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May 26, 2015

Buying your first home? Here’s what you need to know

Real Estate Homes

Content sponsored by Anne Koons - Native 020715

The decision to become a first-time homeowner can feel overwhelming – but it doesn’t have to be. There are up-front questions to ask yourself that, if answered honestly, can get the process off to the right start, and guarantee that you’ll stay on the right track as you make this important investment. Here are 10:

Where do I really want to live?

You’d be surprised how many first-time homebuyers don’t ask themselves this basic question. A “young couples” neighborhood with growing families? A bustling commercial area with close-by shops and cool restaurants? In town? A distant suburb? A country setting? Making a basic statement of your home preferences will clarify your path, and make working with a real estate professional easier.

How much can I realistically afford to spend?

Take a look at your income, your expenses, your savings, and other assets – as well as what you may owe. Then decide on what an acceptable monthly outlay would be. Based on all this information, your real estate professional, banker, or mortgage broker can advise you on the kind of home loan you’ll be eligible for – which, combined with your savings, will more or less dictate the amount you’ll be able to spend on a home. One rule of thumb says that a home should cost no more than two-and-a-half times your annual salary.

Have I saved enough money for a down payment?

Qualifying for a mortgage is one thing, but a significant down payment is crucial. Though it certainly can be less, a down payment of at least 20% of the home price is recommended for avoiding the requirement to purchase Private Mortgage Insurance (PMI), which insures the lender in case you should default. That means if you're buying a $300,000 home, your down payment could be $60,000. For young first-time homebuyers, amassing the down payment through savings can take a while.

What do the next five years of my life look like?

Are you planning on having children? Expecting to be offered a transfer or a job in another city? Thinking of caring for an elderly parent in your home? If you’re a couple, does one of you plan to stop working at some point, or choose to work at home? These are all lifestyle choices that will affect the kind of home you should be looking at to buy – and, indeed, whether you should buy at all.

Do I really know what my credit profile is?

A good credit rating is essential in getting approved for a mortgage, and many young, first-time buyers have discovered that his or her rating – because of missed payments on student loans, or over-spending on a credit card, for example, something that many young people do – is not as high as it could be. Know your credit score – and, if it needs boosting, work diligently on fixing it.

When house hunting, do I get distracted by minutiae?

Many novice home buyers make the mistake of focusing on unimportant things like outdated décor, worn carpets, strange paint colors, and other “easy fix” items. When touring a possible home, stay focused on what’s really important: the location, the “bones” of the house, and its overall stability and condition – as well as its proximity to schools, jobs, public transportation, and other practicalities. Remember what’s really important. Minor cosmetic issues are just that.

Am I prepared to compromise?

Making a list of your needs, wants, and preferences in a home is a fine thing to do – as long as you realize that no home is going to meet every expectation and demand on that list, and that compromise and being realistic are a big part of the home-buying process.

Am I really up for a renovation?

Upbeat home-renovation TV shows convince many that a do-it-yourself overhaul of a newly purchased fixer-upper home is something almost anyone can tackle. Don’t believe it. A first-time buyer should never take on a huge renovation project just because a house seems like a bargain.

Do I really understand what it is I'm buying?

Buying a free-standing home is a lot different from purchasing a home that’s part of a homeowner’s association, a co-operative, a neighborhood association, or a condominium. With the latter, common charges and maintenance fees apply, as, oftentimes, do considerable rules that govern everything from behavior to outdoor décor. Many naïve buyers have purchased a condominium residence only to discover he or she can’t abide by its restrictions – or, worse, that the association’s financials aren’t in good shape.

Speed is a factor

No reputable real estate broker would ever pressure a would-be buyer to act in haste, but the reality is when a good home is priced right, it won’t stay on the market long. First-time buyers should be aware that readiness to make an offer when the time is right is often crucial in snagging the home you want.

There are many things about which first-time home buyers need to educate themselves, and these are just a few. And yes, the process can be demanding and stressful – but it can also be fun, exciting, and result in real happiness for you and your family once you’ve found your dream home. It is out there!

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