1) Establishing a Realistic Price Range
A common mistake among first-time home buyers is purchasing more house than they can afford. You should not rely on banks to determine what you can comfortably spend on a new home. Banks are adept at determining the amount of monthly debt in the form of mortgage, insurance, credit card, student loan and auto loan payments. The bank will try to limit your housing expense to about 25% of your current gross income.You should make a list of all monthly expenses and retirement contributions, excluding rent or your current mortgage payment. You will want to be aware of what you currently spend and have an idea of what you are comfortable spending rather than getting in over your head.
2) Seeking Pre-approval
Getting pre-approved for a mortgage prevents a deal on a dream home from falling apart due to failure to obtain financing. A pre-approval letter will give you some power to negotiate on a home’s price because the seller will view a pre-approved offer more favorably than an offer that comes without lender pre-approval. In today’s market, no seller will consider an offer at all unless you have been pre-approved.
3) Setting Priorities
You should compile a list of what you need and want in a house. Needs might include the number of bedrooms, square footage, high-quality schools and commute time. These needs are aspects of the house that either cannot be changed or cannot be changed without substantial cost to you. A good realtor will help you with this list.
4) Choosing the Right Neighborhood
Crime statistics, insurance rates, property taxes and school quality are important considerations for you. Because the neighborhood makes up a large part of a home’s value, take your time to find exactly what suits your needs. You should also consider job commute, traffic during rush hour and proximity to amenities such as shopping, churches and libraries.
Driving through the neighborhood at various times during the day and night will provide a more complete picture of the location. Don’t forget to talk to potential neighbors, who can be a good source of information regarding the neighborhood and residents in the community. Take note that bad neighbors can bring down the value of a house.
5) Make sure to get a Home Inspection
You will also need a professional home inspection. Even new houses may present costly problems evident only to a home inspector. Main areas covered by the inspection should include quality of construction, integrity of the foundation and condition of plumbing, electrical, heating and cooling systems. If the inspection uncovers serious issues, such as cracks in the foundation, you may decide to back out of the contract or ask the seller to repair the problem.