First Time Home Buyer – Dos’ and Don’ts

We all need a first time home buyer- dos and don’ts some time in our lives. Buying your first home is probably the most exciting and at the same time daunting task you will ever perform. Because of the huge investment and years of saving, it becomes even more important that you ponder over the many aspects of buying house for the first time.

You are excited and bewildered and you wish someone would guide you to the perfect dream house. You don’t want to make costly mistakes.

So here is a step by step guide to find that perfect home for you.

Here are some of the important questions that you must answer while planning for your new house:
  • Will you be able to stay in the home you purchase for at least three to five years?
  • What changes might occur in your family life?
  • Are you planning to have children?
  • Will a parent or other family member move in with you?
  • What is the main requirement for hunting the right home?
  • How many bedrooms and baths do you need?
  • Whether you want a landed property or an apartment?
  • Which area would you prefer to stay, i.e. location.etc
  • How far is the school, your place of work, shopping area and overall suitability?
  • Will your job require that you move or relocate?
  • What happens if the house requires two incomes and one contributor loses employment?
  • What are the various house financing option available?
  • Find out about Mortgage pre-approval – know your affordability level
  • What is your credit – established credit history, review credit report…etc?

Planning ahead….

Mobilize your savings – It is important to develop a financial plan long before you plan to buy a house so that you not only save money for the down payment, but for other costs that will come along later like the credit check, the mortgage application and the closing. But in case you haven’t made any savings yet, but are assured of a bright financial prospect in near future, it may not be too difficult to overcome the financial burden. The most important point to be taken care of is that you should be financially stable enough to repay the loan.

This would lead to another important aspect of planning – Buying new or old house?

Depending on the budget you have to decide whether to buy a new house or a used one. Although we all would love to move into a spanking new building but you must remember that a new house will be more expensive than an old one. All the amenities are new, the house is modern so obviously it will be expensive, whereas like all second hand stuff, an old house will also be cheaper mostly because the owner will be keen to sell it off and move on.

Another important aspect which cannot be overlooked is that if you buy a new house, you will have to bear additional cost of improvement like installation of kitchen cabinets, wardrobes, lightings etc.

Many times you get very cheap houses during distress sell which already has all these amenities and you may just have to freshen up them a bit, or may be not even that. You can save tons of money this way. Thus your financial condition needs to be evaluated before you can decide whether you want to buy a new house or an old one..

The Common mistakes first time home buyer should avoid :-
  • Don’t get a loan with the mentality that if you couldn’t afford it, the bank wouldn’t give you the loan. That point of view though seemingly true, is not a very accurate measure of your capability.
  • Do not make the mistake of changing jobs while applying for a loan. Changing jobs does not convince a bank that you are worthy of a huge home loan because they are not sure of the security offered by a new job.
  • Don’t ignore your own financial resources. Ensure that you have enough for the down payments and closing costs before deciding to buy a house.
  • Don’t forget to include the closing cost and additional cost of doing up the house once you buy it.
  • Don’t rush, be systematic. Selecting the right real estate agent for help – find someone who specialized that particular location, the agent can give more options and the agent have better knowledge on that specific location.

At the conclusion, make sure that the house you buy is what you want and more importantly what you need. Many first time buyers make the mistake of buying a much bigger and grander house than they require and then have to go through the pain of selling it and buying a new house once again, because they couldn’t afford to maintain the previous one. So, buy a house that you can both afford to purchase and maintain in the long run.