming from the mortgage payments on the income tax return. This is mostly beneficial when done at the beginning of the mortgage when the bulk of the payments are applied on the interest.
- Getting your own house will also give you a more stable housing cost. If you get your house financed, the payment term is normally fixed for a certain period such as 20 years or 30 years. This fixed amount will allow you to manage your housing expenses better versus a rental fee which could increase every year.
There are definitely some uncertainties when renting a house so it is a lot better to just buy one. Maintaining your own house versus a rented one is also more cost-efficient as you will have more flexibility in managing the cost. You will be able to make investments as well within your property, which may not be possible if you are only renting a house.
- Owning a house is also better as it gives its owner the freedom to modify the layout and design of a house, which can help make the house more suitable to the lifestyle or needs of the owner. While this can be done by someone who is only renting a place, it is not practical as modifications made to a rented house have to be kept intact even if you already need to move out of the place. This obviously means that you spent or invested your money in nothing. In contrary, if you make enhancements to your own home, it works to your advantage as the changes will help increase the value of your property.
- Owning a house enhances one’s stability and sustainability. Obviously, when a person already owns a house, he or she does not have to worry about having to move out and transfer to another house to rent. It is not only very inconvenient, but also not very cost efficient as moving out and transferring to another place will make an individual incur costs.
- Buying your own home also has some social benefits. If you stay in a place for a long time or permanently, then you will be able to establish a good relationship with your neighbors, stronger community engagement, and the likes. Your children will also do the same at school if they can stay longer and establish friendships over the years.
Things to Do Before Buying
Buying a house does not need to be a nightmare like what some people have experienced. To make sure that it will go smoothly, below are some tips to follow before deciding to buy your own house.
- Before buying a house, make sure to check the value or selling costs of houses within the same category, size, location, etc. so you can get the best one with the best rate out there. This can be done by searching from the listing of houses that are for sale in the area. They are normally available in various sites including the site for National Association of Realtors. These sites also include a calculator that will allow visitors or prospective buyers to compute.
- Prior to buying your own house, carefully assess the expenses that you will have once you get a house mortgage. Include all the associated costs such as taxes, insurance fees, association cost, and the likes. This activity is related to the first item as checking the rates of other houses is recommended to be done for the overall activity to go smoothly. This is important to prevent any financial difficulty to occur after your house purchase.
- Buying a house involves paying several fees so ensure that you get familiar with all the fees involved such as the closing cost. It includes organizational fees coming from the lender, settlement and title fees, taxes, insurance cost, association fees, and the likes. To prepare for this cost, you can check what the average closing cost is in your area by visiting Bankrate.com and its closing fee survey.
- Financial planning is very important when buying your own house. Assess your monthly salary and other sources of income if you have any and see how they can sufficiently fund your monthly house amortization and your other expenses. Experts recommend not spending above 28% of your total income. Anything higher than that can mess your finances and make you house-poor.
- It is recommended to work with professional and reputable real estate agents. Make sure to talk to them about your requirements and to understand the actual situation in the real estate industry. Will the value of houses in your area continue to go down or will it appreciate soon? Or will it stay flat for a longer period? These are the details that you need to know before deciding to get a house in a certain location.
- Make sure to look at the bigger picture and consider the future. Buying your own house could trigger you to incur unexpected costs. These costs refer to the cost of buying new furniture and appliances, interior design, repair and maintenance, fixing plumbing or electrical problems, and many others. Keep in mind that all those costs need to be shouldered by you as there is no landlord anymore to rely on. They can easily mess your finances up and give you financial hardships after a few years.
- Get ready to hunt until you find the best house that you want that is within your budget. This requires that you work with various sellers and this can be physically tiring. But prepare for this stage in the process as it will allow you to get the best option available to you out there.
