If you’re a first time home buyer the process of searching and buying a house can be extremely stressful.
After all, there’s a lot of money at stake.
To ease you through the process, we’ve rounded up some must-know tips on how to buy a home for the first time.
Rest assured that if you do your homework and trust your instincts, you shouldn’t make too many rookie mistakes!
1. Can you afford it?
The first, and perhaps most important, of our home buying tips, is - know what you can afford and stick to your price. This will help narrow down the search by knocking all the properties you can’t afford out of the running. It’s easy to get carried away when looking at pretty pictures online, but the reality is - you need to be able to cover your mortgage payments.
2. How much is your down payment?
The norm for a down payment is 20% of the house’s value, so if you want lenders to look at you favorably, then it’s a good idea to have a chunk of cash stashed away you can use as a deposit. Not only will you owe the bank a smaller mortgage, if interest rates rise you’ll be in a better position to handle the payments.
If you can’t afford a 20% down payment, then consider a lower down payment option that are available with most mortgage professionals including FHA loans, but be aware that although you’ll pay less for a down payment, you will get stung with mortgage insurance.
3. Shop around for a mortgage
You may have been with a particular bank since you were five years old. But that doesn’t mean they will offer you a great mortgage rate. Many people stick with what they know because it’s familiar and more comfortable than shopping around. Take the time to explore different loan options, as well as rates from at least a few different mortgage brokers. You may be surprised at how much they differ.
4. Factor in all the expenses
Buying a home has a lot of hidden costs. Make sure you include all the additional costs in your budget, these can include but are not limited to: conveyancing fees, insurance, utility bills, new furniture, new appliances, home maintenance/repairs, and lawn maintenance. Also, consider the cost of commuting to work from the property’s location, can you take public transport or will you need to pay for parking?
5. Have an emergency fund
A stressful aspect of buying a house can be the worry of unexpected bills that may crop up after the purchase. Building up an emergency fund before you can give you peace of mind that the money will be there when you need it.
6. Don’t buy on emotion
This is a tricky one because people tend to know when a house is right for them and they get ‘a feeling’ this is the one. It’s a good idea to have a checklist of must-haves with you when house hunting, so you can at least evaluate a property on an objective basis and have practical reasons why you like it. It could save you a lot of money down the track.
7. Bring in a second opinion
If you’ve got rosy tinted glasses about a particular house, then you’re in danger of overlooking things that could come back to bite you. Bring along a friend or relative with a critical eye who is more likely to spot if anything is awry - we’re talking about:
- damp spots
- ceiling stains
- old water heater
- loose wires
- plumbing leaks
- bad odors
- lack of insulation
- roof needing repairs
8. Book a professional inspection
Never buy a house without a professional inspector giving it the once over. They will be able to check for problems that aren’t obvious, such as pests and structural issues. They may even be able to give you some first time home buyer tips on what to look out for yourself. Once you know what you’re dealing with you can decide to either; carry on with the purchase and factor in the repairs either to your budget or into the buying price, or walk away if they are too extensive.
9. Check out the neighborhood
Don’t rush into buying a home without finding out about the neighborhood first. Visit at different times of the day to get a better idea of what it’s like to live there. Some questions to ask include:
Does it have good schools/childcare nearby?
What’s the traffic like during rush hour?
Is it on the flight path?
Does it feel safe to walk around?
What amenities are nearby?
Are there trees and parks?
What are the neighbors like?
10. Work with a local agent
Connecting with a local real estate agent in the area you want to live is a good move if you’re a first time home buyer. An experienced agent will give you invaluable first time home buyer advice and be able to guide you through the process. They will also have a good understanding of market value, know of any new developments planned for the area and be able to negotiate a reasonable price for you. If they know you’re interested, you may get first showing of homes that aren’t officially on the market.
A first home buyer with a pre-approved mortgage is an excellent prospect for a seller as they don’t have a home to sell first.