If you are a first time home buyer you may be feeling overwhelmed. It’s OK, it’s understandable easy to feel that way. After all it is one of the largest financial transactions people do and there is a lot of information to sort through. So how do you know where to start? What do you really need to know about a home search? Let’s take a look at buying a home for the first time and point out a few things.
Everyone has goals and dreams. Your dreams and goals are all about your lifestyle, your family, and what is most important to you. As a first time home buyer you are probably envisioning yourself living in those dreams and apply that standard to your home search. In fact right now that may even be the primary factor in your home search. Your goals and dreams are important but you may not be able to start there. A first time home buyer needs to start at the basics and that comes down to balancing what you can afford and what the market has available. The BEST thing you can do is set yourself up in a situation today where tomorrow you CAN afford your dreams.
Most first time home buyers are newly graduated young people who don’t have a lot of work experience. Without experience they are beginning at the bottom of the career ladder and their financial means reflect that. We’ve all started there.
A first time home buyer needs to do a detailed analysis of their capabilities. Ask yourself some questions:
- What is my income?
- What are my major expenses?
- How much can I afford to spend on a home and still maintain my lifestyle?
You never want to spend so much on a home that you can’t afford to enjoy life! Most analysts will recommend spending no more than 1/3 of your take home income on a mortgage payment. LOWER is always better. If you can shoot for no more than 1/4 of your income.
A first time home buyer should visit a few mortgage lenders and discuss their situation with them. Before looking at any homes the first time home buyer needs to know how much he or she can afford. Banks and lenders will often quote you an approval amount that is higher than what you can comfortably afford and maintain your lifestyle. Balance the amount they quote you with the some of your own calculations to see what price range you should be searching. Get a prequalification letter! Being able to send a prequal letter to a listing real estate agent is moving from just being a good idea to being the standard for accepting an offer. That letter gives the seller confidence that your offer will work and be trouble free.
You will also need a good real estate agent who can help you find the right home by understanding your needs and your budget. Your agent should be able to sit down with you and explain the home purchasing process so that you can understand the steps involved. The Realtor® should be able to walk you through the home search, the offer process, inspections, and walk you all the way to the closing table. He or she is your ally and advocate during the home buying process and will work to do the best they can for you.