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Buying a home is a big deal. Not only does it represent a major milestone in your life, but it also takes a lot of work, preparation, and money. You may feel like you’re going in blind, but don’t feel bad; no one really knows what they’re doing.
Consider this your own personal cheat-sheet on the basics of Home Buying 101. Follow these steps to buy a house and you’ll do just fine.
Start saving early
Unless you’re an avid collector of Renaissance-era paintings mounted in frames made of diamond-encrusted dinosaur bones, a house is probably the most expensive purchase you’ll ever make. Even with a low down payment, it takes a while to save up the necessary cash. That’s why you should start sooner rather than later. You may think you’re still years away from even looking at properties, but if homeownership is important to you then saving just a little but on a regular basis really adds up over time.
In addition, try to settle any outstanding debts and do your best to boost your credit score. This will make it a lot easier to get a good mortgage. You might also want to research federal, state, and local assistance programs. Many prioritize first-time buyers and offer such benefits as tax credits, discounted interest rates, closing costs assistance, and even down payment assistance.
Know your needs
It can be hard enough to separate your needs from your wants when shopping for groceries, so it’s no surprise that it’s even harder doing this when trying to find a house. Many first-time buyers search in vain for the perfect home. It’s better to let the house of your dreams stay in your dreams, at least for now. Instead, consider what’s really important to you and your family: living space, neighborhood, local safety and crime statistics, etc.
That doesn’t mean you shouldn’t consider the future when buying a house, though. Quite the opposite, since you’ll probably be there for quite a while it’s important to plan ahead. If you’re hoping to start a family, for instance, keep that in mind when figuring out how many rooms you actually need and how close a property is to schools. Finding the right house is always a balancing act between meeting your needs, planning for the future, and saving money.
Get a mortgage
If your last name isn’t Rockefeller, it’s doubtful that you’ll be able to pay the full asking price for a property all at once. Rather, you’ll have to make do like the rest of us by obtaining a mortgage and making a percentage-based down payment. Although the most common down payment is 20% of a house’s sales price, there are actually many different options with some requiring much lower down payments.
A conventional mortgage can require a down payment as low as 3% with the addition of private mortgage insurance, with options for monthly payments using either fixed or adjustable interest rates. FHA mortgages require a down payment of as little as 3.5%, but only for properties valued at $417,000 or less. Finally, VA and USDA loans require no down payment at all if the buyer meets certain criteria by either having served in the Armed Forces or buying a property in a specific part of the country.
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