First Time Home Buyer
There are many advantages of owning a home, especially when comparing the pros and cons to renting. Along with the pride of ownership, one of the biggest advantages of owning a home is gaining equity, or the natural increase of your homes value over time. Buying a home is by far one of the smartest investments you can make! However, to ensure your buying experience is as rewarding as it should be, you’ll want to prepare yourself both mentally and financially for the responsibilities that come with homeownership, along with the remarkable benefits.
Is Homeownership Right For You?
Some people may assume that buying a home is virtually identical to renting a home with the exception of having the freedom to make changes to the home or the ability to keep pets. While these advantages of ownership are certainly favorable, they also come with the obligations of a mortgage, property taxes, homeowners insurance and routine maintenance. When weighing the pros and cons of each, it’s wise to consider your finances along with assessing your overall expectations.
Questions Worth Asking Before You Buy
ARE YOU READY FOR THE RESPONSIBILITY?
One of the most important responsibilities of owning a home (and also one of the top neglected items) is routine maintenance. It’s important to keep your home safe, sound and sanitary. Small maintenance issues can quickly turn into bigger problems if they are not corrected. For instance, a leaky gutter may not seem like a big deal, but over time, the pooling water can penetrate your foundation wall or crawlspace and cause structural issues or mold problems. Likewise, neglecting the touch up paint on the exterior trim can cause moisture problems that require new siding, insulation or windows.
HOW MUCH HOME DO YOU NEED?
One common mistake that first time buyers make is buying too much home or becoming "house poor". Just because you can get approved for high loan amount doesn’t mean you should buy at the top of your price point. Keep in mind that you still have insurance, taxes and routine maintenance to budget for. You’ll also want to be sure you don’t get caught off guard by economic downturns, unexpected situations or layoffs. As a first time buyer, the chances are good that you won’t live in this home for the rest of your life. It’s perfectly acceptable to keep things practical for now and apply the equity you build on this home towards a larger down payment when you are ready to upgrade in the future.
DO YOU NEED TO BE PRE-APPROVED FIRST?
Many people are fairly knowledgeable when it comes to buying a car. In most cases, you test drive the car, negotiate the price and then apply for a loan. In a matter of hours, you are driving down the street in your new ride. Buying a home is drastically different. The first thing you want to do before you get out looking is to get pre-qualified with a local, reputable lender. The reason for this is simple – mortgage loans are heavily regulated and require extra scrutiny. (You may recall the great recession and housing crisis of 2008?) Not only is it important to know your overall budget for a home, it’s also important to know which type of loans you can qualify for (conventional, FHA, VA, USDA, etc.). Some houses will have financing restrictions and will not work with certain types of financing.
WHICH LOAN TYPE IS RIGHT FOR YOU?
If you are active duty or a military veteran, chances are you will most likely use a VA loan for your home purchase. VA loans are hard to beat due to the fact there is no mortgage insurance and (in most cases) no required down payment on the loan. If you are not eligible for VA financing, the other two main options are conventional financing or FHA financing. FHA financing requires a minimum down payment of 3.5% and conventional financing requires a minimum of 5% down. Although there are many differences between FHA and conventional financing, one of the biggest distinctions is that conventional financing requires a higher credit score. The other major difference is that you can eliminate the inconvenience of mortgage insurance on a conventional loan if your down payment or equity is at least 20% of your homes total value.
WHAT IS YOUR TIMEFRAME FOR A PURCHASE?
What is your current housing situation? Are you renting or do you have a lease to fulfill? If you are 6 months to a year out (or more), it probably doesn’t make much sense for you to actively look at this point. Markets can drastically change over the long term and most sellers will want to close as quickly as possible. When obtaining a loan, the typical real estate transaction takes about 30-40 days and the majority of sellers will expect your offer to be based around that timeline. When you are 2-3 months away from your desired move in date, this is the ideal time to get out looking. Your loan pre-qualification also has an expiration date, as most are valid for just 90-120 days.
We’re Here to Help
You deserve a great REALTOR® who is knowledgeable about the local real estate market and will work hard for you. The Pfeffer Group team is dedicated to helping buyers find the right home for the best possible price and terms and provide you with a stellar buying experience. As your buyer’s agent, we will work as your trusted advocate and consult you through the entire process. Buying a home doesn’t have to be stressful for you and we’re here to make sure that it’s not.