By Rebecca Hidalgo Rains, managing broker for Integrity All Stars @Berkshire Hathaway HomeServices
Buying a home is a stressful time in anyone’s life, especially for first timers. Not only is buying a home the biggest financial expense of your life, but the process is also complicated, confusing and full of unexpected expenses.
Having worked with dozens of first-time home buyers I know how difficult this time in your life can be and know how to guide you through the home-buying process. Let’s look at a few areas to help ease you into home buying so you will be better prepared.
Start saving early
Many real estate agents and mortgage brokers suggest a minimum of 20% be put down on a home. However, many lenders allow first-time buyers to pay a lower down payment. Putting less money down upfront will result in higher costs and insurance. Use a down payment calculator to help find your ideal down payment amount.
When saving for your down payment set aside money from work bonuses and tax refunds and create an automatic savings account. Keep track of your money in these accounts and try not to touch it because doing so will allow you to save quicker for that home.
Decide on how much home you can afford
Before you even start looking for a home you must know your price range. You can use an online home affordability calculator to help you determine what you can afford. Always speak with a professional real estate agent and your bank to help you decide the right price range for you. The last thing you want to do is purchase a home and become house poor, meaning all the money you bring in goes into paying for the home.
Know your down-payment options
Many first-time home buyer programs exist, including federal mortgage programs that allow loans with low interest rates. Speak with your real estate agent and mortgage broker to find the right options for your family.
Create a budget for closing and after move-in costs
When saving for your down payment, you must also save for the money needed to close on your mortgage, which can be a significant amount. Closing costs will typically be between 2% and 5% of your loan. Shop around and compare prices for closing expenses, such as inspections, title searches and insurance. You can also ask the seller to pay a portion of the closing costs and negotiate with your real estate agent on their commission rate.
Once you have budgeted for closing costs you must also set aside money for after move-in costs. These often include furnishings, updated fixtures, flooring, appliances and paint. If you plan on updating the home, you must have money set aside for these costs.
Hire the right agent
When purchasing your home, you will be working closely with your real estate agent so it is imperative that you hire someone you will get along with and have your best interests in mind. The right agent should be knowledgeable about the area you are looking at and must have a proven track record. Inquire about previous sales the agent has made in the area and about all the services they offer clients.
Be willing to negotiate
Major savings can be earned through the negotiation process when buying a home. One area you will always want to negotiate is if large repairs are needed. You will want to try to get the seller to cover these costs either by taking care of the problems themselves or giving you a credit adjustment during closing. Also, remember to ask if the seller is willing to pay any of the closing costs. When in a buyer’s market you may find the seller will negotiate with you so they can get their home off the market as quickly as possible.
Purchasing a home will be the largest financial decision of your life so understanding all the steps you must take is crucial in determining the home you can afford. Follow these tips and speak with a professional real estate agent in your area so you can find your dream home and make the right financial decisions.
Rains, the managing broker for Integrity All Stars @Berkshire Hathaway HomeServices, integrityallstars.com has worked in Phoenix real estate for nearly 30 years helping Arizonans find their dream home.
