Purchasing a home for the first time can be a daunting process. You have to evaluate dozens of things, including how much you can viably afford, how much of a down payment to make, the duration of your mortgage or what homeowners insurance to buy. Buying a home is probably one of the biggest decisions you will make in your life, so being properly informed and prepared can help you ensure you are not making poor financial choices that will hurt you in the long run. Here are things all first-time home buyers should know before taking the big plunge.
1) Determine What Matters Most To You: Space Or Location
Before you even begin searching for your first home, determine whether you care more about having ample space or being in a prime location. Some people prefer to have two bathrooms instead of one and a basement even if it means being in a less convenient area. Others, on the other hand, would rather be in a convenient neighborhood to work or school— or somewhere with more of a restaurant/nightlife scene — at the cost of living in a smaller house. It’s important for you to decide your priorities in this regard before making any major home-buying decisions.
2) Evaluate How Much You Can Afford
A common mistake among many first-time home buyers is thinking they can afford more than they actually can. The subprime mortgage crisis that occurred during the 2008-2009 recession taught us this. Not knowing how much you can afford can lead to foreclosure on your home, among other things. According to Nerd Wallet’s 2018 Home Buyer Report, 13% of Americans have lost a home due to foreclosure or another similar event in the last ten years. Set a budget and find out how much a bank can lend you based on your income, credit history and more. Getting pre-qualified is very important.
3) Find Out What Type Of Mortgage You Qualify For
It’s always important to ensure you are pre-approved for a loan before placing any type of offer on your first home. Knowing how much you can afford under different loan programs is also good. Knowing what kind of debt counts against you is also helpful.
You hurt your credit score by simultaneously financing another big asset purchase, like a car, the bank can rescind your loan at the eleventh hour. Stop spending temporarily unless an emergency arises.
4) Save Up For A Down Payment — However Much That May Be
A down payment is always a sound first step to take when purchasing a home for the first time, as this is a form of equity that can be a deciding factor of your loan. To save up for this sum, you can transfer a fixed amount into a special savings amount each month, lower your expenses, reduce your debt (especially high-interest rate) or get a second job. However, make sure you know the correct minimum rate required for a down payment. Nerd Wallet’s 2018 Home Buyer Report also found that 62% of Americans think at least 20% is needed for a down payment on a new home purchase. However, census data from that year showed 32% of U.S. homeowners ended up putting down 5% or less on their homes. A mortgage lender can assist with this aspect of the transaction.
5) Factor In Other Expenses & Fees
Another mistake many first-time home buyers make is not factoring in things like property taxes, monthly maintenance costs, like utilities, and fees (in the case of an HOA or a condo), homeowners insurance, and potential renovations and repairs. It’s also important to ensure you get a home inspection in order to avoid any surprises before your big asset purchase.
6) Buy Title Insurance
Title insurance is a form of indemnity insurance that shields a holder from financial loss suffered from liens or defects in the title to a property. A title refers to a document that proves legal ownership of a property. Not purchasing this type of insurance can be a big risk if a defect is found in the title to a property. For example, if a buyer without title insurance closes a deal on a new home and finds the previous owner still owes a contractor, , the new owner now becomes responsible for the claim associated with these payments.
Seeking More Information About Home Buying & Title Insurance For First Time Home buyers
If you’re a first-time home buyer looking for more information and advice on this process, including how and why you should acquire title insurance, contact Mathis Title Company in Fairfax, Virginia. Their professionals — like attorney Robin Mathis — have over 30 years of experience and will assist you by conducting research on a title and after approving it for transfer before enlisting underwriters for hep insuring said title. Mathis offers a free consultation for its services, which also include contract preparation and review, mechanics lien and agent services, refinancing and settlement and real estate closing.