Don't
Step into Home…Yet
Although the current market in
most areas definitely favors the buyer, that is no reason
to leap headfirst into home ownership. There are several
steps first-time buyers should take to be fully prepared.
Everyone’s saying it: it’s
a great time to buy a house, especially your first house.
Sellers are pricing competitively to try and outpace
the competition and mortgage rates remain low. Just
because it’s a buyer’s market and you want
to buy, however, doesn’t mean that you should,
according to a recent article in the Denver Post. There
are several important steps potential first-time buyers
should take before they leave renting behind.
1. Act like you already
own a home. Home ownership is a big change
financially, one that takes getting used to. Dustin
May and Heidi Myogeto of Denver started banking $2,000
a month as soon as they decided to start house-hunting.
That gave them an idea of how their finances would look
once they were homeowners.
2. Save paper. This doesn’t mean
recycle, although you should do that, too. Start saving
all of your documents, including W-2’s, pay stubs
and bank and investment account statements. You will
need all of these items for the loan approval process.
Reputable lenders will also pull your credit report
before offering you a loan to get an idea of your outstanding
debts. It doesn’t hurt to check your own credit
report ahead of time at annualcreditreport.com before
you even start looking for a house. This gives you the
time to correct any mistakes that could hurt your chances
of qualifying. Getting pre-approval from a lender will
make the home buying process easier, although you should
remember that just because one lender pre-approves you
doesn’t mean you are committed to that lender.
3. Factor in other costs. Home ownership
is about more than just paying a mortgage. You also
have to be able to afford all of the upkeep that comes
with a home. Remember that you will probably have higher
utility bills and that you may need to purchase new
furniture or appliances. You will also need to allow
for homeowner’s association fees, repairs, assessments,
property taxes and homeowner’s insurance.
4. Decide what you like. You’re
in for a lot of work if you start home shopping without
any idea of what you want and what you can’t live
without. For example, if you can’t live without
air conditioning, it’s pointless to look at homes
without it. Before you start looking, you should make
a list of what you want that is within your price range.
Consider basics like the number of bedrooms and bathrooms
and commuting distance and also add-ons like fireplaces,
air conditioning and views. Your search will be a lot
easier if you keep this list handy and share it with
your Realtor.
5. Don’t overbuy. Buyers can
typically qualify for home loans that take up more than
half of their pay. This is more than most people are
comfortable paying. Remember that just because you qualify
for a certain amount doesn’t mean you have to
spend that amount. Your first priority is making sure
you are comfortable making mortgage payments and aren’t
tempted by taking on too large of a loan.
6. Plan how long you will stay. Regardless
of what you heard, it’s extremely difficult to
flip your house and make a profit. In today’s
market, you need to stay at least five years in order
to make any money. If you think you will just be able
to stay for a year or two, maybe waiting to buy a home
would be a better idea.
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