You’ve been dreaming of a home of your own for a long time.
You’ve stalked the online listing sites forever.
You might have even popped into an open house or two to kill some time on a lazy Saturday afternoon. And now you think you are ready to join the first time home buyer ranks. Well, it’s time to roll up your sleeves and get to work. Answer these six first time home buyer questions to make sure you are prepared.
1. How much can we afford?
This is most important of the questions every first time home buyer should ask. I wish money weren’t an issue, and we all had everything we needed and maybe even wanted. But we don’t. Everyone comes to the table with a unique set of financial circumstances, so you have to figure out what you can realistically afford before you sign a representation agreement with a buyer’s agent.
Don’t rely on online calculators. Meet with an experienced, ethical lender as soon as you think you might want to consider purchasing in the near future, even a year or more out. They will help you understand the expectations for credit scores, income requirements, and down payments.
There is also more to buying a house than considering the mortgage payment. A good lender or financial advisor should guide you towards making a sound financial decision when it comes to making your first foray into real estate.
Don’t shop for a home until you’ve taken this step.
2. Do we qualify for VA, USDA, or FHA loan programs?
Often the down payment is the biggest hurdle to home ownership for a first time buyer.
The same lender that you meet with to discuss your budget should also be able to explain the various types of loans available to you. In a nutshell, VA, USDA, and FHA loan programs are designed to make home ownership more accessible, generally through reduced down payments, for buyers in very specific situations. Each program has restrictions around income, credit scores, and even property location, so consulting a good lender is necessary to help you weed through them to see what options might be right for you if you are ready to buy but coming up short on the down payment.
3. Do we have enough savings in case something goes wrong?
I know, I sound like a broken record, but truly, considering the financial aspects of home buying is really Step Zero on the path to home ownership. They have to be thought through, or you may find yourself in a bad situation down the road.
Look at your assets. After you hand over the down payment, will you have enough money in the bank to cover the expected and unexpected maintenance and repairs that come with home ownership? What about if you lose your job or someone in your family is diagnosed with a serious illness a few months after closing? Do you have the funds in savings to get through an emergency and stay current on your bills?
I have seen all of these situations, and more. Prepare for them before you buy.
4. What are our priorities in a new home?
So you have your financial ducks in a row. You know what you can afford to spend, what type of loan programs are best for you—and ideally have been pre-approved for a loan—and you know you will still have a cushion for emergencies. Now you can start shopping, right?
Nope, not so fast.
Before you set up viewing appointments with your agent, determine your needs and wants for a home. Prioritize them, and determine what you can compromise about and what is a deal breaker for you. No one else can tell you what’s best, so take some time to determine these before you start the hunt.
I’ve created a pretty printable for you to download. Use it to record your needs and wants in order of priority, and carry with you as you look at properties to keep your focus on what matters to you!
5. Have the renovation expenses been well thought out?
Yep, I’m coming back to the money. Unless you are purchasing new construction, chances are you will want to make some changes to the property. Before you make an offer, you have to consider the expenses of renovating an older home, and if they work into your finances. Even if you plan to do the bulk of the work yourself, material costs may surprise you, and it is a rare project that doesn’t go over budget in some areas.
Don’t get yourself into a money-pit situation. Get an inspection (even on a brand new house!), talk to your agent and a reputable contractor about realistic budgets for the types of repairs and renovations the property may need, and don’t take on more than you can handle.
6. Do the terms of the purchase and sales agreement work for us?
The purchase and sales agreement (PSA) is your contract with the seller. It specifies things like closing date, contingency timelines, and earnest money. The PSA can be written up a lot of ways, so you’ll want to make sure your on the same page as the agent and lender. Go over this contract very carefully with your agent, and do not agree to anything that does not work for you or that you do not understand.
I hope this list of first time home buying questions helps you know what to think about before you step into the home buying process. If you have any questions about these topics, or anything else real estate related, contact me! I’m here to help.