Buying your first new home can be a rewarding experience or a stressful one. Even seasoned home buyers can run into snags, but first-time home buyers are likely to experience a roller coaster of emotions as their idea of their dream home clashes with harsh reality. To avoid becoming overwhelmed and making choices based on emotion, break the process into small, handle-able pieces just like you’d handle any project. Here are some suggestions to get you started.
Step 1: Be prepared
Be an informed consumer. Educate yourself on the basics of new home buying. Do some Internet research, talk to a mortgage lender, real estate agent, or bank loan officer. Armed with a plan, you can save yourself time and money.
Step 2: Get a good idea of what you are looking for in a home
Figure out what you need – square footage, number of bedrooms and bathrooms, storage space requirements, lot size, children or pet accommodations, proximity to work or school – vs. what you want – carpeting, wood floors, bay windows, scenic view, swimming pool, roof color. Research and compare neighborhoods, school systems, crime rate, and environment.
Step 3: Make your credit report shine
Your credit score plays a significant role in your ability to get the best possible interest rate and terms on your mortgage. Your credit score ranges from 340 to 850. A credit report contains personal information such as your name, social security number, current and previous addresses, employment history; public records from the court system including bankruptcy, foreclosures, or accounts in collection; late payments; credit history; and credit inquiries. Pull a copy of your credit report and correct any errors you find on it. Pay down debts, pay bills on time, don’t close any old accounts and seek advice on how to improve your score. You might even consider moving the target date for purchasing your new home to give yourself time to get your credit into pristine condition.
Step 4: Know how much home you can afford
Don’t fall into the trap of overspending on a new home. Home buying is an emotional experience and of course you want to purchase the nicest home that you can comfortably afford. To avoid the stress of becoming house poor, get pre-qualified or at least pre-approved as soon as possible and work up a budget for your new home. This will make it easier to keep a cool head and make a decision you can happily live with.
Step 5: Ask the important questions
Whether you’re working with a real estate agent, a buyer’s agent, or doing it yourself, you need to ask questions such as:
* What types of home inspections are required in your area?
* Who will conduct the title search and what is the fee for that service?
* What does the closing process entail?
* Who will be acting as the “settlement agent,” the professional who handles the final paperwork for you to sign?
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