Buying Your First House? Here’s What You Need to Know

couple receiving the keys to their first house

If you’ve been thinking about buying your first house, you’ve probably listed the features you’d love to have—a front yard laid with stone steps, an oak front door, or tall French windows that let in natural day light. House hunting is very personal, which can be especially overwhelming. However, with proper planning and alignment of expectations, home buying can go from being stressful to one of the most exciting experiences.

Be Prepared by Asking Yourself These Questions

Before picking your house, there are a few questions you should ask yourself as a first-time home buyer:

Are you both mentally and physically ready?

Applying for a home loan is a complex and expensive process. Moving to another house can be physically, emotionally, and mentally taxing. Adjustments to a change in routine and lifestyle are not easy. These are the realities that you must acknowledge before deciding if it’s time to be a homeowner.

Have you saved enough funds to cover the earnest money, down payment and closing costs?

Your bank account should be ready to cover these three outright costs. When submitting an offer for a property, home buyers pay a deposit of 1% to 3% of the offer price as earnest money. The down payment is a percentage of the property’s total price paid at closing. Depending on the loan terms you get approved for, the down payment amount ranges from 10% to 20%. Lastly, your lender will charge you closing costs for appraisal, survey, inspection fees, title insurance, commissions and other processing fees.

Will you have a steady income stream for the next 2 to 3 years?

The first 2 to 3 years of owning a home and paying a mortgage is crucial. It is in this stage that homeowners adjust to monthly mortgage payments. Any change in the stream of income may be a tipping point for a homeowner.  According to statistics, the majority of homeowners who face foreclosure are first-time homeowners with loans that are less than three years old.

Will the income be enough to pay for the mortgage, insurance and taxes?

Owning a home requires commitment. You may need to adjust your spending habits to ensure that you can cover the monthly mortgage payments, taxes and insurance. Make sure that you have a good debt-to-income (DTI) ratio. DTI is the mapping of your monthly debts and obligations against your income. Calculate your DTI by adding your total monthly obligations and divide it by your monthly income. A good DTI to qualify for a mortgage is 36% and below.

Repairs are coming. Are you ready for it?

As a homeowner, you have to prepare for unexpected repairs. Renovations are something that you can plan for and set aside funds for. But unexpected repairs like clogged drains, leaking pipes and busted water heaters can be costly. There are also routine maintenance jobs like repainting walls and ceilings, cleaning of carpets, and power washing sidewalks or pavements. You need to set aside an emergency fund for these repairs and maintenance.

Reality-Check Done. What’s Next When Buying Your First House?

After doing the due diligence and determining that you are financially ready to be a homeowner, you can start planning the purchase of your first house.

  1. Ascertain how much your bank can lend you. This can be determined by your income, credit history and the down payment amount. Employment and residential history may be factors as well. Most lenders provide a prequalification screening and can give an estimate of how much you can borrow. Knowing your price range will make your house-hunting experience much easier.
  2. Narrow down your market. Specify the area where you want to purchase a property. This will give direction for your search, making the process easier and less stressful. The area where you will focus your search can be influenced by where you work, the length of travel you are willing to make and the kind of lifestyle that you wish to pursue.
  3. Be certain of the type of house you want. Do you prefer a house that is not attached to another house? Then you have to look at single family houses. Also, decide on the size of the house and the number of rooms. When selecting the type of house, consider the possible changes that may happen in the next 5 years. Remember that owning a home is a commitment. Your home should be able to accommodate possible changes in your life.
  4. The neighborhood should also meet your requirements. The vicinity should be safe for people to engage in outdoor activities. Check if there are available amenities nearby like parks, sports clubs, and jogging lanes. Take note of transportation and means to get around the neighborhood. Be sure to also check the demographics of the area. The kind of people within the vicinity will contribute to your quality of life in your new home.
  5. Hire a professional buyer’s agent. Buying your first house is much easier and safer when you have the help and guidance of a pro. Look for an agent who has had significant experience in the area where you plan to buy a house. If possible, ask for recommendations from friends or family members for agents that they had great experiences with in the past. A buyer agent can help you understand the processes and make better decisions. 

Buying your first house is both an exciting and nerve-wracking experience. But taking the time to educate yourself on home-buying issues can markedly minimize the stress. You’ll soon realize you are on your way to owning the home of your dreams!

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Josh Miles is a St. Petersburg/Tampa based writer who studied Business Management and Marketing at the University of South Florida. He believes that time spent with good friends and a connection with nature are keys to a healthy and happy life. In his free time, you will find him exercising, listening to music, or playing video games with friends.

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