Tips for First Time Homebuyers

Buying a home can be a frightening experience for anybody, but for a first time homebuyer this can be especially true. There are so many facets of the home buying process and it can get overwhelming trying to keep everything straight and be sure you have covered all your bases before you close on a home. The following tips will help get you started and be better informed on the process of buying your first home.

Decide if you are Ready to Buy a Home

Buying a home can be a sound financial decision, and can provide you with a place all your own. As a renter it is easy to see the benefits of homeownership. Your monthly housing payment will be going toward building equity instead of straight into the pocket of your landlord. You'll have a place that you can paint whatever color you want, make as many nail holes in the walls to hang pictures as you would like and decorate exactly how you want it. You can have pets without having to pay large deposits. However, as great as it sounds many soon-to-be home buyers only focus on the benefits and fail to see the potentially negative factors involved in homeownership.

To weight the positive and negative factors of renting vs. buying, please see our article on the subject here.

You've Decided to go Ahead with it

Congratulations! After looking at the comparison of renting vs. buying you have decided to go ahead and buy a home. It is one of the biggest decisions you will make in your life, and now you need to do your homework so you can make informed decisions throughout the process. The following tips will help you to research the things you need to know before moving forward.

Choosing a Real Estage Agent

Working with a real estate agent is very important - especially if this is your first time buying a home. The home buying process is very complicated and varies from location to location, so it is important that you get educated on the cusomts and procedures in the location where you are buying a home. A real estate agent will be familiar with the customs and will be able to provide you with advice and information that will make the process much smoother.

Because getting the right agent is so important in making the process as painless as possible it is a good idea to compare agents before deciding on one. You can do this the old fashioned way by calling around to different agents in your area and asking them about their qualifications. Recently, and company called Home Gain introduced an online tool to simplify this process. You just fill in a short form and then realtors in your area will compete for your business. They will send you information such as how much commission they charge, how familiar they are with your area, and lots of other important details on how they can help you. The service is free and is an easy way to find the right agent for you. If you would like to give it a try you can follow this link:

If you decide instead to call around to real estate agents be sure to ask them how much their commission is and how much experience they have selling homes in your area. You should also ask them who will help you to write up the offer, what information sellers are required to disclose to buyers, and ask for a copy of a sample disclosure statement to review. Ask if the title search is done by a title company or an attorney, whether the real estate agent, title company or someone else acts as the closing agent, and how long closing typically takes after an offer has been accepted.

Get your Finances in Order

Clean up your Credit

In order to get the best interest rate on your loan (or in some cases to even get approved for a loan) it is important that your finances are in order. Check out our credit repair article for some great tips.

Pay Down your Debt

One mistake many first time homebuyers make is that they save all of their money toward a downpayment. A smarter move would be to pay down or pay off your debt. Credit cards and other such debt has very high interest rates, which makes it more difficult to save monty. Additionally, how much outstanding debt you have will affect whether you get approved for a loan, and how much money a bank will allow you to borrow. By paying down your debt you are getting a much better debt to income ratio, which will help to boost your credit score and get you a better interest rate on your loan. Additionally, it will free up extra money each month that you can apply to your mortgage payment.

Decide how Much Home you can Afford

Deciding how much you can afford is typically figured by making sure your monthly payments aren't higher than 28 - 29% of your gross income (income before taxes). Then figure in how much you are able to put as a downpayment, being sure to leave enough to cover closing costs and a small amount for initial home repairs once you move in.

Get quotes on homeowners insurance since your lender will require you to carry it. Many lenders will allow or require you to pay toward your homeowners insurance each month when you are making your mortgage payment, and this can add a lot of extra cost to your monthly payment.

Also look at about how high property taxes are on any property you are interested in. This too is often paid in monthly installments that are included in your mortgage payment to your lender and again can significantly increase the payment you will be making each month.

get a copy of a utility bill or an estimate of monthly utility expense from the seller These expenses can be quite high and it is good to know in advance so you can factor that in to your decision making and be sure you won't go over your monthly budget and become unable to pay your other bills or your mortgage.

Get Preapproved

Getting preapproved for a loan before you start shopping is a very good idea. A preapproval from a bank will give you the same advantages as if you were a cash buyer. Additionally, many real estate agents won't work with you unless you have been preapproved. A bank that preapproves you will also let you know how much money you are actually able to borrow so you can limit your home search to that price range. Also be sure to check out our article on the difference between pre-approved and pre-qualified.

Don't Make any Major Financial Changes

Between the time when you start shopping for a home and have been preapproved for a loan and when you actually close on your new home don't make any major financial changes. This would include things like quitting your job, buying a new car or other major purchase, or neglecting to pay your bills on time. All of these things can adversly affect both your credit score and how a lender views you and can mean that you won't be approved for your loan when closing time rolls around.

See if you can Find Assistance

Look around for gift and grant programs designed to help first time home buyers. There are many programs out there that can reallyl help with things like downpayment assistance (or in rare cases they will cover your entire down payment for you), eliminating or lowering closing costs, helping you get a loan and many other benefits.

Be Sure to get a Home Inspection

Any offer should be contingent on an inspection. Based on the outcome of the inspection a buyer can ask a seller to make repairs or lower the asking price, or you may decide to walk away from the deal entirely