House Hunters and other HGTV shows can make home buying seem so breezy. Spend the day with a fun, sassy real estate broker, check out a few fabulous properties, relax with a glass of wine, and decide on your dream home.
But for first-time homebuyers who aren’t living in a “reality TV” fantasy, the process can be stressful and overwhelming. So much to think about and so many options!
Take these five tips to heart, though, and you’ll prevent your first-time home buying dream from turning into a nightmare.
Do Not Overextend: Sure, you’ve got a great job and so does your partner, but there are few guarantees in life and a steady income can become very wobbly very suddenly. Be smart and play it safe. If you lost your job and had to take a 25% pay cut in a new position, could you still afford it? Make sure the answer is yes. Talk with one of our lending experts to find out how much you can afford BEFORE you go house shopping. There is nothing worse than falling in love with a home you can’t have! As a general rule, you can spend 36% of your gross monthly income on your debts such as housing, credit cards, car payments and other types of loans.
Don’t underestimate expenses both before and after: — Don’t forget about the down payment plus closing costs and escrows! Do you have enough with some left over for possible home improvements? Furnaces and water heaters break down, trees need pruning, the garage door won’t open, the window sills are rotten. “Mr. Fix-It” owners have some advantage, but many major repairs require expensive expertise. Separate from your retirement and rainy day accounts, build a “house doctor” account you can tap for emergencies. Be disciplined and don’t dip into it for a trip to Bermuda.
Be conservative in your financing approach – Conventional, fixed-rate mortgages remain the gold standard in home financing, and for good reason. They provide protection against interest rate risk, a reasonable payment schedule, and utter predictability. You know exactly what your obligation is, always. Litchfield Bancorp offers a First Time Home Buyer Adjustable rate mortgages that gives new buyers a low down payment requirement plus a low rate, reduced caps and fees. Our lending experts at Litchfield Bancorp can help you figure out what is best for your situation.
Do a home inspection: You want to know what you are buying. The last thing you want to have happen is to have something major happen right after you buy your new home! If the inspector finds an issue, you can ask the seller to repair it prior to the sale, renegotiate or even back out of the purchase. Don’t get blindsided!
Be honest about any downsides – Life is about compromise. It’s the only way relationships can prosper and stay great over the long haul. When buying a house, you’re entering into a relationship of sorts and you will inevitably have to make compromises. Some things you can live with and some things you can’t, some things you can change and some you won’t be able to. One major thing that you can’t change and shouldn’t compromise on is location. Don’t miss out on a great home in a wonderful location because of a leaky water heater. Remember, when you are buying a home, you are also buying the neighborhood it is in. Explore the area before you commit to buy.
If you’re ready to buy, that’s great. Talk to us about how we can help finance your dreams. If you are on the fence, we provide great counsel and never push. Renting is an excellent alternative until you are truly ready for the commitment of owning your own home.