You have made the decision! It is time to get your own place and 2016 seems like the year to do it. Buying your first home is both exciting and nerve-wracking at the same time. Organization is key when it comes to getting ready to buy a new home. Planning for it financially can be a daunting task but, with the right preparation and research, it can be achieved. This is most likely the biggest purchase you will make in your life. Here are some tips that will give you a head start in this tedious process.
Tips to Prepare for a New Home
Healthy Credit Scores
Healthy credit scores are the first great sign you are ready. Your credit score is the most important thing that determines a lot of crucial factors in your potential mortgage. The interest rate on your mortgage is largely dependent on your credit score. So make sure that you have no disputes such as collection accounts that are wrongfully depicted on your score. If there are any major or minor errors, strike up a conversation with your creditors and address them immediately. Actual corrections and depiction of the right score may take longer than you think. Keep track of your credit score from credible sources and make sure you start well ahead of shopping for your first home.
In addition to the purchase price of a new home, there are many factors you have to consider when buying a home. Property taxes, homeowners insurance, utilities, maintenance, condo fees, and repairs can add up quickly. Make sure to research interest rates to determine the best time to buy. Consider enrolling in a first time homebuyer’s course. These classes, which are often offered online by a variety of nonprofit organizations, provide homebuyers with detailed information, advice and budgeting tips on how to successfully purchase a home. The details provided from credit reports and mortgages to home inspections and insurance can be invaluable. ACCC has some helpful resources and tools that discuss the many aspects of buying a home.
Must Have or Nice to Have?
It can be an overwhelming experience to attend so many open houses or just browse through hundreds of pictures online of home listings. And each time you see a new house, your image of an ideal home can change. Make sure you consider and reconsider all the choices you are making, determining your essential requirements. Upgrades to a home can be done over time. So is it extremely important that you have the completed patio outside? Or is it more important to look at aspects of a home that may potentially costly, such as the age and condition of the roof, the quality of the heating system, and how well your potential home may be insulated. Ask questions from your realtors about the cost of electricity, water & gas, and if the home has flooding issues or ice dams. Cosmetic upgrades can be done over time, but basic structural work is more urgent and costly. So make sure you ask the right questions and prioritize your needs in a “must have vs. nice to have list”
Once you find your dream home, make sure that you do not settle on anything too fast. Negotiate rates with your lenders. Compare different lenders and discuss to find out how you can potentially omit the personal mortgage insurance(PMI) from your monthly mortgage with different mortgage packages, whether it is financially advantageous to go for two mortgages instead of one to take advantage of rates. See if you can come to an agreement with the seller to pitch in for some of the potential costs of any necessary repairs. Make sure you use your bargaining power to settle costs in a more favorable way as every dollar saved will have a good use once you actually own the new home!
What Comes Next?
Save as much as possible. Adjust your budget. Control your spending. With homeownership comes major unexpected expenses, like replacing the roof or getting a new water heater. Start an emergency fund for your home so that you won’t be caught off-guard when these costs inevitably arise. Take care of your house. Regular maintenance in and around your home can minimize large repair costs.
Owning your own home gives you an immense sense of pride and achievement. However, keeping your finances intact once you are a homeowner is a bigger challenge. So take these tips into consideration and be mindful of each and every step you take before, during, and after the home buying process. Make your home a happy place. Good luck!