If you are a first time home buyer and quite eager to get your new home, here is a list of seven steps you need to follow before you take the plunge.
1. Are you sure you are getting a house at a price at par with prevailing real estate rates? No one can actually be very sure about it. Hence, it’s advisable to check home rates in your area on websites like Homegain and Zillow. Here, you will get a clear idea on how much you must pay in order to own a home. Another trust worthy site is the one developed by National Association of Realtors.
2. Most of the first time home buyers find it quite difficult to repay the mortgage because the monthly payment is too high. This happens due to inadequate research and inefficient planning before getting a mortgage. Make use of mortgage calculator provided by Bankrate to work out how much you can afford to repay every month.
3. First time home buyers must also add housing cost in their planning list before owning the home. You must calculate how much home owners insurance and taxes would sum up to, to get the approximate monthly spending amount. This sounds insignificant, however it’s much important than one’s perception. In some areas, taxes can almost double the amount of mortgage.
To know how much insurance can cost, you can pick up any property in the desired area and call up the local insurers in order to get the exact amount of insurance. Getting details about property tax is comparatively simple. Zillow provides information about property tax in all the areas around the world. It’s also important to make note of the exemptions and complexes of local tax system. Many areas can help you save lots of money spent as tax.
4. Determine how much amount would be spent as settling cost. This cost comprises of tax and insurances, lender fees, settlement and title fees, and prepaid fees like homeowners association fees.
5. Before shifting to the new home, first time home buyers must set up a budget. According to Fannie Mae, spending more than 30% of your income as household expenses can expose you to the risk of being house poor.
6. Get as much information from the real estate agent as possible. Learn about the local climate, rise and fall in prices, etc.
7. House is definitely an investment. However, not maintaining this investment appropriately can prove to be a costly affair and can be more expensive than the investment itself in the long run.
Hence, jumping to a decision without proper precaution can land you in trouble. It’s advisable for first time home buyers to follow these steps before actually become a first time home buyer.