If you’re buying a home for the first time, you might be anxious, nervous, or excited, perhaps all at once! Of course, purchasing a home can be stressful and challenging for the first-timers because you’re worried about every step from home hunt to making offers to closing the deal.
Whether you decide to buy a family home or a condo, the thrill of finally becoming a homeowner is always there. The real estate market also encourages new entrants by offering flexible financing opportunities to first-time homebuyers.
However, there are also several mistakes and pitfalls that first-time homeowners can fall victim to. But don’t worry; we’ve got you covered.
Here we’ve compiled some common factors that you should consider when buying a home, summarized the home buying process, and listed some tips for new homeowners.
6 Factors to Consider Before Buying a Home for the First Time
Buying a home is a significant investment. Therefore, narrowing down your dream home goals will help you go through the process smoothly. Here are some factors to consider before buying a home.
1. Your Financial Health
Before you start searching for a dream home, do a comprehensive analysis of your financial health. You’ll have to consider your ability to finance the home purchase and other subsequent expenditures. The result of the analysis will show whether you can buy a new home instantly or need more time to gather finances.
Here are some steps to consider.
Check Your Savings
Don’t think of buying a new home unless you’ve saved for at least 5–6 months’ expenses. Because when you buy a new home, many operational costs arise other than the house down payment. So, make sure you’ve accumulated ample savings to fund your expenses. Here are some safe options to invest your funds.
- Certificate of Deposit: It won’t make you rich but can give you a substantial return to increase your fund value with the inflation;
- Fixed Income Portfolio or Short-Term Bond: These are low-risk investment instruments that will help improve your fund value;
- High-Yield Savings Account: If you want to keep your funds liquid, keep them in a high-yield saving account.
Evaluate Your Spending
Analyze your spending patterns and calculate your expenses for a month to figure out how much money you’ll have to keep aside for paying out the home’s operational expenses. Consider every expense, from utilities to car maintenance to retirement savings.
Review Your Credit Standing
You’ll need to have a good credit score and credit standing to qualify for a loan. So, review your credit standing and get a statement issued by any credit rating agency. Those who pay their bills on time and have a debt to income (DTI) ratio of at most 43% are strong candidates for bank loans.
2. Choose a Home Well-Suited to Your Needs
Once you’ve assessed your financial health, decide about the home type you want to purchase, matching your needs well.
Many options are available in residential properties like condos, traditional homes, modern homes, or apartments with 2–3 units. Each option has some benefits and drawbacks depending on your family’s needs, so choose wisely.
3. Look for Specific Features for Your Ideal Home
In addition to the home type, you also have to look for other specific home features like the neighborhood, its proximity to restaurants, schools, and other public places, home interior, and the need for home renovations or remodeling.
4. Decide What You Can Afford
If your affordabilitiy qualifies for a $500,000 amount home, it doesn’t mean you should buy the new house with the exact worth. Often homeowners end up ‘house poor.’ It means that they’re unable to meet other operational expenses like property taxes, utilities, clothing, etc., after making a home down payment.
6. Who Will Help You Buy a Home?
Now that is a million-dollar question for first-time homebuyers. Since home buying is a lengthy and tedious process, it’s always recommended to seek a professional real estate agent’s help.
A real estate agent will help you find a home suitable to your needs by showing potential listings. They also help you make the offer, negotiate the deal, and complete all the paperwork involved in the home buying process. When you hire a real estate agent, you reduce the likelihood of falling into common pitfalls that otherwise may happen without a professional’s help.
The Home Buying Process
Now that you’ve finally decided to buy a new home, here’s how you can proceed.
Step 1: Find a Home
When you’re on the hunt for your dream home, make sure to take maximum advantage of every option. While the real estate agent shows you potential homes, don’t hesitate to look for homes online or drive around the neighborhood where you see homes for sale.
Additionally, reach out to your friends and family members to recommend you a good home. If you’re on a tight budget, look for homes that need minor repair and replacements. Also, if the location and home size are perfect to meet your needs but aren’t too aesthetically pleasing, don’t turn down the option immediately. You always have some room to negotiate with the seller for the maintenance costs.
Step 2: Hire a Real Estate Agent
If you haven’t hired a real estate agent by now, do it as soon as possible. Take significant time to research the real estate agents, ask them about their experience with first-time homebuyers, and choose the ones you can easily and readily trust with anything.
Remember, real estate agents play a significant role in buying a home, especially if you’re a first-time buyer. They guide you throughout the process and help you get your dream home at the best competitive price.
Step 3: Secure Your Financing Options
After choosing the desired home and hiring the real estate agent, explore your financing options. First-time homebuyers have multiple options to finance their home purchase. For instance, first-time homebuyer programs offer initial down payments for as low as 3% to 5%. Make sure you explore those options.
Step 4: Make an Offer and Negotiate
After securing your financing options, make an offer. Your real estate agent will help you make a reasonable offer alongside mentioning all the stipulations and conditions. If the seller allows you to counteroffer, do that wisely. Don’t delay the deal. If it suits you, show affirmation for acceptance. If it doesn’t, call it quits.
Once the deal is finalized, you’ll have to deposit a good-faith deposit and move on with the home inspection.
Step 5: Get Home Inspection Done
Even if the home looks squeaky clean and sparkling, get a home inspection done by independent home inspectors. They’re professionals who will inspect your potential new home for safety, quality, and other structural problems. They help you enhance your investment security.
If the home inspection result reveals serious repair problems that the seller didn’t disclose, you can revoke the offer and get your deposited money back. On the other hand, you can also negotiate with the seller for the repair and maintenance expenses.
Step 6: Close the Deal
If things went smoothly and the home inspection report also came out clear, you can close the deal. Closing the deal involves a lot of paperwork and documentation that your real estate agent will walk you through.
Closing involves several procedures like getting a home appraisal, title search,and paying property taxes, insurance, and credit-report expenses.
Tips for New Homeowners
So, you’ve made the final payment and moved into your new home. Is the game over? Not really.
There are many other costs to manage than the down payment. Here are some tips for new homeowners.
- Create an emergency fund to accumulate reserves to meet unexpected homeownership expenses like water heater installation, replacement of the roof, etc.
- Maintain your home regularly to fix problems when they are small and need less money for repair.
- Don’t pay heed to the housing market or your home’s current value that keeps fluctuating unless you’re fully prepared to sell your home.
- You shouldn’t rely on selling your home to fund your life after retirement. Instead, plan and try saving a significant amount in your retirement account.
Want to Buy a New Home in Medellin? Get in Touch with In House Real Estate Experts!
Are you interested in buying a new home in Medellin? The real estate experts of In House Real Estate will help you throughout the home buying process.
Medellin offers high-quality properties with a low cost of living. Our property management experts help people invest in furnished rental properties, sell real estate, and invest in new development projects.
Our real estate experts also help people obtain Colombian citizenship by applying for an investment visa, entrepreneur visa, tourist visa, and retirement visa.