- Make sure to review your credit status before starting the buying process. If your credit standing is not good and you started the process of buying a house, then it may hurt your credit score further. It may result in you losing your chance to buy your own home permanently. Because of this, review your credit status by looking at your yearly credit report for free. Look at it carefully and see if there are inconsistencies or incorrect entries. Make sure to dispute and report them immediately to the credit reporting agency for them to get corrected. It is also recommended to get a copy of your FICO credit report for a small fee.
- If you have a plan to buy a house and get a bank loan, make sure to prepare all the needed documents in advance to prevent any delay as it may result in your loan application getting disapproved. The documents that you need for this activity are bank statements, pay stubs, w2 forms, tax documents for the past 2 years, credit card billing statements, any existing or past loan documents and certificate of full payment, and many others. These documents may be too much but they are needed to assess your finances and establish your capacity to pay.
- Since buying a house involves a big amount of money, getting a loan is needed in most cases by many house buyers. This means that you need to look for lending institutions that can give you the amount that you need at the most reasonable rate. These lending institutions can refer to banks, local credit agencies, and the likes. It is recommended to get your loan application pre-approved so you have some financial assurance before starting your house hunting activity. Many people also suggest getting a loan from various lending institutions at the same time as it can increase your chances of getting approved and getting the best offer there is.
- In relation to the item above, if you get disapproved at first, keep trying even the government agencies. The local housing department of the government normally has programs that insure mortgages of many home buyers for the first time. This guarantee from the government may result in your loan application getting approved as lending institutions will be more confident to lend you money.
What to Know
- When buying a home, it is recommended to decide where to buy first instead of worrying about the structure or design of the house.
- Buying a house is a commitment. Make sure to not make impulsive decisions without making sure that you are 100% ready to invest in your own home. Remember the financial obligations that come with it so take your time and assess your financial status carefully before deciding to buy your own house.
- While it is recommended to hire a professional contractor in remodeling a house, it will also be good to perform it DIY style especially if you are creative and have the time, skills and experience to perform some basic house improvement activities. This will allow you to get some savings unlike if you will have the remodeling of your house performed by a professional.
- A down payment is not wasted money. Hence, if you have enough funds to give a bigger down payment, then do so. It will decrease your monthly amortization rate and will increase your home equity.
- Check your neighborhood as it will improve the value of your property for sure. Schools, for example, can increase the resale value of your house so take it into consideration regardless if you have children or not.
- Conduct a land survey yourself to know your property boundaries. While this information should come from the seller, data could be inaccurate so it is better to have your own land assessment before officially buying a house.
- It is also important to know what the plan is within your neighborhood especially near your house. If you are planning to buy a lot in a village, check what the plan is. If based on the plan a playground is expected to be put up near your house, then assess the impact it has on your property. For clients who do not have children, having a playground in front of their house may not be well received, but could be a good selling point for clients with kids.
- Inspect the house thoroughly before deciding to buy it. Make sure to look carefully as there may be hidden defects that need to be raised to the seller. At this point, it is recommended to hire a professional house inspector to ensure that you will be buying a house that is free from any defects.
- If there is a defect found, then negotiate the selling price with the seller. Take advantage of it to get a discount or price reduction. Defects can have a big impact on the selling price so be sure to have the house inspected carefully.
- Keep in mind that real estate can be affected by recession.
- Do not get a house based on the loan amount you qualified for. Do not spend every cent of the loan in paying for the house or its down payment. Be willing to get a house at a lower price range and use the extra money for house renovation or to buy home appliances or furniture that you need.
- If you want your house renovated, make sure to have it done by a professional house remodeling contractor. This will make you incur additional costs but that should be okay as a professionally remodeled house will last longer and will have a higher resale value.
- When looking for a house to buy, do not ignore the landscape as it is equally important as the house’s interior. A great landscape will improve not only the exterior appeal of your property but its resale value.
- Bidding can be challenging so prepare yourself that your offer may be rejected or outbid. If your bidding strategy is not working, be ready to use a different one after a few attempts. A professional real estate agent can help in making sure that you are bidding properly and using the right pitch.
