Tips for First Time Home Buyers
May 23, 2018
The best part about looking for a house is buying the home of your dreams. You look for the perfect location, the perfect space, the perfect structure, and the perfect design; all in all the perfect property. In a sense, you want to restlessly fall in love with its physique and its personality – the outside and inside of the house. However, when you are heads over heels with a specific house, certain requirements come to play.
For the first time home buyers who are reading this, or simply those of you who aren’t still crystal clear about the processes involved at owning a house, there are key factors to follow in order to avoid future stress or regrets.
The house of your dreams isn’t always the synonym of affordable. Because of this, mortgages, a loan that is secured by property or real estate, exist. They allow us to buy the house little by little, at a reasonable price, until finally owning it completely. However, once you rely on a mortgage you have to pay close attention because the bank can use your house as collateral, meaning if you don’t pay the bank back on time, then they can take possession of your home. The bank has to review your proof of work, notice of assessments (NOA), income statements, bank statements, and debts. Once the bank thoroughly reviews your background and grants you a mortgage, they give you a contract containing the downpayment, a fixed rate percentage, a specific year term, and a specific year amortization (it all depends on the bank).
The downpayment is the initial payment, typically an upfront percentage of the total cost of the house. Example: If the house costs $500,000 and the bank asks for a 20% downpayment, then the buyer should pay $100,000. From this, the buyer has a fixed rate to pay, meaning that each year they should pay percentage amount of interest. There typically exists two types of rates including interests, the fixed rate and the variable or floating rate. Usually, fixed rates are much more expensive bur much more reliable and steady. Instead, the variable or floating rate tend to be cheaper but provide uncertainty as to how much money you will spend next. All of these rates depend on the value your house has on the market at a time, so you should always pay attention to that. The year term means that the buyers are locked to that specific contact for an x amount of time and the amortization period is simply the estimated about of time it will take for the buyers to completely own the house.
Now that we have gotten over the more formal and legal part, let’s see the tips you have been waiting for.
The first thing a buyer should do, as mentioned above, is get the pre-approval. Having a great sum of money in your account doesn’t guarantee that the bank will grant you a mortgage. Thus, you should go over all of your background with a consultant before even thinking of living in that specific house.
Don’t make emotional choices, go for the reasonable ones. Before falling in love with a house, make a checklist! Is it close to work, to school, is it in a good neighborhood, is it too small or too big for your family, ect. Also go several times to the house, maybe you’ll see something that you missed the first time.
Get your own real estate agent! Not only will they be your second pair of eyes, but they’ll be working for you – meaning that they will want what’s best for you.
Lastly, don’t underestimate the closing cost of the house. Be honest to yourself, can I actually pay for this house? It is not only paying the downpayment, but the interests, the taxes, and all in all living comfortably every day with your family.
Buying a house is easier than it seems, however, one should simply be well informed regarding everything before making the decision of owning a specific property. So, know that you are further informed, how about we go buy some houses?