First time home buying can be exciting. This excitement could make you fall in love with every home that you check out regardless of how they look like, price or location.
It is also possible to feel overly anxious, stressed or confused as you try to make sense out of everything. But don’t worry because this cannot compare with the feelings of relief and happiness of being a homeowner.
Dealing with the emotions of first-time home buying and overcoming the challenge of financial preparedness is critical. How will you afford your dream home?
The following are financial tips that will set you on a smooth financial path to your first home:
- Strengthen your credit score and get preapproved before looking for a home
Affordable homes are not easy to find and are competitive due to high demand. Start by strengthening your credit score and getting ready with the down payment for the right house that comes along.
With a variety of mortgage options to choose from, the traditional 20% down payment is no longer required. For instance, credit unions have good options for first-time homebuyers especially with low to no down payments.
Getting a fully underwritten preapproval places you in the category of a “serious buyer” hence compete well when the right home hits the market. When doing this, shop around to ensure you get the best rate, fees and terms.
You also don’t want to waste your time viewing houses that you cannot afford. A preapproval gives you a true picture of your monthly payment so that you know what you can afford.
- Prepare for the closing day
Apart from the down payment, which you need to save for in advance, there are the closing costs and associated expenses like home inspections plus move-in expenses.
The closing costs are typically between 1.5% and 5% of the mortgage amount and the seller may agree to pay part of it but you need to be prepared in advance to cover the cost. However, do not drain all of your savings on the down payment and closing costs because it could put you in a financial bind. Don’t forget the hidden costs of homeownership like property taxes, insurance payments, repairs and maintenance!
- Shop, inspect and negotiate well
Choose a good real estate agent and then pick the right house within your preferred neighborhood. Stick to your budget and pay attention when visiting potential homes so that you do not miss important details that can cost you later like an aged roof, plumbing and the electrical system, for example.
When you are satisfied with the house, make a strong offer to avoid bidding wars and other emotions that could blow the lid off your budget. Negotiate well and consider that there may be major repairs, or the seller may cover part of the closing costs. It is always better to be safe than sorry!
Financial knowledge and preparedness are very important for first-time home buyers. You lose or gain depending on how you handle the financial aspects of the entire home buying process. For further advice and information, give Firefighters Credit Union a call!