If you’re considering buying your first home, there are some questions that you’ll need to answer before you actually go through the home buying process. Between figuring out your finances and actually going through the home buying process, there are many things that you need to have in order before you buy your first home. Here are a few questions that you should answer before you dive fully into the home buying process.
1. Is Your Debt Manageable?
The average American has $38,000 in non-mortgage debt. While it is normal to have debt, you may need to think about whether or not it is manageable to pay a mortgage on top of your other debts. If you aren’t sure if you’ll be able to make payments on a mortgage loan, student loan, and car loan, for example, then you might want to wait until you’ve paid down your other debts before trying to take out a mortgage. Take a careful look at your budget to ensure that you are not overspending and you can focus on paying your bills after you buy your home.
2. Do You Have a Buyer’s Agent You Can Trust?
It’s important to have a dedicated buyer’s agent during the home buying process — their only job is to get you your dream house for the best price possible. Not only are they dedicated to helping you, but 78% of recent home buyers reported that their agent was a useful source of information. If you are a first-time homebuyer, you’ll likely need more help than a more experienced home buyer. It’s important to have a buyer’s agent that you trust so that you can ask all of the questions you will have during the process. You can interview multiple agents before you begin the process of buying your first home, but make sure not to interview more than one agent at the same real estate agency — it can be seen as rude.
If you’re wondering about the necessity of a buyer’s agent when there are websites like Zillow where you can easily find houses for sale, you’re not alone. However, it’s important to remember that a buyer’s agent is not just there to help you find the perfect home — they are also there to help you get the best possible deal on your home. They will help you every step of the way and are an invaluable resource to you throughout the home buying process.
3. Do You Have Enough for a Down Payment?
A down payment on a house should typically be 20% of the total cost. If you have less than 20% of the total cost saved up, you will have to pay an additional type of insurance. This insurance, called Private Mortgage Insurance, or PMI, results in a higher monthly cost to pay down your mortgage. In the long run, it is better to save up for a down payment in order to avoid paying this extra insurance.
You may even end up with more than 20% for a down payment considering the fact that approximately 75% of homes in 2019 sold below the asking price. With a good buyer’s agent, you may be able to put more down on your payment and end up with a lower monthly mortgage payment.
4. Are You Pre-Approved for a Mortgage?
Getting pre-approved for a mortgage is a very important part of the home buying process. The odds are that you are not going to be outright buying your home, so you will need a mortgage. Getting preapproved for a mortgage is key to ensuring that you are able to buy a home in your desired price range. Pre-approval will make the entire closing process move more quickly. You will need to get your credit score in order before you begin to contact potential mortgage lenders, so keep that in mind as well.
5. Do You Have Enough for Closing Costs?
Closing costs are typically between 3% and 5% of the total cost of the home. To avoid having this taken out of your down payment, and therefore increasing your mortgage payments, make sure that you also save up for closing costs. These are, as the name suggests, due at the time of closing on your home, so make sure that you are prepared to pay them.
Closing costs cover a range of different costs that are associated with buying a home, such as attorney fees, title insurance, tax payments, and certain homeowners insurance fees.
6. Are You Prepared for the Upkeep of a Home?
If you have only lived in rented homes or apartments before, you may not be used to having to do any renovations or fixes yourself. However, when you buy a home, you no longer have a landlord that you can call when something goes wrong. Instead, you have to take care of any potential issues that may arise. If you were already comfortable with asking the sellers and sellers agent questions, you may have some information about what to expect in terms of issues with the home, but are you prepared to take care of those issues when they arise?
Before buying a home, it’s a good idea to have recommendations of contractors for services that you could potentially need to have performed. For example, having a recommended plumber, electrician, or cable provider could help you if an emergency issue arises. You don’t want to end up with a major plumbing issue only to call whatever plumber you find first because you didn’t have a recommendation that you had already researched and vetted.
Buying your first home is an exciting time, but in order to make the process as easy and carefree as possible, make sure that you are properly preparing beforehand. If you can’t answer any of the questions outlined on this list, it’s probably a good idea to delay when you’re planning on buying your home to ensure a smooth and easy process.
What advice did you get before buying your first home that worked for you? What struggles did you face when buying your first home? Let us know in the comments below!