Buying your first home is one of the most exciting yet challenging experiences. It’s all too easy to get caught up in emotion and make some bad decisions that could turn your dream home into a nightmare.
There are many steps involved in purchasing a house, from securing financing and setting a realistic budget to researching neighborhoods and understanding the importance of home inspections. To many home buyers, these steps can feel overwhelming.
But it doesn’t have to be. We put together this list of 24 tips to make the home-buying process less stressful. By following these tips, you not only increase the odds of finding your dream home, but you can save thousands of dollars in the process.
1. Save Save Save
Most lenders ask for a down payment, usually around 3% to 20% of the home’s price, so start saving early. While only putting down 3% can feel like a relief, you pay for it with a higher monthly mortgage payment.
We recommend putting as much money down as possible so your mortgage payment is more manageable. You never know what life will throw at you, and the difference between a monthly payment of $1,500 and $1,000 can be significant.
2. Are You Ready to Commit?
Before starting your home search, consider whether you’re ready to stay in one place for the long term. Owning a home is a long-time investment that comes with duties such as upkeep and property taxes.
The general rule is not to buy if you don’t plan to stay in the house for at least five years. When you account for all the expenses, owning for a shorter time frame usually results in lost money.
3. Fix Your Credit
Remember, a good credit rating improves your chances of getting approved for a loan and secures you a lower interest rate.
And this lower interest rate is critical over the life of your loan. On a $200,000 mortgage, the difference between a 6% and 7% interest rate is a savings of close to $48,000 in interest over the life of the loan.
4. Have a Stable Income
A reliable income is vital when applying for a mortgage, so having a steady job is essential. Lenders want to see that you have a consistent income stream to make sure you can make your monthly payments on time.
If you are unsure about your job or are thinking of switching, take the proper steps before buying a house.
5. Start an Emergency Fund
Before you buy a home, you need an emergency fund that covers at least three to six months of living expenses and your mortgage payments. This cushion will protect you against unexpected costs, such as emergency repairs or job loss.
Ask any homeowner, and they will tell you things break, usually at the worst time. So it’s not an if but a when you will need to dig into this money. Having it there will be a lifesaver.
6. Make a Budget
Before buying a home, it’s crucial to put together a budget that includes expenses such as mortgage, property taxes, insurance, and repair or maintenance costs. Lenders usually like it when your housing costs are no more than around 25% of your gross monthly income, so you still have enough money for your other living expenses.
With that said, you should create a budget using your take-home pay. Using gross income, which is before taxes and other deductions, can make it seem like you can easily afford a home, only to be surprised when money is tight.
7. Get Pre-Approved
Getting pre-approved for a mortgage lets you know exactly what you can afford. It also demonstrates to sellers that you are a committed buyer.
In today’s hot real estate market, you cannot find a house and then get pre-approved. By the time you get your approval, others will have looked at the house and possibly made an offer.
8. Stick to What You Can Afford
While your agent is on your side to get you the best deal, know they make money by selling you a house. So they have a vested interest in showing you more expensive homes, homes that might be just outside your budget.
It is critical you don’t look at these houses. With higher prices come nicer features you will want but not find in lower-priced homes. Before you know it, you are overextending yourself for 30 years.
9. Know Your Loan Options
Various loan options offer distinct advantages, so it is important to research different options that might work for you. Get to know FHA, VA, and conventional loans to determine which fits your needs best.
Also, run the math for mortgages between 15 and 30 years. While a 30-year mortgage will offer lower monthly payments, a 15-year mortgage will save you thousands in interest and be mortgage-free sooner.
10. Know What You Want
Before you start shopping for a home, you need to list your must-haves and nice-to-haves in a home. Consider things such as the size of the house you need, what your preferred layout would be, the best location, and what amenities you really want.
As you visit homes, update your list. Take off things you thought you wanted or needed but realize you don’t, and add what you would like. This can help you take some of the emotion out of home buying.
11. Know the Neighborhood
Research any of the possible neighborhoods you’re interested in before choosing houses to look at. You should research crime rates, school ratings, proximity to work, and neighborhood amenities before starting to look for homes in the areas that work best for you.
When you are considering making an offer, visit the home at different times, like at night, in the morning, etc. When I did this, I discovered that the main road outside the development gets backed up for a couple of miles during the morning and evening rush hour.
