First Time Home Buyers Tips
Purchasing your first home is a huge step and it will quite possibly be the largest financial decision you’ll ever make. Many Central Texas first time home buyers are overwhelmed by the home buying process. Renters continue to avoid home ownership while throwing money away on rent. However, if you breakdown the home buying process in to the simple steps below, you will find the process much less intimidating.
In most cases buying is better than renting. When you rent, you make your monthly payment and your money is gone forever, no write-offs, no appreciation in value, nothing. You can’t even change your wall colors without your landlords permission.
When you own your own home you have tax deduction opportunities. On your federal tax return you can deduct mortgage interest and property taxes. Since the front end of mortgage loans is mostly made up of interest, the mortgage interest deduction can be substantial and a long term write-off. Its also likely the value of your home is going to appreciate over time.
A tenant may say “I don’t have to pay property taxes when I rent”. Trust me, your landlord has included all the cost associated with your rental property in your monthly rental payments and that also includes property taxes and insurance. The difference is you’re paying property taxes indirectly and the landlord is getting the tax deduction!
Use a REALTOR® during your home buying process. First-time home buyers and experienced buyers alike are far better off using a licensed real estate professional. A REALTOR® at Longhorn Realty will have access to information and documents on MLS such as surveys, restrictions and disclosures that is not available to the unlicensed public. A Longhorn Realty REALTOR® will also have contacts and information such as, inspectors, lenders, community information, and contractors that can be invaluable to a buyer. Read more information on why you should use a REALTOR®.
Know how much you can afford. Lenders will tell you that you can spend up to 28 percent of your gross monthly income (GMI) on your mortgage, taxes and homeowners insurance, and up to 36 percent on your total debt. To calculate a housing budget you can live with, start by figuring out how much you spend each month. Track your daily expenses to get a real sense of how much is going out and where you’re spending most of your available cash. Watch your savings and calculate how long it will take you to come up with a down payment. Also be sure to check for financial assistance programs for first time home buyers. Use our mortgage calculator to see how your income, debts, and expenses affect what you can afford. Additional information on “Can you Afford to Buy?”
Get Pre-Approved for a loan. Getting pre-approved from a lender is the single most important thing you can do when getting ready to shop for your first home. Once you’ve talked to a lender and reviewed your loan options, it’s time to get pre-approved. You’ll need to provide the lender with details of your credit, income, liabilities, assets and tax returns to get the process started. The lender will verify everything and issue a pre-approval letter that tells you and sellers, how much you are qualified for. Click here to read more about why you need to be pre-approved by a lender.
List what you need in a home. Based on your housing budget, and where you want to live, compile a list of what you’d like to have in your first home. Research is helpful when putting together your list. Check out homes in your price range online to get a feel for what your money can buy, and make your wish list based on those homes in your price range.
Start your home search. Decide on a location and identify the features you want in a home. Check local listings, compare prices of similar homes and consult with your REALTOR® to help determine an estimated purchase price. Start your online home search in the Central Texas real estate market by clicking here.
Make the offer. You may hear that your initial offer should be a percent below the seller’s asking price. In reality offers should use recent comps as a basis. If multiple buyers are competing for a home, then sellers may likely get full list price or more. If demand is weak, then offers below asking price may be in order. Because counter-offers are common, it’s important for buyers to remain in close contact with their REALTOR® during the negotiation process.
Get a home inspection by a licensed inspector. Its always a good idea for buyers to get a home inspection. Home inspections are almost always performed during the option period. If major deficiencies are found in the inspection and the seller is not willing to have them corrected you will have the option to terminate the contract during the option period. A home inspection is key to really understanding the condition of the home that you are buying.
Closing on your property. Next to moving day, closing is the last step in the buying process. Contact the title company for the safest way to get your down payment to them. Closing costs are various fees incurred to process the loan, appraisals, county filings, surveys, title search, legal costs and so on. All of the different closing costs items add up, so understanding early on what these are and why will make the cost less surprising. When you first apply for a loan, your lender is required by law to give you an estimate of your loan costs, which shows in detail what the estimated closing costs may be.
Click here to read an informative blog post with more home buying tips.