You’ve found a good job, saved up your paychecks, planned out your budget, and even started considering which neighborhoods you can like to see yourself living in. You’re finally ready to start looking at houses, and you couldn’t be more thrilled.
It won’t be long before you’re signing the papers for the purchase you’ve been dreaming about: your first home in your ideal neighborhood.
But before you get out there and start picking out drapes, take a look at these 5 important reminders for all first-time homebuyers:
1. Owning A Home Costs More Than Your Mortgage Payment. If you’ve ever calculated what your monthly mortgage payments would look like, you may already know just how easy it is to talk yourself into a house that’s too expensive. This is a common mistake first-time homebuyers make, but you mustn’t let it happen to you.
While your mortgage payments may be your highest monthly expense, you need to remember that it won’t be your only monthly expense. You’ll still need to pay for utilities, Internet and TV, transportation, property taxes, and homeowners’ insurance, on top of the monthly expenses you’re already used to, including your phone bill, your car insurance, and your groceries.
Ideally, you’ll want your mortgage payments to be low enough that you can afford all your regular expenses and still be able to put money away at the end of the month for emergency savings and that vacation you’re looking forward to
2. On A Related Note, Your Monthly Mortgage Payments May Go Up. First-time homebuyers may not all be aware of this, but your monthly mortgage payments will not be set in stone.
There are several reasons why your payments could increase, and you should be familiar with these from the beginning.
One common reason why homeowners see an increase in their monthly payments is due to an increase in the interest rate on their adjustable rate mortgage (ARM). It’s therefore crucial that you understand whether the mortgage you’re taking out is a fixed-rate mortgage or an adjustable rate mortgage. This information can be found in the Closing Disclosure, which the lender will provide you with at least 3 business days before you close on your mortgage loan.
3. You Can Get Pre-Qualified Early. Although many first-time buyers choose to look at homes before talking to a lender, this may not actually be the best plan.
If you can instead get pre-qualified before looking at homes, you’ll be in a better position to make an offer when you find a property you’re interested in. In addition, getting pre-qualified ahead in advance will give you the time to correct any errors that may exist on your credit report that could lengthen the process of taking out a loan.
4. Understand What Is And Isn’t Covered By Homeowner’s Insurance. Just like your medical insurance and car insurance, the coverage provided by your home insurance will depend heavily on the plan you’ve put together.
Make sure you do your homework and have a clear understanding of the options available to you. Shop around to compare coverage and quotes from multiple insurance agencies, and make sure you’re choose the best plan for your needs.
For example, if the carrier you’re considering does not include coverage for natural disasters in its standard policy, you may want to consider adding this coverage if you’re moving to a region that has a bad hurricane season or is prone to earthquakes. Your home insurance plan is an investment that should be thoughtfully considered and well-researched.
5. Budget For New Appliances, Even If You Don’t Think You Need Them. Sellers are not required to upgrade working appliances, and you never know when your washing machine may just kick the bucket. Estimate how much it would cost to replace the appliances you need the most, and make sure you keep some money aside for unexpected repairs or replacements. There’s no such thing as being too prepared!
For most, buying a house can be an exciting, yet stressful endeavor. Doing your homework and learning what to expect ahead of time can help to minimize that stress and allow you to fully enjoy your new home. Research as much as you can, and talk to people you trust when you’re making tough decisions.
Do you have more advice for first-time homebuyers? Leave your tips in the comments below, and don’t forget to share this post if you know someone shopping for a house!