Tips for first time home buyer tend to come in all different shapes and sizes. There are little tricks of the trade that can be related to the mortgage process. Things like insider information on selecting a proper and well matched real estate agent. In reality there is no shortage of guidance available to a first time home buyer.
1. You Must Be Realistic About Your Budget and How Much You Are Able To Afford
While understanding what you can afford applies too many purchases in life. Whether it s a big purchase like a car and vacation or a smaller purchase like grocery shopping. However this is principle is especially necessary for a first time home buyer who is taking on all the necessary steps to buy a house. In fact, out of all the first time home buyer tips out there, this may be the most important.
In order to determine your monthly housing budget, you must become familiar with the term “housing expense ratio” — this is an indication of a borrower’s ability to make the payments on their mortgage loan. This ratio will measure the housing expense as a percentage of gross income (income before deducting for Social Security, Medicare, and taxes). Mortgage lenders expect an housing expense ratio of 28% or less for borrowers.
Lenders are likely to consider a borrower’s total expenses — this includes housing expenses and fixed monthly obligations. Industry experts say that a borrower’s expenses should not exceed 36% of their gross income.
Get Pre-Qualified, Even If You’re Not Quite Ready
Before you start to look seriously at homes, you should get pre-qualified for a mortgage. No one wants to find the home of their dreams just to have it fall apart financially.
A good way thing to engage in when shopping around for financing options, is to engage in at least three different types of lenders. You should look at big banks, regional banks, local lenders, credit unions or mortgage brokers.
Eventually, after shopping around, you will find mortgage terms that fit your needs. Then the next step will be to get pre-qualified. This will involve providing your lender with various details related to your credit score, income and assets. Your mortgage broker will then verify and assess all the information you gave them. They will then issue a letter letting you how much the bank is willing to lend you. It is important to remember that a pre-qualification is not a guarantee.
Monitor the Market
As a first time home buyer you should be like a hawk. You want to be surveying the local and regional real estate market similar to how a hawk surveys its prey.
By knowing how the market is behaving, as a first time home buyer you can monitor the selling prices of comparable homes in their area. This will allow you to be a bit more knowledgeable when going to look at homes.
Getting started is pretty easy. There are several web sites, like Zillow, that can give a first time home buyer a general idea of what the market looks like. You can find real estate listings on the internet through sites like National Association of Realtors®. You might want to create a few Google Alerts for when new homes come on the market. Also don’t be shy about picking up some real estate magazines that you might find at the supermarket.
Timing is Everything, Don’t Hesitate
It is very common for a home to sell super fast. This is especially true when cash buyers are involved.
It is usually a general rule of thumb for a first time home buyer to take their time and not rush. YOu dont want to make a rash decision when it comes to the home of your dreams. However, BE AWARE: this only works if you have all of your ducks in a row and feel comfortable pulling the trigger.
Create a Wish List
Creating a wish list will give first time home buyers a way to prioritize what they want in their future home. This will eventually make the real estate search more focused and easier to deal with.
It s important to know what you’d like to have in your first home and what you can live without. A good way to accomplish this is to separate your list into “Needs” and Wants”. This allows first time home buyers an opportunity to prioritize what they REALLY should have in their first home.
Wish list items might include: a pool, a big back yard, central air, office, number of bathrooms, garage size, 1 story/2 story, playroom etc.
It is crucial to be sure that you’re not settling for something that may make you unhappy six months down the road. This is a huge decision, and you don’t want to purchase something you’re going to hate.
This principle is not only important when it comes to searching for that perfect home, but it also relates to figuring out the terms of your home mortgage loan. Persistence can pay off. You don’t want to settle for a price or for an interest rate that makes you uncomfortable.
Ask A LOT of Questions
Buying a home is a significantly large purchase a first time home buyer to make. Therefore, you shouldn’t be afraid to ask questions, and ask again until you’re comfortable with the answer.
Don’t ever feel like you’re bugging your real estate agent or broker — they’re getting paid to help you!