7 Things to Know When You’re Buying Your First Home
Buying your first home can be very exciting, fun and even financially rewarding over the long haul. Thanks to historically low interest rates, now is a great time to buy a house. However, buying a home does come with a list of things you should know. The good news is that with just a little planning and forethought, you can make your first homebuying experience truly exceptional.
1. You’ll need a good credit score
Your credit score will impact what interest rate you are offered. If your credit history is less than ideal, then you might need to wait until it goes up a bit. There are many ways to actively boost your credit score, such as paying off credit cards and avoiding late payments.
2. You’ll need cash
You’ll need enough cash to cover a down payment. First time homebuyers often don’t realize that closing costs will also be required and can add up to thousands of dollars in cash. The simple fact is that closing costs can be an unpleasant shock for first time homebuyers.
3. Don’t forget repair costs
If you bought a “fixer upper,” then you’ll definitely need extra money for repairs. Some of this money might even need to be spent before you can move in. It is important that you don’t underestimate how much it will cost to handle necessary upgrades. Many people buy fixer uppers because they seem like good deals, but only learn once it’s too late that they have far more house than they can afford.
4. Upkeep costs must also be considered
Similar to making certain that you can handle repair costs is the variable of upkeep. For example, a large house can be wonderful. But a large house also means more work, expenses, surprise problems and things that can go wrong; this is particularly true with older homes. When you’re buying a house, you should also factor in a percentage of your home’s value for annual upkeep expenses.
5. Be prepared for a large monthly payment
Being approved for a mortgage and actually being able to pay for that mortgage are two very different things. So, first time homebuyers should truly reflect on their upcoming mortgage before signing on the dotted line. Will it be too much pressure to have that large sum of money set aside each and every month? A failure to make your mortgage payment does come with consequences, so be sure you can handle it without too much stress.
6. Is the neighborhood a good fit for you?
The sixth factor you should consider when buying a house is whether or not the neighborhood is the optimal fit. Different factors must be weighed carefully to avoid making a mistake. For example, do you really want a home that is in a neighborhood where you won’t feel your children are safe? Are the neighborhood schools suitable? Are you able to handle the commute? These are all location related factors that shouldn’t be overlooked.
7. Consider how much space you truly need
If you know that you won’t be home many hours a day, or are a single person, then a small one or two-story home might be fine. The larger the home, the larger the related expenses. For every square foot you add you’ll see an increase in other home related costs such as utilities and upkeep.
On the other side of the equation, if you are planning on having children or have a relative that lives with you, perhaps that two story home won’t be large enough. In that case, you might want to look into multigenerational homes. Factoring in your space needs, both now and in the future, is a savvy step towards making the right decision.
While buying a house can be exciting don’t get too caught up in the emotions of buying that first home. Instead, pause, step back and carefully reflect on what you need and what you can afford. In the long-run, you’ll be very happy you did.