- A higher down payment may appeal more to a seller. Hence, save and prepare for the said cost before deciding to look for a house.
Avoiding Home Buyers’ Remorse
You may not know that buyer’s remorse is real until it happens to you. This is the feeling of being happy and excited about the house that you bought, but the feeling of uncertainty if you did the right things kicks in after officially signing the contract. This is when several questions start to get into your mind. Did you make the right decision? Were you too excited and decided too quickly? Will you be able to pay for it throughout its payment terms?
All the questions below are normal especially that you invested in something that requires a huge amount of money. A house is probably one of if not the most expensive investment one person may decide to have. Although the feeling of uncertainty is normal in this situation, unless there is a real issue or concern, you may just be suffering from buyer’s remorse state.
In order to validate the questions or fears running in your mind, it is recommended to go through the decision you made and validate the concerns you have. Below are the common reasons that cause remorse among home buyers.
- Review the needs and wants list that you have. In buying a house, it is recommended to have a complete list of what you need and want your house to have. You should have this list that led you to buy the house that you have now. Go through that list and validate if the house you decided to buy has the needs and wants in your list. Does it satisfy your requirements when it comes to location, size, layout, neighborhood and likes? Going through this activity will help remind you why you decided to buy that home in the first place.
- Home buyer’s remorse normally kicks in as soon as an individual starts talking to his family or friends after buying his own house. Most of the time, due to differing opinions, a family member or friend may question the choice you made, which may lead you to feel bad or doubt if you have made the right decision to buy your house. While they do not mean anything bad, it is a normal reaction for them to react and share their opinions on the decision you made based on their own experience. But keep in mind that their experience may not necessarily apply to yours as the market situation at the time they made their investment could be different. There are other factors too that can affect the prices and cause the difference between your investment and theirs. Bottomline, do not feel bad and just be happy with the decision you made.
- After buying a house, remorse may also happen if you continue to look at properties and their prices. This is a big no as it will certainly only cause you to feel bad if you find one that is better or cheaper than what you bought. Do this only if the deal has not been officially closed or if there is any possibility of it not pushing through. But if everything is all set, stop looking and be content with what you have decided to buy.
- Home buyers may also experience remorse if they have an unsupportive real estate agent. If your questions or uncertainties get unanswered towards the end of the buying process, then the tendency is for you to develop some doubts. This may also cause you to panic and get anxious about the entire buying process. Because of this, it is important for the real estate agent to be available all the time to answer questions and guide the buyer until the end. Establish a good working relationship with your real estate agent and set your expectations early on.
- Aside from the items above, remorse may happen due to the doubts coming from the buyer himself. In this life wherein nothing is certain, it is normal for a person to doubt and focus on the uncertainties especially when making big decisions such as buying your own home. Avoid this as much as you can buy trusting that everything will fall into its proper place and that you will find your decision to be correct in the end.
Tips for Lowering your Property Tax
Property taxes are part of the cost that a home buyer needs to include in the financial planning. They are permanent expenses, which means that a homeowner must pay for it even after the mortgage of the house has been paid in full. Also, be aware that these taxes increase over the years. Because of this, this cost must be carefully accounted for in your finances to avoid having your finances messed up.
Despite the items mentioned above, property taxes are not 100% cumbersome for a homeowner as there are ways to minimize them. Below are some of the tips to lessen the burden of property taxes on a house owner.
- Not all homeowners may be aware that they can visit the town hall and request to receive a copy or view their property tax report from the assessor’s office. The said report gives a homeowner information about the property that the town was able to gather over a period of time. It contains details about the measurement of the lot, dimensions or layout of the rooms, and the types and numbers of fixtures inside the home. It may also show information about its special features and history of renovations or house improvements that have been made. Review the tax report and make sure that any errors or discrepancies are raised with your tax advisor, who will then make the re-assessment of your taxes and correct them as needed.
