by Donna De Palma
Finding your dream home requires preparation, research, money, time and patience. Rushing in is the number one mistake first-time home buyers make.
Reduce risk by discovering some of the things first-time home buyers wish they could do over if they had the chance.
Start saving sooner
It’s a good idea to begin saving at least two years before you plan to start looking for your dream home. The sooner the better when it comes to saving. Put away as much as you can each month. Start a new home fund and deposit at least $100 a month to start.
Plan on saving up to 20% of your new home’s value as a down payment. For a $100,000 house, you’ll need as much as $20,000 in savings for that down payment, so buying your first home may require some sacrifice.
Take your time
Educate yourself on the local real estate market before you even begin to look. Visit several different neighborhoods and areas when scouting for a new home.
Before deciding to buy, consider property values in the neighborhoods you like best. Take into account the school district your new home will be in. Research property and school taxes before signing on the dotted line.
The neighborhood you choose needs to be one you and your family will feel comfortable in for years to come. You may be living there for a long time so choose carefully.
Have an emergency fund
A new home means higher utility bills, home repair costs and lawn care. Have a strict budget in place and then prepare for unexpected expenses like a hot water heater that makes it through inspection but quits a few weeks after you move in. A rainy day fund will come in handy for emergencies.
Price shop for a mortgage
Shop around for a mortgage. Rates vary from one brokerage firm to another and the difference can be significant. Explore loan options and rates from several different brokers.
Saving just a half of a percentage point on an average-priced home could result in tens of thousands of dollars in savings over the years of your loan.
Make a home wish list
A good real estate agent will ask a first-time buyer to create a detailed wish list with everything they’d love to have in a home. Size, amenities, condition and location are key.
Do you require move-in ready or are you willing to put in some ‘sweat equity’ to create the home of your dreams? Think about what you can handle.
It may be hard to avoid the ‘kid in a candy store’ mindset that first-time buyers are prone to. After you’ve made a wish list, begin to prioritize your needs. Ultimately, you’ll need to come up with a must-have list for your first home.
If you’re having trouble deciding on a style of home, ask your broker to show you an example of each style from ranch to Cape Cod. Narrow down your search once you find a style you like.
You may want to reserve some of the items on your wish list for your second home. Most first-time buyers are on a pretty tight budget. Remember, the goal is to find a home you can afford.
Love at first sight
Remember what it was like to fall in love? Most likely, you overlooked some pretty important details that had an impact on your future happiness. Don’t fall in love with your new home while you’re in the buying process. If something isn’t right, the rosy glow of first love may allow you to gloss over a serious problem.
Things you overlook in a property can get expensive. Bring an objective friend or relative with you who can look at the home without bias and give you an honest opinion. Best to bring someone who knows you well: someone who knows what you need in a new home.
Keep your eyes open
Home inspections are much more limited than many first-time home buyers expect. Keep your eyes open during the inspection process. Don’t rely on your home inspector to catch all the flaws in the house. Instead, follow your inspector around from room to room while he inspects the property.
Ask questions and take notes. Then check things for yourself. If you aren’t satisfied with your home inspection, speak up. Pay attention to every detail. What seems like a small problem now may turn into a much bigger problem later.
According to Curtis Niles, president of the National Association of Home Inspectors and a home inspector himself, all inspectors are not alike and the value an inspector brings is based upon his experience and knowledge. Don’t just accept your real estate agent’s recommendation of a home inspector. Interview a prospective inspector to assess his knowledge.
A good home inspection requires a reliable professional. Question your potential inspector about his experience; whether he’ll be getting up on the roof or not, and if he has any particular area of expertise such as environmental safety or knowledge specific to child safety.
If you’re purchasing an older home, your home inspector should point out the possibility of environmental risks like lead or asbestos in homes built before 1978. If you, as a buyer, are made aware of toxic hazards before closing, you can ask the seller to cover some or all of the cost of abatement or removal.
Child safety hazards, like old railings that have too much space between posts, are a safety threat to young children. Updated standards require posts be placed closer together. A smart inspector will spot these problems so you, as a first-time buyer, can address them before closing.
All homeowners insurance policies aren’t alike
Some people get into a rut with insurance. They feel a sense of loyalty to an insurance company that may be charging them too much for too little. Most insurers offer a discount if you package your auto and homeowners policies. Don’t be afraid to transfer your car insurance to a different agency that may have a more suitable homeowners policy.
Your home is one of the biggest investments you’ll ever make. Select a quality policy just in case you ever need to use it. The cheapest policy isn’t always the best. Instead of just shopping price, look at coverage options. If you ever need to file a claim, you’ll be glad you did.
Evaluate the actual value of the contents of your home to avoid the default amount your agent suggests. Once you calculate the value of everything in your home, adjust replacement value downward slightly to save on premiums.
Furniture shopping can wait
Buying brand new furniture for the home you’re about to move into is usually a mistake especially for first-time home buyers. Take a breath, get past the move in, then purchase a few select pieces that are essential to living comfortably.
Don’t overextend your budget only to regret it later. It’s best to wait until you have a handle on your expenses. You can splurge on that modular sofa, mid-century dining table or Louis XIV chaise after you’ve paid for essentials like shrubs, grass seed and the water bill.
When you have a firm grasp on your budget, start shopping sales. Never rush into new furniture. Save up until you can afford what you really want.
Ask for help with your move
Most of us have a large network of relatives and friends we can call on for help. Be sure to ask for help with your move. Just be prepared to help family and friends with their moves over the next couple of years. Feed the people who help you. They’ll feel appreciated and you’ll feel like you’ve taken good care of your help.
If you make a mistake or two along the way to buying your first home, relax and focus on the goal: an address of your own and a place to call home.
The Simple Dollar