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Tips for First-Time Home Buyers

Buying a home can be an intimidating process — especially for first-time buyers!  Below are some tips to help you navigate the process, avoid common mistakes, and save money.

1.  Pay Off All Debt & Build an Emergency Fund — This is the #1 tip recommended by Dave Ramsey, American financial author, radio host, television personality, and motivational speaker.  If you have been renting a home or apartment, you may not be aware of all of the maintenance and upkeep expenses that go along with home ownership.   They can add up quickly!  Before you purchase a new home, make sure you are debt free and have an emergency fund of 3-6 months of expenses in place.  This will allow you to pay cash for expenses that come up without the stress and worry that can come up with unexpected repairs or needs.

2.  Establish Your Price Range — Before you fall in love with a house you cannot afford, check your monthly budget and establish your price range.  Your monthly housing costs (including any HOA fees, taxes, insurance, etc) should be no more than 25% of your monthly net income.  Don’t forget that property taxes and homeowner’s insurance will affect your monthly payment!

3.  Save a Down Payment — If you have the means to pay cash for your home, than of course you should do so!  But if that is not feasible than you should save for at least a 20% down payment.  This will keep you from having to pay for private mortgage insurance (PMI), which usually costs around 1% of the total loan value and is added to your monthly payment.  There are loan options that may allow you to put little or no money down, such as an FHA or VA loan.  Just know that these will cost you more in interest over the course of the loan. A 15-year, fixed-rate conventional mortgage with 20% down is a good way to go because you will pay off your mortgage in half the time, have a lower interest rate, and save thousands of dollars in interest.

4.  Save for Closing Costs — Closing costs are generally 3-4% of the purchase price of your home, and include items such as the appraisal, home inspection, credit report, attorney, and homeowner’s insurance. So if you are purchasing a $200,000 home, you could be paying around $8,000 in closing costs.

5.  Get Preapproved for a Loan — Get prequalified for a mortgage and take the time to get a preapproval letter from the lender before starting your home search.  This will show that you are a serious buyer and also prevent you from looking at homes that you are not qualified to purchase.  Also be sure to compare mortgage rates so you aren’t leaving money on the table!  It is a good idea to compare rates between at least 3 lenders.

6.  Hire the Right Buyer’s Agent — A real estate professional will help you find a home, negotiate a deal, and see the process through to closing.  Choosing the right agent is important because you will be working closely with them, so you want someone you get along with well.  You should look for an agent who is highly skilled, motivated, and knowledgeable about the area.  This is probably the biggest purchase of your life so far, and you want the process to not only go smoothly, but to be enjoyable as well!

7.  Research Neighborhoods for the Best Fit — There is a lot more to think about when purchasing a new home besides the house itself.  Consider the length of your daily commute to work, the neighborhood crime rate, the quality of the schools.  If you find a house you like and are considering buying, stop by at different times of the day, if possible, to check out things like noise levels and traffic conditions.

8.  Find a House For Sale in Your Price Range — Search for homes online and send examples of ones that you like to your real estate agent so they have a good idea of what you are looking for.

9.  Attend Open Houses — When attending an open house, pay close attention to the home’s overall condition and be aware of any stains, smells, or other items that need repair.  Be sure to ask lots of questions about the home (when it was built, when items were last replaced, and how old systems such as air conditioning and heating are).  Attending open houses is a great way to learn more about the area!

10.  Make a Competitive Offer (within your budget) — So you found a home you love and you are ready to make an offer.  Don’t let your emotions take over when buying in a competitive market.  As a first time buyer you may not know how much to offer.  This is where you can rely on the expertise of your real estate agent!  Ask him or her to help you come up with a competitive offer that is within your budget and the home’s value.  You may also consider including a personalized letter with your offer to help it stand out from the competition.

11.  Prepare for Closing — Once your offer has been accepted, the closing process begins.  The average closing process takes 41 days — which is plenty of time to take care of the closing items.  Here is where your real estate agent is again very helpful.  He or she will schedule the remaining steps from home inspection to final walk-through, keeping you informed along the way.  It is very important for you to read every document and ask your agent to explain anything you don’t understand, especially before signing the official contract for the home transaction.


If you are ready to begin your home search, Novak & Associates are ready assist you with all of your Real Estate needs!




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