Buying a home for the first time can be an exciting yet overwhelming experience. Trying to purchase a home at an ideal time with a focus on a property that you are happy with and all the while staying within your budget is no small task. If you are a first-time home buyer, the tips below can help you decide if now is the opportune moment to do so, and if it is, how to go about the process.
Truly Knowing What You Can Afford
While it seems like an elementary concept, many first-time homebuyers will make the mistake of not looking into their monthly allowance ahead of time. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs to limit the risk of becoming house poor while many homebuyers will suggest that 25% can be better suited to allow for savings.
By knowing what your budget is ahead of time, you can prevent yourself from looking at homes outside of your price range and get a good idea of what you can get for your hard earned money.
Compare Ideal Areas Vs. Value For Money
Living in an ideal neighborhood with parks and great schools can be advantageous for many, but they can also be quite pricy. Many first-time homebuyers typically don’t have enough saved up to be looking for a costly house in a luxury community, therefore it’s important to be realistic about your goals and find a compromise that you’re satisfied with.
If you genuinely want a great area, see if you’re willing to compromise on the age of the house and necessary fixes, or if you’ll be satisfied with being a little further from the city center but getting a larger, or upgraded property in return. Being open-minded before looking at homes can help you be realistic about what you’re looking for and help you spot your perfect home even if it isn’t perfect by other standards.
Understand Your Monthly Housing Costs
The cost of a house may be in the low six figures, but beyond looking at the sale price, it’s important to take into consideration other factors, such as taxes, homeowner’s insurance, and homeowner association fees.
By using tools like home affordability calculators, you can see what you would be paying for taxes and insurance depending on where you’re living in addition to other monthly expenditures to ensure you have the funds necessary to purchase a home before signing on the dotted line.
In some areas, what you’ll pay for your taxes and insurance escrows can almost double your mortgage payment, for example with mortgage rates in Houston. Compared with the average yearly premium ranging from $477 in Utah, for example, to $1,327 for Texans, understanding your monthly housing costs can be extremely important, especially if you’re looking at mortgage rates in Houston.
By taking time to understand your budget, including all possible costs, and being realistic about the quality or location of your first home, you can feel better prepared and increasingly confident going in to making your first home purchase.
It’s easier now than ever before thanks to online calculators, the tools available on realty websites like Zillow.com, and as with all things these days, there are plenty of apps to help decide on budget, taxes, location, home loan help, and which kind of mortgage will best suit your short and long term needs.