You finally decided to abandon a rental property (or a room in your parents’ house) and buy your own home. The feeling is certainly exciting: you are investing in your own space and writing an important chapter in the story of your life.
However, the process can be extremely challenging and stressful. There are so many steps, tasks, and requirements that it’s easy to make a costly mistake. It’s important to be prepared to venture into the real estate market and find your first home. There are several steps to take during the exciting process of buying your first house.
1. Start Saving
Before you even think about buying a home, evaluate your savings. You will have considerable costs along the process, some of which are unexpected. When in doubt, start saving early and prepare an emergency fund. The main costs include:
Down Payment– How much you will need to invest in the down payment depends on the type of mortgage you choose and your lender. Be prepared and always consider the total value of the property. For example, remember that a 3 percent down payment on a $350,000 home equals $10,500.
Closing Costs– When finalizing your mortgage, you also need to pay fees and expenses that normally vary between 2–5 percent of the loan amount.
Moving and Renovation Expenses– These costs are often overlooked until it’s too late. After purchasing the house, you will probably still need funds to invest in more immediate home repairs, renovations/adaptations, moving into the house, even purchasing new furniture.
It is worth remembering that, to qualify for a real estate loan, you need to have good credit and a history of paying bills on time.
2. Bundle Insurance for a Better Rate
Home insurance is not required by law, but mortgage lenders often require you to find home insurance coverage before closing the deal. The importance of home insurance is unquestionable: it can cover the costs of repairing, rebuilding, and even replacing the property in the event of an incident covered by the policy.
This is one of the few steps where you can save money. Look into home and auto insurance bundles with the same company, as the package can guarantee you a good discount (between 5 to 25 percent). Insurance coverages managed by the same company also generate fewer complications to handle.
3. Find the Right Real Estate Agent
Choose a real estate agent carefully to help you in the process. The right professional will offer properties that meet your needs. Friends and family can give good recommendations because at some point they were in the same situation as you. But to avoid falling into a trap, look for references with other people who recently bought houses from the same agent.
A good professional needs to be proactive and experienced. A good way to dismiss candidates is to do an initial search on the internet. If the real estate agent’s website does not have professional photos and detailed description ads, it’s best to look elsewhere.
4. Shop Around
Some people have a dream house and do everything they can to get it, which can be very expensive. Avoid this by searching for more affordable deals in different areas and neighborhoods. Don’t let one property take up all your time in the beginning.
If your decision for the new home involves starting a family, it’s good to also assess the quality of the neighborhood (crime rates, for example) and the distance from your home to school and essential services, such as hospitals and banks, and even your work. Visit the neighborhood on different days and times, so you can get a better idea of traffic conditions, safety, and noise levels.
After choosing your area, go to some open houses to compare real estate options in the neighborhood. Even if you don’t like the house itself, you will have a general idea of the condition of the properties in that region.
5. Thorough Home Inspections
You finally found the ideal home. But before closing the contract, it’s time to do a complete inspection of the property, even if, at first glance, it looks flawless. This is one of those cases where saving can be expensive later.
Seek the services of a specialized professional to inspect the entire house. This includes the structure, the plumbing and electricity systems, and the general conditions of safety and conservation. If you skip this step, you could end up with many unexpected repairs.
6. Be Ready for Closing
If the inspection didn’t reveal any significant problems, it’s time to close the deal. This is the most complex part of an already very demanding process and involves a lot of paperwork, subscriptions, and dealing with some issues that you may have left out.
Before signing the final contract, do an appraisal of the home (a requirement by mortgage companies), and research to make sure that no one but the seller has any claims on the property. You will also have to pay all related taxes.
From start to finish, the closing process can take between one month and 45 days. So it’s good not to leave the property you rented too soon. You can also find some temporary accommodation during the period.
That Place to Call Home
Becoming the owner of your first home goes far beyond choosing the property of your dreams and moving there. It is a big step, probably one of the biggest steps you will take in your life. There are several costs, processes, and bureaucracies that can take you months, so it’s essential to be well prepared to save money and avoid future problems.
A good real estate agent can guide you through this process, but you will also have to do your part to find that place to call home. Follow these tips without skipping steps and get ready to enjoy your new home.