12. Find a Good Realtor
Once you’ve determined what you want in your dream home and which neighborhoods work for you, the next step is finding a good real estate agent. A good realtor knows all about the properties in your favorite neighborhood and is great at helping you through the whole home-buying adventure.
You should interview a couple to find the right fit. Remember, they are your partners, so if you can’t get along with them or disagree on certain things, the home-buying process will be tricky.
13. Take Your Time
Buying the first attractive house may be tempting, but checking out several properties is smarter before diving in with an offer. This way, you’ll make a well-informed choice and grab the perfect opportunity!
When you do find the one for you, try to look at it with a critical eye. It can be easy to overlook issues when you really like a house, but these issues could come back to bite you.
14. Get an Inspection
Once you choose a house, it’s important to get a professional home inspection before finalizing the purchase. This will ensure that the property has no major issues or hidden problems, such as foundation issues or roof damage, that could cost you thousands of dollars later.
While some people will forego an inspection to secure the sale of the home, this could be a costly mistake. There could be tens of thousands of dollars of repairs hiding beneath the surface that a quality inspection will find.
15. Look for Problems
Remember to check if the property is in a flood zone or prone to other natural disasters. These can affect insurance premiums and future repair costs. If the property is in an area that could flood or experience other natural disasters, consider the added costs of insurance and potential damage in the future.
Even if not in these areas, look around the property. Is it lower than the surrounding properties? This could mean heavy rain will pool here. Are there large trees close to the house? They could block the sun and create mold on your roof.
16. Know Zoning Requirements
If there are zoning regulations in the area where your new home is, it can impact your ability to make changes or additions to the property.
Make sure you understand the local zoning laws before you purchase the home so you won’t be sorry later if you plan to install a pool or build a shed.
17. Ask for Past Utility Bills
Heating and cooling costs vary a lot from home to home, depending on the insulation and the HVAC system’s age.
Request past utility bills to get an idea of what you’ll pay each month before buying a home. Knowing this monthly cost can help you better budget to see if you can afford the house.
18. Negotiate with the Seller
Once you have done an inspection and appraisal, don’t hesitate to negotiate the price with the seller. If you find problems with the home or it is overpriced, you might be able to lower the purchase price or get them to cover some closing costs.
This is where an experienced real estate agent comes in. They have the skills to negotiate and get you the best terms.
19. Understand Your Mortgage Terms
Make sure you’ve got a good handle on the terms of your mortgage, such as the interest rate, repayment plan, and any fees if you pay it off early. Also, see if they offer any discounts with autopay, paperless billing, etc.
While these discounts may only amount to a quarter of a percent discount on your interest rate, this can add up over time.
20. Remember Closing Costs
Many buyers forget about closing costs. Closing costs can add up to 3% to 5% of the home’s purchase price and include the appraisal, taxes, title insurance, and more.
Make sure you add this to your savings budget. While some people ask the bank to add these expenses to their loan, this can be unwise because you are paying them over 30 years, and interest will be added to these costs for the entire time.
21. Negotiate Closing Costs
While most closing costs are required, a handful are negotiable. These include appraisal fees, processing fees, and document fees.
Depending on the state you live in, you might be able to choose your title insurance company, which can save you money. Don’t hesitate to ask your lender to lower or waive some of the closing costs.
22. Buy Enough Insurance
Homeowners insurance is one of the most important purchases you’ll make as a homeowner. Having adequate insurance coverage can save you from financial ruin in case of damages or disasters.
While it can be tempting to save money by insuring the least amount possible, you have to remember this is your home. You will be thankful you have adequate insurance should a disaster strike.
23. Keep All Papers
It’s important to keep all paperwork related to your home purchase, including the sale contract, inspection reports, and any warranties or guarantees. You may need some of these when it comes time to file your taxes, both now when you buy and when you sell.
You might also need them to remind yourself of certain things, like how old the roof actually is or what the square footage is.
24. Trust Your Instincts
If something feels off about a property or the buying process, take a step back and reassess everything before signing any papers.
Purchasing a home is a big investment, so it’s important to feel confident and comfortable throughout the process before you take that big leap into purchasing your new home.
