11 Things First Time Homebuyer's Need to Know
11 Things First Time Homebuyer's Need to Know
1. It costs more to own a home than just the purchase price. Besides the money needed for a down payment at closing, you should keep in mind the additional cash needed such as the fees for home inspection, termite inspection, financing, attorney, title insurance, pro-rated property taxes, and homeowner's insurance--all of these combined will be your closing costs. Future costs in homeownership are the ongoing expenses of insurance, taxes, utilities, and maintenance. Make sure you are comfortable with these numbers or reduce your purchase price to keep within your budget.
2. Just because it is a buyer's market do not assume it is right for you to buy now. Homebuyers should make sure their jobs are secure, they can qualify for financing, and their reason for buying is based on facts, not emotions. If the answer to these questions is "yes," consider moving forward with the home buying process.
3. Before looking at any homes get pre-approved for financing. This accomplishes three important goals: you will be able to find the best terms for you, it will keep you focused on the correct price range when looking at homes, and your offer will be taken more seriously by the seller.
4. Select a competent real estate agent by asking friends for a referral, researching on the internet, and calling real estate agencies in the area where you want to buy. Interview at least three agents and select the one you feel is the most knowledgeable and who you think you can work with the best. First time homebuyers should select an agent with an ABR (accredited buyer's representative) designation, which signifies that the agent has additional training and experience in representing buyers.
5. When making an offer on a specific home, be sure to get an estimate of any maintenance or updating you intend to do to ensure that the purchase price plus additional work costs are within your budget.
6. VA loans and US Rural Housing loans require no down payment. Down payments for FHA loans range from 3.5% - 6% of the home's purchase price, while conventional loans are 20%. There are local, state, and federal loan programs to help the first time homebuyer with down payment assistance, loan terms, and interest. Be sure to check these options out.
7. Make sure you new home has good resale potential. Factors that affect property value include the specific location, school district, community amenities, closeness to shopping and dining, etc.
8. Potential sources for finding the lowest price homes are properties that are for sale by owner, foreclosures, and short sales. In most instances these homes are sold "as-is"--always get a home inspection done. The new homebuyer should not go down this road alone. Consult a real estate attorney or utilize a real estate agent. In most cases the real estate agent can negotiate so that the seller will pay his commission.
9. When buying a home, do your homework before submitting an offer. Have you realtor complete a current market analysis of similar homes in the immediate area so that you know what a fair price is. If possible, walk around the neighborhood and speak with current residents to see what they like about the neighborhood and drive through the area at different times of the day so you will know first hand if it suits your needs.
10. When you submit an offer, make sure your agent has included any contingencies which enable the buyer to be released from the contract with a return of earnest money. Contingencies can include the buyer's satisfaction with financing terms, the appraisal, home inspection, or the ability to secure home insurance.
11. Immediately prior to closing have your realtor make arrangements for a final walk through to insure that the home is in satisfactory condition.