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7 Essential Tips for Buying Your First Home

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Buying a House in the USA“This is most likely the largest financial investment you’ve ever made,” Chicago real estate attorney John R. O’Brien says.

When you buy a home, you are making a huge commitment. On top of that, buying a home is a complex transaction, requiring titles, insurance, escrow, and there are usually a number of players involved. As a first-time home buyer, things can become overwhelming.

If you are planning to buy a new home here are 7 essential tips to ease the process:

1. Check Your Credit First

Make sure you check your credit report before you begin the process. Mistakes on your credit report can lead to a lower credit score that disqualifies you from borrowing, or that results in a higher interest rate. Look over your credit report and identity problem areas. Then, fix issues that need to be addressed. You can get a free copy of your credit report from AnnualCreditReport.com.

2. Figure Out How Much You Can Afford

How much house can you afford? O’Brien recommends that you consider costs beyond just the principal and interest. He points out that you will have tax and insurance costs as well. “Houses have a tendency to surprise you with unexpected expenses,” he says.

Don’t stretch to be able to “afford” a house. Instead, make sure that you truly can make the payments with relative ease. That way, if you experience a financial setback, you won’t fall behind with your home payments.

3. Contact a Realtor

“In most cases it’s a good idea to contact a Realtor,” O’Brien says. “They are generally paid by the seller. A competent Realtor should know the market value of the property you’re considering, and will give you tips on how to avoid overpaying.”

It can also help to have someone on your side to guide you through the process. A buyer’s agent can provide you with valuable services — at no cost to you in many cases.

4. Make Sure the Contract Has a Home Inspection Provision

“Make sure the contract has a home inspection provision — most do — and is subject to being cancelled if the home doesn’t pass, or if the seller doesn’t agree to correct items that the inspector finds,” O’Brien says. He says to make sure there is a final inspection, and that you bring someone you trust along to look at items that need to be corrected. This is the time to ask for repairs and corrections to be complete before you close.

5. Consult an Attorney about Your Contract

O’Brien recommends that you consult a knowledgeable and trusted attorney before you sign the contract. Make sure everything is in order, and reads the way you want it to. “It is worth having an attorney look at the contract,” O’Brien insists.

6. Put Down as Much as You Can

You should make the largest home down payment possible to reduce the amount that you borrow. The best case scenario is to put down at least 20% so you don’t have to pay PMI. However, if you don’t put down that much, you will need to figure the cost of PMI as an expense that can affect affordability.

7. Plan Your Closing Date

Do your best to plan your closing date. “Do not put yourself in a position where you have to close and move in on a specific data,” O’Brien says. Instead, plan ahead so that you close prior to your need to move. “If you have a lease that expires on June 30, try to schedule your closing for June 15,” he suggests. That way, you have some leeway in the event that your closing is delayed.

What other tips can you think of for first-time home buyers?

(Photo: Images_of_Money)

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11 Responses to “7 Essential Tips for Buying Your First Home”

  1. Michelle says:

    These are all great tips. We are working on building up our down payment for our next house.

  2. J says:

    We have owned a house before, but not since 2008. Working with the Credit Union, we qualify as first time home buyers so they waived the origination fees. That’s three-quarters of a percent.
    North Carolina’s State Employee’s Credit Union also does not charge PMI. AWESOME.

  3. Clint says:

    My wife and I just closed at the end of April. I think the biggest piece of advice is to start looking at houses at least a year in advance of when you would want to purchase. In doing so, you will develop a better understanding of the market, your home preferences, and exposure to different areas.

    My wife and I were thankful in that we started looking at houses over a year ago and started looking at houses in person 3-4 months ago. Since we were able to observe the available homes where we wanted to live we were able to quickly put down a contract on a foreclosure at 84% of its value and get a great deal. We wouldn’t have been as willing to purchase this quickly without realizing the going-rate for similar homes in our area

  4. admiral58 says:

    Great article. Thanks

  5. Scott says:

    #5 is the most important by far. You should have a real estate lawyer lined up before you even talk to a realtor. Before you sign anything or pay anyone any money, you should review it with your lawyer. At the closing, the lawyer controls everything and the realtor nothing no matter what any slick realtor tries to tell you.

    Also, to add to #4, never skimp on an inspector. Bargain inspectors likely won’t find all of the problems that you really want to know about. Spending a little more on a good inspector up front can save you many thousands of dollars over the long run.

  6. Ira Bornstein says:

    First make sure that your income and life are as stable as possible. I’ve seen way too many people buy houses to try to establish stability, and a year later after they’ve broken up their relationship and left their job, the house becomes an anchor.
    Next, look around a bit online (zillow.com, realtor sites, newspapers, and school ratings). There’s a lot of information out there.
    When you find something you like, look in person including during the day, night, and see the neighborhood…even talk to neighbors if you can.
    All of the other advice is great too!

  7. Cindy says:

    Get everything in writing! I made an offer on a house, the seller countered, I accepted. BUT when the seller countered, my real estate agent passed along an extra requirement from the listing agent, that the seller insisted I keep their sectional couch. I asked how much, the answer was nothing — the seller simply didn’t want to deal with moving it. I said “Sure!” My agent said that since it didn’t involve any actual exchange of money, it didn’t need to be written into the agreement for accepting the seller’s counter.

    You can probably guess where this is going. I sold my couch to save on having it moved; I got to the new house pre-closing walk thru… No couch. Suddenly my agent didn’t really remember that it was a mandatory condition, the listing agent didn’t really remember the details either… and the seller apparently found someone to sell the couch to. I was out a pretty expensive piece of furniture, and my agent — who had assured me that the details of couch didn’t need to be in writing — said he wasn’t going to spring for a new/replacement couch for me. Since nothing was in writng, I had nothing to use as leverage against any of them, and I ended up having to buy a new couch.

    I like my new couch, but I’m still ticked at how it all went down. Bottom line — even if something is agreed upon that doesn’t seem to mean an actual exchange of money, get it in writing!!!

  8. Justin says:

    I just bought my first home 9 months ago. What i would suggest is to plan for money being spent after you close but before you move in. I went from an apt to home. Family helped with older appiances (craigslist proved useful as well). Also i would recommend money kept aside for paint, possible carpet cleaning, replacing fixtures etc. after a certain point of escrow you do your final walkthrough and you have three choices: extend escrow (if the seller/bank okays it), pull out of the transaction, or deal with it. By the time i paid for appraisals inspections etc i realized i was out money either way, so best to be house poor than just poorer.

  9. Shirley says:

    While all seven points are very good, I think number two is the most important. “Don’t stretch to be able to afford a house.” Spending above your means is just begging for stress, headaches, and even unhappiness and dissatisfaction with your life.

  10. Great summary! So many people only look at mortgage payments without taxes, insurance, and possible PMI.

  11. Good advice, I really do appreciate this article. I bought my first home last may and I feel like I should have waited, read more articles like this and just done some genuine research. I hope more people that haven’t purchased a home yet read this article.


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