I remember looking to buy our first house, we were so excited to drive around town with our realtor and look at all the possibilities. Driving up to each house we could envision ourselves living there and working in the yard or playing catch with a yellow dog in the back. Opening the front door we would walk in with bated breath imagining our lives playing out for years to come. Each new discovery was better than the next. We had in mind a specific era home. We wanted specific things like off street parking, guest rooms, office space, a dining room and good neighbors. The euphoria of the search was spurning us on and the further we went the less inhibited we were.
Realistically, we had a price range in mind, a location, a budget for repairs, an idea what tax range we would be in, and what it would cost to live in the properties. It was difficult to stay on point as we went from house to house but in the end we finally found a great house in a good neighborhood. The house was well within our price range, fit the bill for what we wanted, and we decided to put in an offer.
This is when the business and financial end of things comes into play. Better known as the “Not so fun part” the process of purchasing your home has begun. The problem now is that through the whirlwind explanations of escrow, down payments, points, title searches, appraisals, fixed rates, adjustable rates, balloon payments, amortization tables, commitment letters, FHA loans, APR, credit scores, Debt to Income ratios, Equity, and Loan to Value you have begun to get very confused. The words that you hear become gibberish even with the explanation of what each is and, as a first time home purchaser with a cursory knowledge of what is going on, you make decisions without having a full understanding of the situation. Honestly, I was working in the banking industry for a short time when we were looking to buy and was still confused in some aspects of the process. At times I would find myself complacently nodding at something when I did not fully understand it just because everything was just so overwhelming.
I am in no way trying to frighten anyone out of buying a home but am hoping that having worked in the industry I can help alleviate some stress out of the process.
Five things to consider when Buying your First Home.
- Look at what you can afford, not what you want.
I stated that when we were looking for our first house we had a set plan but as we went from house to house we continued to look at some that were out of our price range. Of course we liked them better than the other homes we were looking at in our price range but in the end we knew that what we wanted and what we could afford were two different things. Fortunately, because we continued to look for the right house we finally found the perfect home and at the right price. If you buy out of your comfortable price range that will only cause you stress and financial problems down the road. - Know Your Costs
Too often when we are looking for our first home, we fail to know and understand all the costs involved with that purchase. When we make our decision to buy we need to know as much as we can of the costs and break them down into a monthly budget. If in the end those costs meet your budgeting requirements then you should feel comfortable in proceeding with placing an offer on the house. Costs to you during the purchase process would be appraisal fee, down payment, possible initial escrow deposit, points, attorney fees, realtor commission, home inspection cost, and recording fees and taxes. A breakdown of some of the costs you will have monthly would be the principal and interest for the mortgage, taxes and insurance for the property, any repair/emergency fund that you start, potential increase of insurance and taxes on the property in years to come, cost of upkeep and general maintenance of the property, and monthly utility bills. Considering these costs is imperative to making the right decision for you and your family to enjoy your home and the life you make in it rather than having to focus on the stress of not being able to afford what you purchased. - Understand the Process
There are many resources out there that can help you understand the process of buying a home and it would do you good to consult them as you go through the process yourself. The reason is that it is in your best interest to know what you are getting into and how it works. Typically the decision you make when you purchase your home will dictate how that mortgage functions and works for you for the next twenty to thirty years. Making decisions without a full understanding of what you are deciding on could create many more headaches than you need. For example choosing between a fixed rate and an adjustable rate would mean that if you went with an adjustable rate you could have additional mortgage costs down the road with an increase in payment that you cannot afford. Asking questions throughout the process is all right because in any situation it is the responsibility of your attorney, realtor, mortgage lender, and insurance agent to make sure that you are fully aware of everything in the process. - Buy a Home that Has Been Properly Maintained
Just because the house you want is sold “AS IS” or considered a “Fixer Upper” and is in your price range does not mean that you have to hope that it is in good shape. Knowing rather than hoping is important here. Often when people are buying their home they opt out of having a home inspection before they buy. Why would you do this? It is cheaper but in the end a few hundred dollars in savings could amount to tens of thousands of dollars in roof repairs, foundation issues, or electrical work. You do not have the luxury of being able to crack open walls and look at what is happening underneath and even if you could how do you know what you are looking at? Spend the time and money to make sure that what you are buying is not going to fall down around your ears shortly after you sign on the dotted line. This goes for old, fairly new, or newly built homes because unless you did the work yourself you cannot assume that everything is as it seems. - Know Your Neighborhood and Your Neighbors
One of the most important factors in choosing your home is location, location, location. Sometimes I think if only I could move my house to the country how happy I would be. As much sense as this makes I cannot move my house and neither can you. It may be near impossible to find the perfect house in the perfect neighborhood with the perfect neighbors but you can come as close as you can. Find your house then do the research on how the area has progressed over the years and where it is headed. I know that when we found our house I asked the present owner these questions and even asked who all the neighbors were. This way I could understand the demographic of who we were going to live next to for the next twenty to thirty years. Do not be afraid to probe a little more when searching for your dream home because leaping into your dream may turn out to be a nightmare if you fail to do your homework.
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