Monday, July 29, 2019

5 Important Things To Consider When Buying Your First Home

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It's an exciting time.  You have saved and are finally financially secure enough to begin the process of purchasing your first home.  


While it's an exciting time, it's also a scary time.   Buying your home is the single largest purchase you have ever or will possibly ever make.  You want to make sure you get it right and don't overpay.  There are some critical things that you should consider when buying your home. 


Here are our top five things to make sure you know before you pull the trigger on your purchase.

Payment Amount

Make sure you can afford the homes you are looking at.  It is easy to get swept away in the looking process and finding your dream home.  Smart financial advisors suggest not committing more than 28% of your income on living expenses.  

There are many other variable costs to consider, not just your mortgage amount.  For example, the home owner's association fees, utility bills, taxes, and insurance.   All these together can add a hefty amount to your bottom line.

Escrow Account

Many first time home buyers don't have the full 20% to put down on their new home.  That's okay, many programs are available such as FHA loans that don’t require 20% down.  The flip side of that is that you will be paying mortgage insurance and will also have to fund an escrow account.  

The escrow is funded by adding to your monthly mortgage payment.  This fund is used by the bank to pay for your home owner’s insurance and taxes.



Length of Stay

Many people talk about purchasing their starter home.  You will want to pay careful attention to the amount you are paying.  If you are considering owning your home for under 5 years before upgrading to a new home, you may be better off renting and saving aggressively while you are waiting to purchase.   

Some factors may negate the renting aspect, such as a hot housing market.  If housing prices are on the rise, it may make financial sense to purchase the home and hopefully make money on the flip.  You may also consider renting it out when you move for additional income.

Getting Pre-Qualified
Getting pre-qualified is an essential first step in your home buying venture.  By going through this process, the lender can help advise you on a healthy budget based on your debt to income ratio.  Going through this process can be a bit of a headache initially, but it is well worth it in the end.  

In today's housing market, it is not unusual for sellers to get multiple offers on their property.  When you have your pre-qualification letter in hand, that can be a beautiful thing for sellers.  The last thing they want to do is accept an offer and have it fall through because of financing.  
You can feel confident when making an offer on the home you wish to purchase that you will not have any further issues going through to closing.  This will significantly reduce your stress.



Home Warranty 
One of the last considerations but certainly one of the most important is should you purchase a home warranty.  Home warranties are different than homeowner's insurance.  Home owner’s insurance covers significant events and damage such as fire, weather-related, and water damage.  

A home warranty is basically a contract between the homeowner and repair specialist that offers discounted repair and replacement on significant components of your home.  Things like your air conditioning, plumbing, electrical, and even some larger appliances.   
Some lenders can factor the home warranty into your mortgage payment others will not.  However, most warranty companies offer flexible payment plans so you can budget it into your cash flow.

Conclusion
There are many things to consider when you are thinking about purchasing your first home.  Make sure you take your time to evaluate all possible angles to ensure a positive experience.  When you get your pre-approval letter, you will see that you are most likely approved for more money than you initially thought you wanted to spend.  You do not have to max out your loan.  By making a smart financial decision when purchasing your home, you leave yourself open to having additional funds to cover your regular household expenses without straining your budget.  If there is room, consider purchasing a home warranty for a short period at least, to help you cover unexpected costs which can quickly add up.  Happy house hunting!

19 comments:

  1. There are indeed so many things that need to be factored in and the first one is buy what you can afford. I've seen so many that have bought more house than they can afford and then lose the house.

    Have a fabulous day, my friend. ♥

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  2. Sure good not to use as much as you are given unless you find that right one. Would almost never rent, way too many horror stories I know about with renting it out.

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  3. Yes to all of this! I remember when we were looking to buy a home we didn't now it was so important to get pre-approved. It also didn't help that my husband was nervous about the entire process. Getting approved does let you know how much "house" you can buy.

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  4. It is indeed an exciting and scary decision. Which I suspect too many people go into driven by their hearts rather than their heads.

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  5. Such an exciting time, but as you point out there is a lot to consider to get it right and have piece of mind.

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  6. These are such great tips. My husband and I have bought 2 homes and each time the experience taught us so much. Researching things like this really helps.

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  7. All such key factors when considering purchasing a home. Thanks for the share!

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  8. These are such great thoughts! We're not looking to buy for a while but will definitely be remembering these

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  9. I will be going through buying my first house next year and I am very nervous about it. Your tips are so very helpful to me!

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  10. Good tips and I never know that getting pre-qualify is one of the top thing to look at.

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  11. These are all great tips! I'm only a part owner in my home, my parents were the main buyers, which made it easy for me.

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  12. Great tips and information for those looking. It's can be a daunting process!

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  13. These are great tips for those who are buying their first home, so much insight and knowledge shared here

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  14. These are some important tips to consider when buying a house. I wish I knew this when I bought mine!

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  15. I love this topic, always gives me a little bit of sense what I need to do and be prepared for. Thanks!

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  16. It is so hard to buy a home these days. I have a friend who is buying a home now and she had to go to so many banks until she managed to get the required amount needed.

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  17. Great topic. Buying a house is a big deal so you have to really know everything and research.

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  18. It's such a nerve wracking experience, I was glad that Jason took over most of the duties when it came to buying our home. I never seen him so stressed either!

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  19. Those are all great tips! I just purchased my first home two months ago using an FHA loan so we have an escrow account. We also have a home warranty. It's a joke. We've already tried to use it for the downstairs shower pipes and company tried to give us the run-around. They finally agreed to pay half.

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