When you’re in the process of looking for your first home it can be very exciting and a little daunting. As you are probably more than ready to get the ball rolling with your search for a new home, you should make sure that you take a deep breath and arm yourself with the right tools so that you don’t make any costly mistakes.
After all, this will probably be the biggest financial decision that you make in your entire life, so you need to be sure that you have made the right choice.
1. Get an idea of what you can afford
One of the first things that you should do is to take a long hard look at your finances and start the conversation with your bank. Banks and other lenders have formulas to determine how much you can afford to borrow. But they don’t always have your best interest in mind. Make sure that you have fully understood the terms of any agreement that you’re looking into.
Don’t forget to factor in child care expenses, retirement savings, and the cost of your lifestyle. Just because the bank approves you for a $500,000 mortgage doesn’t mean you can actually afford them alongside the lifestyle that you plan on living.
2. Make a list of must have and nice to have
This can be the best way to get an idea of how realistic your expectations are. Before you start seriously shopping for your first home, you should determine what your needs and wants are. If you know off the top of your head what you can make compromises on then you are approaching the homebuyers process the right way. By doing this, you will be able to narrow your house search down to properties that really fit your needs.
3. Figure out how you’re going to pay the down payment
You should be shooting for 20% down, this way you will be able to qualify for a regular mortgage and also get a much better rate.
4. Don’t forget about closing costs
The closing costs can be a lot more than you think. If you are not prepared for them it can be a real shock and even a deal breaker. Closing costs can range anywhere from 1.5% to 3.5% of the total cost of your home.
5. Get pre-approved for your mortgage
Now that you are looking at homes, it’s time to get serious with the bank. You need an up to date pre-approval to be sure that you have a clear idea of what you can afford and that you will not be disappointed.
Getting pre-approved for your mortgage gives you an edge over other people who might be interested in the same property as you. The seller will know that you are a serious buyer, and you are able to confidently negotiate the purchase of a home.
6. Don’t keep looking over the fence
If you have a found a house that you like, can picture yourself living in and can afford, stop looking. The last thing that you want is to be well into the process of closing the deal when you see something else that catches your eye. You don’t want to second guess yourself. If you can keep your eye on the prize then you will feel much better about the home that you have bought and you can move in confident that this was the right choice for you with no regrets.