6 Things You Should Know Before Buying Your First Home

6 Things You Should Know Before Buying Your First Home
So you’re at the point in your life where you’re ready to buy your first home? Congratulations! Now, it’s time to familiarize yourself with the home buying process so that you don’t get burned.

Here are 6 things you should know before buying your first home.

1. Learn the Value of Sweat Equity

If you’re not familiar with the phrase “sweat equity,” it refers to manual labor you put into a home yourself so that you don’t have to pay a contractor. It’s a way that some people save money fixing up a home.

If you’re someone who’s handy with carpentry-related work, you might save yourself a fortune by buying a house that’s in need of repair and just handling the repair yourself. Sometimes, houses that “need some work” are offered at a steep discount. However, once that work is completed, the value of the home increases dramatically.

If you’re interested in saving a lot of cash and you’re a self-proclaimed handyman, consider buying a house that’s a fixer-upper.

2. You Need a Down Payment

Buying a home is not like renting an apartment. You need to have a lot of money up front before you can move in.

Consider having 20% of the value of the house in the bank before you make an offer. That 20% will be your down payment when you’re ready to close the sale.

Sure, there are home buyer loans that are offered with no money down. But if the real estate market tanks shortly after you move in, then you could be left with negative equity. If the market takes a bad hit, like it did in 2008, then you could be in very serious financial trouble.

If you’re having difficulty coming up with the cash for a your first home, keep in mind that there are home buyer grants available in many states.

3. Save Extra Cash for Maintenance

A house is a money pit. End of story.

If you drain your bank account on the down payment, be prepared for a rude awakening when the first maintenance bill comes due (and it will come due). Avoid falling into that trap by having some cash in the bank ready for “projects” once you move into your new place.

4. Learn HOA Rules

If you’ve found a great home in a great neighborhood, ask if the home is part of a community that belongs to a Home Owners Association (HOA).

For starters, an HOA will cost you money. There are monthly fees associated with joining, which is required if you buy into certain communities.

Second, an HOA also has a set of rules that you’ll have to follow. Sometimes, those rules can seem ridiculous but must be followed no matter what, including limits on construction, decorations, and landscaping. Be sure to read them all before you make an offer on the house.

5. Get Pre-Qualified

Before you go shopping for a house, get pre-qualified from a reputable lender for a mortgage. That way you’ll know that you can get the mortgage once you’ve found your dream house.

6. Come Down From Your Pre-Qualification Limit

Once you’re pre-qualified for a certain amount, resist the temptation to look for a house that’s offered at that price. Come down a bit from the pre-qualification amount and give yourself some breathing room. Don’t max out your available credit.

Instead, back-in to your mortgage limit by considering how much money you have as a down payment and what you can afford for monthly housing costs.

Buying a house is an exciting and sometimes maddening journey. Be sure that you’ve understand what you’re getting into before you buy your first home or you could be miserable for years.

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...