Buying a home can be challenging for a first-timer. After all, there are so many steps, tasks, and requirements, and you may be anxious about making an expensive mistake. But first-time homebuyers actually enjoy some special advantages created to encourage new entrants into the real estate market.
With more than 1 million people buying their first home each year, plenty of people obviously decide the commitment is worthwhile. And as for the scary parts, preparation goes a long way. Homing in on what you want and really need in a house will make each step of the process much easier as well.
You shouldn’t make the decision to become a homeowner lightly. Take the time to prepare and educate yourself.
To make the process easy so you get the most out of your purchase, here are guidelines of what you need to consider before you buy and what you can expect from the buying process itself, plus tips to make life easier after you buy your first home.
Taking Advantage of Being a First-Time Homebuyer
Being a first-time homebuyer has its difficulties: saving enough money for a down payment, making sure your credit score and finances are up to par in case you are considering taking a loan, and of course, navigating the complicated housing market, which is currently more competitive than ever.
But there are certain advantages to being a first-time homebuyer as well. You may qualify for assistance with your down payment or closing costs, and can reduce the cost initially set aside for buying your property.
There are also some real estate companies that have programs and plans for first time property buyers. You can also look out for programs like this to use for your advantage.
Make Sure You Are Ready to Buy
Buying a house is a major financial decision and a long-term commitment. Before you start shopping for a new home, be sure you’re ready for the responsibilities that come with being a homeowner and the costs associated with buying and owning a house.
Here are three questions you can ask yourself to help you determine whether you’re ready to buy a house:
- Can I afford it?
The first thing to do when buying a home is to figure out how much house you can afford. But your income isn’t the only number you should be looking at; your existing debts also matter.
Another thing to take into consideration is the down payment. For most people, it takes a while to accumulate the down payment money, says personal finance expert and author Eric Tyson. To get access to the best terms, you’ll want to put down 20% of the purchase price, he says. That’s in addition to saving up funds for closing costs, moving expenses, and, ideally, having an emergency fund to cover a job loss or expensive home repair.
- Will I stay in my new house long enough to recoup the upfront costs?
Beyond the purchase price of a home, you’ll also typically have to pay closing costs. These costs, which include things like the taxes, commission, agent fees, damages and inspection costs, typically run about 3%-6% of the home purchase price. All in all, you can expect to pay a few thousand naira and sometimes million in addition to the down payment.
On a related note, if you’re uncertain about your finances or future income, you might be better off waiting to buy a home. The last thing anyone wants is to lose their new home because they couldn’t make the monthly payments.
- Who will help you find a home and guide you through the purchase?
A real estate agent will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you’ve chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent’s expertise can protect you from any pitfalls that you might encounter during the process. Most agents receive a commission, paid from the seller’s proceeds.
Now that you’ve decided to do this, let’s discuss what you can expect from the homebuying process itself. This can be a tormenting time, with offers and counteroffers flying furiously, but if you are prepared for the hassle (and the paperwork), then you can get through the process with your sanity intact. Here is the basic progression that you can expect:
Find a home
Make sure to take advantage of all the available options for finding homes on the market, including using your real estate agent, searching for listings online, and driving around the neighborhoods that interest you in search of for-sale signs. Put out some feelers with your friends, family, and business contacts. You never know where a good reference or lead on a home might come from.
Once you’re seriously shopping for a home, don’t walk into an open house without having an agent (or at least being prepared to throw out the name of someone with whom you’re supposedly working). You can see how it might not work in your best interest to start dealing with a seller’s agent before contacting one of your own.
Make an offer to the agent
Your real estate agent will help you decide how much money you want to offer for the house, along with any conditions you want to ask for. Your agent will then present the offer to the seller’s agent; the seller will either accept your offer or issue a counteroffer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits.
Before submitting your offer, take another look at your budget. This time, factor in estimated closing costs (which can total anywhere from 2% to 5% of the purchase price), commuting costs, and any immediate repairs and mandatory appliances that you may need before you can move in.
Even if the home that you plan to purchase appears to be flawless, there’s no substitute for having a trained professional do a home inspection of the property for the quality, safety, and overall condition of your potential new home. You don’t want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. If the home inspection reveals serious defects that the seller did not disclose, then you’ll generally be able to rescind your offer and get your deposit back. Alternatively, you can negotiate to have the seller make the repairs or discount the selling price.
Close the deal
If you’re able to work out a deal with the seller or better yet, if the inspection didn’t reveal any significant problems, then you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period, while praying that nothing falls through at the last minute.
Make sure you do a title search on the property to be sure no other person other than the seller has a claim to the property.
And voila! You are now a home owner. So, what’s next?
Homeownership costs extend beyond down payments and maybe full payments. Let’s now go over some final tips to make life as a new homeowner more fun and secure.
With homeownership comes major unexpected expenses, such as replacing the roof or getting a new water heater. Start an emergency fund for your home so that you won’t be caught off guard when these costs inevitably arise.
Perform regular maintenance
With the large amount of money that you’re putting into your home, you’ll want to make sure to take excellent care of it. Regular maintenance can decrease your repair costs by allowing problems to be fixed when they are small and manageable.
Ignore the housing market
It doesn’t matter what your home is worth at any given moment except the moment when you sell it. Being able to choose when you sell your home, rather than being forced to sell it due to job relocation or financial distress, will be the biggest determinant of whether you will see a solid profit from your investment.