- Keep in mind that structural modifications made to your house will increase the property tax. These modifications may include adding a pool, a shed, a patio, or any permanent feature. Having said this, a homeowner should assess how much the new additions to the house can increase the property tax. Work with the local office and tax agency to get this information. They will be able to give you an estimate of the property tax that you will need to pay after the increase.
- Also, be aware that tax assessors have established guidelines in evaluating the value of a property. The bigger and more attractive a house is, the higher assessment value it will get compared to other properties that are less physically attractive. In the overall property evaluation process, remember that your house will be compared to other houses within the area or other locations based on location, category, and the likes. Because of this, it is recommended not to make any house improvements both internally and externally before the actual evaluation activity. Renovation is necessary if a house or property is being sold.
- Keep in mind that data about several homes such as assessments can be viewed publicly. This will allow a potential home buyer to assess various comparable houses and view the evaluation results for all of them. In this review, there could be discrepancies that can decrease your property taxes. What this means is, if your house was assessed to be worth $200,000 but a bigger and more appealing house nearby was valued for only $180,000, then there could possibly be some errors in the assessment done for your house. Having it re-assessed could change the value of your house and lower its taxes eventually. Make sure that the review is done by a certified home and tax assessor.
- In relation to the item above, make sure that when your house is being assessed by a professional home assessor that you guide them in the entire house. If left unguided, then the assessor may just only see the highlights of your house and overlook its imperfections. That kind of assessment will cause your house to be valued higher than it should be. Hence, make sure to be with the assessor all throughout the activity so you can show him the great things about your house as well as its defects. Doing this strategy will guarantee that your house will be assessed correctly and fairly.
- Do not stop the tax assessor to view your house entirely. If you do this, then the assessor will make assumptions, which could be not beneficial to you. For example, if you do not allow the assessor to view the interior of your house, then an assumption that you have made some improvements in the house can be concluded. The said assumption may result in higher property tax rate. Be aware as well that in some areas, the policy being followed by assessors if they cannot view the entire house is to allocate the highest value for the type of property you have. You can dispute this, of course, but the only way to correct this is to give the tax assessor access to your house.
Home Maintenance Checklist to be Aware of Once You’ve Bought
Proper maintenance is important after you have bought your own house. It is one way to maintain the quality of your house and extend its lifespan. The way we take care of our house can differ depending on the season. Below are some tips to help you maintain your house during the 4 known seasons we have.
Spring is a good season to clean up especially your yard after the winter. It will be good to inspect the areas of the house to see if there are any cracks in the concrete structure of the house. It is also suggested to check the roof and the gutter for any possible damage caused by the winter season. Assess the condition of the paint around your house and see if it requires repainting. Inside the house, check your heating system, plumbing structure, chimney, and other areas for possible damage due to winter.
Unlike the earlier season, summer is not recommended for fixing the house, but enjoying it. However, there could still be household activities that can be done to make sure that you and your family can enjoy the summer 100%. Mow your garden but not too short to prevent it from getting too dry because of the hot season. Water the plants and make sure that the water system and hose in your garden are working fine. Clean the pool as well to allow your kids to enjoy it to the fullest. Inside the house, clean the fans and cooling systems to make sure that they will operate efficiently. This will allow you to get ready for a higher temperature during the summer. This season is also a good time to perform pest control activities to keep your house safe and clean.
During this season, a homeowner must spend activities to prepare for the winter. In your garden, it is a good time to plant new trees and plants and make your garden bloom again. For leaves that have fallen off the trees, make sure to clean them completely. It is recommended to check the chimney and the heating system that you have in the house. Your pool will be inactive so be sure to clean it up before it goes idle for the entire season.
For this season, make sure that you are fully prepared for the cold season. Stock up and ensure that you have the most important items and supplies to keep you safe in case you are unable to get out of the house due to low temperature. Make sure that your heating systems are working fine as well. Check out this extensive guide on better maintaining your home and make sure to check out these things you need to avoid doing.