Buying a new home can be exciting and stressful and scary all at once, especially if you’re a first-time buyer. Before you can make the move and start making your home really yours, you’ll need to prepare. Here are ten things to do before buying a new home that can help you prepare and save you money:
1. Find Out Your Credit Score
Your credit score is one of the first things you should check when you’re getting ready to buy a new home, since mortgage lenders will look at your credit score when ascertaining whether or not to approve you for a loan. A good credit score can be the difference between being accepted for a mortgage or not, and it could also affect the rate of interest you’re eligible for—and a lower interest rate could save you tens of thousands of dollars over the lifetime of your loan.
As soon as you begin to seriously save money for a house, check your credit score. (You can use a tool like Experian or CreditKarma to check it online for free.) If your credit score is under 700, you’ll most likely want to take some time to build it up before you buy a home.
2. Research Lenders
Research potential lenders to find one with the lowest rate available. A difference of just one or two percent might not seem like much now, but that one percent interest rate change can make a difference of several hundred dollars per month.
As you research lenders, you’ll also want to make sure you get preapproved by your lender before you begin home shopping. This will help you to choose options that are within your means while at the same time showing sellers that you’re a serious prospect.
3. Find a Reliable Local Real Estate Agent
Your research skills will come in handy once again in searching for a reliable real estate agent. It’s best to work with a local agent, as they will be well aware of the true market value of homes in your area and will ensure you don’t overpay. Try to find a local real estate agent with good reviews who also fits your budget.
4. Work With Your Lender or Real Estate Agent to Understand Associated Expenses
When you’re transitioning from renting to owning for the first time, having to pay additional expenses on top of your monthly payments may take some getting used to. Don’t let these additional fees surprise you. Talk to your lender or real estate agent (or both!) to understand all the costs that will be associated both with buying and owning your new home so that you can have confidence in your ability to cover all the necessary expenses.
Here are some of the costs associated with your home that you may be required to cover:
- Down payment: This is traditionally 20% of your home’s total cost due up front, although you may be able to negotiate a lower down payment.
- Home inspection: The buyer is usually responsible for paying for a home inspection, which will cost around $300 to $500.
- Closing costs: These costs are often between 2% and 5% and due to the lender upon closing. This cost will be included in your loan estimate, so there should be no surprises.
- Property taxes: These vary depending on your location, but they usually amount to a couple thousand dollars a year. Generally, first-time buyers will include property taxes in monthly payments, but you can also choose to pay the full amount when it’s due once or twice a year. Property taxes can also vary if local taxes are raised and according to changes in your home’s value.
- HOA fees: If you’re moving into an area with a homeowner’s association, a condo, or a co-op, there will likely be a small monthly fee you’re required to pay.
- Home insurance: The cost of home insurance will depend on your home’s value, the type of coverage you need, and your insurance agency.
5. Determine the Type of Property You Want
Your buying process will be much simpler if you go in knowing what kind of property you’re looking for. Do you want a single-family home? A condo? Make a list of non-negotiable features for your home. Keeping your priorities in mind will help you narrow down choices and not waste time or get distracted by prospects that don’t really fit your needs.
6. Establish a Budget
To go along with the previous point, before you start shopping you also should decide on a budget. Having a definitive cap for the maximum you’re willing to spend will both give you a target to save for and help you limit the options you consider. Be sure to factor in the extra costs listed above, both closing costs like a home inspection and long-term costs like home insurance and repairs.
7. Verify Listing Information
You are responsible for verifying that the information in a listing is accurate. If you don’t do your due diligence, you could end up paying a lot more for a property than it is worth. You should double-check the square footage and grounds included with the property, homeowners association fees and regulations, potential damages or problem areas, and any other factors you may have questions about.
8. Work With a Trustworthy Home Inspector
A home inspection is one of the steps that will help you find any undisclosed or potential problems with the house. Ensure that your home inspector has an active permit before hiring them. Research their business and reviews from past customers to ensure they will complete a thorough inspection that will help you understand any major issues before signing on a home.
9. Understand the Potential for Your Property Investment to Grow
It’s likely the value of your property will increase over the years. Take this into account when buying a new home. It might not be a deciding factor, but it’s a fact that certain areas grow in value more quickly than others. This could affect the area you choose to buy in, or it could simply help reassure you that buying a house is a worthwhile investment.
10. Research and Purchase a Home Insurance Policy
One of the key things you’ll need to decide before closing on a house is what homeowners insurance policy to take out. Because the amount of coverage depends on the home’s value following an appraisal and is determined by the lender, you’ll need to purchase a policy before your closing date. Getting home insurance from a reliable provider is key to ensure you don’t overpay while also getting the full coverage that you need. Working with a trusted home insurance provider can save you money while also giving you peace of mind in case of catastrophe.
As you can see, there are many factors to take into account when you buy a new home. But when you take the right steps, you can be confident in your investment and your future. Hopefully these tips will help you prepare to take the plunge!
