March 24th, 2016
It’s important to plan to get pre-approved for a home loan before you start getting serious about buying. There are some steps you should take.
You want to go in with the best information possible. Don’t rush in and then regret.
Something else you should evaluate is how long do you want to live there, and how is your life going to change over those years? Some people are happy to buy a starter home of 1 bed and 1 bath. But how long would you be able to comfortably live there?
Also, would you want to sell that to buy another house or would you rent it out?
We’ll finish up with some mistakes first time buyers make:
You should know what you can comfortably afford today before you ask a real estate agent to pull listings. The best way to achieve this is by writing down your average expenses, looking for things you may want to give up for a little while, and getting pre-approved by a reputable mortgage loan officer.
When you do find some good houses, have your agent find out the average expenses for gas, electric, water, and garbage. You can also go online to estimate your property taxes. This gives you a better long term picture of how much the home will cost you.
Finally, contact your insurance agent for an estimate on homeowners insurance, and if you will need additional coverage for earthquakes or floods.
A house is also an investment, and the only thing constant in life is change. If you don’t have kids, you may buy a fun house in a neighborhood that doesn’t have good schools. If you decide to have kids, you’ll need to either look into private schools, or selling that fun house and buying in a different neighborhood.
When you get older, you may not want a house with three flights of stairs, or four bedrooms and three baths.
A rule of thumb is you should live in a place for at least five years to make it worth the investment. You should also evaluate if you would have to do any major repairs or remodels and how long it would take to get back your money.
As a first time homebuyer, you lean towards trusting what your real estate agent advises because you assume they have your best interests at heart. Usually, yes, but remember that they may not fully understand your situation and make recommendations that aren’t. So trust advice but verify. Don’t be afraid to ask questions or see if there are any other options.
And finally, a verbal agreement isn’t worth the paper it’s printed on not to mention it’s non binding. Get every part of the offer in writing when the seller agrees to your bid. If it’s not under contract, then the seller is free to reject your bid and accept one that comes in afterwards.
Put together a team of professionals to work with you, and always think with your head. It’s easy to lose focus when you buy your first home.