Buying a home can be exciting, but it can also be challenging especially for first-time homebuyers. After all, this decision could be a costly mistake if you don’t know what you’re doing. Whether you’re planning on turning it into a rental property or on selling it when you retire, there are several things to consider when buying a home.
In this article, we’ll simplify the process to make sure you purchase the perfect home. Here are our top tips for first-time homebuyers.
#1 Ask yourself if you’re ready for a loan
A house is a huge investment. Unless you can pay out of pocket, you’ll probably have to take out a loan. Before you buy a home, ask yourself if you’re ready to commit to 15 to 30 years of mortgage payments. Ask yourself the following questions:
- Will I still be staying in this city in the next couple of years?
- Is my employment situation stable?
- Do I have an emergency fund?
If you answered “no” to even one of these questions, you should hold off for now. Additionally, consider if there are inevitable events that could change your situation. For instance, if you’re expecting a child, how will that affect you financially? Will you still be able to make your mortgage payments?
#2 Get pre-approved
Get pre-approved for a mortgage before you buy a house. A pre-approval letter lets you know how much money you’ll get from your mortgage. This way, you won’t have to waste your time with properties that are beyond your budget.
However, it’s worth mentioning that a pre-approval letter isn’t the final offer. It simply shows that you’re financially capable of purchasing properties at a certain price range. Your lender will still have to pull your credit report when you close on the property. That’s when they’ll decide on their final loan offer.
#3 Be careful with your credit
When you get a mortgage pre-approval, lenders will pull your credit card report. Lenders look at your credit score to determine whether or not they should approve you. They also check your credit score to determine the ideal interest rate. If they discover that you’ve opened a new credit card or credit line, or that you have a lot of late payments, they’ll hesitate to approve your loan.
Avoid attempting to influence your credit score by spending a substantial amount of money in a short period of time. Lenders simply want to see if your habits are consistent, as this indicates whether or not you can make your mortgage payments.
Pro Tip: Aim to have a credit score of at least 760. This will get you the best interest rate on your mortgage.
#4 Conduct a comprehensive property analysis
If you’re planning on buying an investment property, you shouldn’t skip this step. A property analysis determines whether or not a particular property is profitable. It asks questions such as:
- Is the property in an appealing neighbourhood?
- Is the neighbourhood undergoing changes that could increase property values?
- Does the property require repairs? If so, to what extent?
In general, it checks if the property will continue to attract tenants in the long run. A property analysis also includes determining the financials, such as the cash flow, net operating income (NOI), and more. Since it can get complicated, you can benefit from enlisting the services of a property management company.
#5 Identify your needs
You might’ve thought about what you want in a home, but have you thought about what you need? Oftentimes, your wants don’t match your needs. For instance, let’s say that you want a two-story house with five bedrooms, four bathrooms, and a fancy kitchen. If you’re living alone, it wouldn’t make sense to have all of that space.
You also need to consider its location. Are you willing to drive to and from work for twenty minutes daily? Is the home in a family-friendly neighbourhood? How far from the home are amenities such as hospitals and day care centres?
Consider what you currently need, as well as your imminent needs. By doing this, you can narrow down your options and ensure that your future forever home matches your lifestyle.
#6 Inspect the home
Would you buy something if you aren’t sure if it works? Probably not.
When buying a home, you shouldn’t base your decision on first impressions. You need to dig deeper. If possible, hire a home inspector for a third-party opinion of the property. Sometimes, a home may look stunning on the outside, but it has serious issues on the inside. For instance, the home might have mould issues, or it might need major repairs.
Alternatively, if you’re planning on hiring a property manager, there’s no need to hire an inspector. Their property management services include inspections, plus they already have a vetted network of vendors to rely on.
#7 Hire a real estate professional
If this is your first time buying a home, you’ll need someone to hold your hand throughout the purchase process. An estate agent can help you choose a home that meets your household’s needs and price range. They can also assist you in making an offer, completing the paperwork, taking out a loan, and so on. Ultimately, their task is to protect you from problems that you might not be aware of.
If you’ve already hired a property manager, you no longer need to find an estate agent. This should already be part of their property management package.
#8 Drive around the neighbourhood
Don’t rely on showings. To get the lay of the land, you’ll have to visit the home on your own. Drop by during the day, afternoon, and night to be certain that the community is really what the seller says it is. For instance, sellers might say that the neighbourhood is peaceful when it’s actually not. They may also claim that the home is a ten-minute walk from the nearest grocery store.
To verify this information, visit the property on your own time. Drive around the neighbourhood and observe. If you can’t imagine yourself living there, it’s probably a sign that you shouldn’t.
A house isn’t something you can simply return. It’s one of the biggest buys you’ll ever make in your lifetime. Hence, before buying a house, you should consider if you’re actually ready for one and if a particular property is exactly what you need. Otherwise, you may end up making an eye-wateringly expensive mistake.