Things You Should Know When Buying Your First Home
Thursday, June 18, 2020, 6:00 AM | Leave Comment
Firsts are always an exciting part of life – first day in school, first crush, first job, and first home.
If you’ve reached the latter milestone, give yourself a pat in the back. Not a lot of people save enough to get their first place.
But before a celebratory bottle of wine is in order, here are seven important things you should know about buying a home.
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Cost
Unless you are paying in full, a home purchase will have long-term implications for your personal finances. Regardless of how the real estate market is currently doing, it’s prudent to have a sit-down with your realtor and talk about what your life would be like five to ten years from now. Can you still afford to make monthly mortgage payments? It’s not just the asking price that you have to consider when looking at property costs. Transactional fees, down payment, furnishings, and moving costs can also add up to a hefty sum. Unaccounted for, these costs can easily derail someone’s plans to purchase a property.
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Credit Score
So you’ve saved up enough cash to make a down payment for the house you want, but how is your credit score doing? Nowadays, a credit score has much heavier weight when calculating a person’s mortgage-worthiness than how much they can put as a down payment. Lenders, both banks and private sources, will be scrutinizing all paperwork of your income and outstanding debt and liabilities.
Competitively low-interest rates are reserved for borrowers with good credit scores – anything above 700. Use an affordability calculator that’s available online and free of charge. These algorithms calculate your mortgage-worthiness using data including credit score, your prospective house, monthly income and expenses, etcetera.
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Local Market Conditions
Property values can vary widely depending on location. Whether you’re buying new houses for sale in Edmonton or a fixer-upper in San Francisco, you’ll want to know in-depth the market’s current situation. Is it attracting more residential buyers? Is commercial development dropping to troubling heights? Is the neighborhood safe? Monitor market conditions, specifically the average length of time that most properties in your valuation range stay in the market.
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Pre-Approval Letter
Note that pre-qualification and pre-approval are two different things. It’s easy to get pre-qualified by your lender, which essentially gives you an estimate of how much you are eligible to borrow based on your current financial standing.
On the other hand, a pre-approval letter is a more specific intent to buy a property. In a pre-approval letter, the lender scrutinizes your finances and writes up an offer, detailing how much they are willing to lend you.
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Screening Process
Having a screening process can help you weed out the liabilities from the assets. Once you know how much you can afford, list your set of priorities. Whether it’s space, proximity to work or school, weather, or an indoor pool, you should write down what you value most about your prospective home to help filter out the options in front of you.
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Realtor
Now that you have your list of priorities and a good idea of your financial health, the next step is to speak with a realtor. A good realtor can help you find the right home with your exact specifications and serve as a mediator between you and the seller. They will also help you determine a competitive price point to offer the seller, which is especially important if you are bidding against multiple interested parties for the property.
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Inspections
Inspections are an essential part of the whole home-buying process. Skipping it puts you at risk of missing structurally unsafe features. The cost of a professional inspection varies depending on the total square footage being inspected as well as the type of home.
For instance, condos and apartment studios under 1,000 feet will cost roughly $200 while larger properties may run twice that. Key areas of a home that should be inspected include roof, basement, and walls.
Final Thoughts
Every mistake you make when buying a home can cost you a lot of money and can haunt you for the next 10 to 30 years, depending on how long of a mortgage plan you signed up for. Minimize your risk by keeping these seven things in mind.
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