Few experiences are more exciting or rewarding than purchasing a new home for the first time. However, the process can be more complex than it may seem. Working with a skilled agent can make things go more smoothly, but it’s important to remain actively involved at all phases. Anticipating and addressing key issues directly can make the buying experience easier and more enjoyable. That can also help ensure you come away with the best deal. Consider the tips below:
1. Make sure you understand crucial terms
Many homebuyers enter into the process of taking out a home loan with little or no knowledge of how mortgages work. Here are a few mortgage terms you should brush up on before signing on any dotted lines.
- Annual percentage rate (APR) – The interest rate on a mortgage. This is the percentage of the loan amount that you will pay each year in interest.
- Application fee – Some lenders charge a fee that covers the cost of property appraisals, credit reports and other expenses.
- Closing costs/settlement costs – This covers any costs associated with buying or selling a home, and can include origination fees, escrow payments, attorney fees, title insurance and discount points. Be sure to review these with your mortgage broker to better understand the purpose of each fee.
- Fixed rate mortgage (FRM) – Interest rates on an FRM stay the same through the life of the loanFixed rate mortgage (FRM) – Interest rates on an FRM stay the same through the life of the loan.
- Term – The length of the mortgage loan in years. Common terms lengths are 10, 15 and 30 years.
2. Take to the internet to start your research
You want a real estate agent who knows the market and understands what you’re looking for. Get customer reviews on specific agents in your desired location and discover their recent sales using Zillow.
Have you ever seen a house for sale and wanted to learn more about it, but didn’t want to call the selling agent? With Homesnap, simply take a photo of the home and you’ll get instant information about the property.
3. Take a closer look at the neighborhood
You may think you’ve found the right home in price, size and style. But sometimes, less obvious details are more important than what is readily apparent. It may take extra legwork to uncover important points or to confirm your initial judgment about a property.
For example, you might take a closer look at whether a neighborhood fits your lifestyle. Is it close enough to shopping? To parks and recreational opportunities? Is the neighborhood close-knit? What types of individuals live in the community? Speak with local homeowners about their likes and dislikes.
Calculate your potential commute time. That can add stress and additional costs to your budget when you need to pay for gas and parking or for public transportation. If you have—or are planning to have—children, check local schools. A highly rated public school could save you thousands of dollars over a private one. However, when considering school districts, you may also want to consider property taxes; in some communities with outstanding public schools, property taxes may be as high as private school tuition.
Finally, visit the neighborhood throughout the day, especially in the evening. The atmosphere could be much different after dark. You want to feel comfortable at all hours.
4. Be prepared to act quickly and walk away if necessary
Make a list of your must-haves, want-to-haves and deal-breakers. If a house fits your checklist and you feel good about it, don’t be afraid to make an offer. It might be the only chance you get at living in your dream home.
However, if you put an offer down and find that something about the house actually is a deal-breaker, like a compromised foundation, don’t be afraid to walk away. You can be happy in another home—the structure itself only gets you so far. It’s much easier to turn an imperfect house into a home than to end up having to move out of a “perfect” house because of a feature that puts your safety at risk.
It’s also easy to become emotionally attached to a house during the negotiation process. Getting caught up in a bidding war over a property can be devastating to your budget. Before making an offer, have a clear expectation of how much you’re willing to pay should you be outbid by another person. If you’ve hit your maximum do yourself and your budget a favor and walk away.
It may seem strange to make one of the biggest purchases of your life after spending so little time looking at it. But when you’re buying a house, you will often need to make an offer after only having spent around an hour or so inside. That’s why step three is so important—if you make your offer contingent on inspection, you have the option to withdraw the offer should the inspector find something wrong with the home.
5. Have a professional inspection
Hire an unbiased construction expert or professional inspector to thoroughly inspect the foundation, roof and other major structural components, along with electrical and plumbing systems. But stay involved with the inspection process. Ensure that the contractor you hire is looking at hard-to-see areas. And don’t hesitate to ask questions. If you have concerns about something, it’s better to ask them before the sale is complete.
One last tip: Avoid using inspectors recommended by the seller’s agent or employing someone who’s unqualified. That can result in a less thorough inspection, and in some cases, raise conflict-of-interest issues.
6. Check local zoning ordinances
If you plan to make improvements, such as adding a bedroom or expanding a home’s footprint, contact the local zoning board before you buy. Most municipalities try to work with homeowners, but it’s best to ensure that your project will meet local guidelines. That may be particularly important for homes in hillside communities or near water. Those areas may have more restrictive ordinances.
7. Don’t underestimate your monthly costs
Even after you find a mortgage with interest rates to meet your budget, there are other costs to factor in, including utilities, homeowners insurance and a maintenance fund. Allocate about 1% of the purchase price for annual maintenance.
Closing costs may range from about 1% to 5% of the purchase price, although that amount doesn’t include title insurance, title search, property insurance and other prepaid items. You may negotiate with a mortgage provider about a few of these items.
Purchasing a first house ranks among life’s most memorable moments. If you have questions about homeowners insurance others aspects of starting life in your new home, Nationwide has resources to help you make the right decisions.