How To Buy Your First Home On A Budget
Congratulations! You’ve finally stepped into serious adulthood, and are ready to buy a home. A new house is probably the biggest purchase you will ever make, so it is important to do everything you can to get the right home at an affordable price. The devil is in the details when it comes to fees—take care of the six items on this to-do list and you’ll be a home-buying pro before you know it.
1. Check Your Credit Score Early
Unless you’re planning on paying for your new spot upfront or in cash, you’ll need to take out a mortgage when buying your first home. A year before you begin seriously looking for a house, check your credit score. If your score is low, take steps to boost it. A low score can take you out of the running entirely or at least dramatically hike up your rates, potentially costing you thousands of dollars over the course of your loan.
2. Prep for the Big Down Payment
One difficult but important step you must take before looking for a home is to save as much as possible. Strive to pay 20% of the cost of your new home upfront. If you do put down 20%, you can avoid extra mortgage costs like private mortgage insurance (an added monthly fee you pay to protect your lender against yourself).
3. Do Your Homework
When you finally find a place that you are interested in, do some research. How much did comparable homes in the neighborhood recently sell for? How long are homes in this area staying on the market? What percentage of the asking price are sellers generally getting? The answers to these questions will help you determine which areas fit your budget and what homes will give you the most bang for your buck.
4. Don’t Be First to Say the “L” Word
Keep your head in the game. Buying your first home is exciting! It’s difficult not to walk in and immediately imagine the perfect rug to rest on those dark hardwood floors, the dinners you might make on the marble countertops. But entering into a bidding war with another buyer or ignoring issues because you are starry-eyed by the selling points can end up taking a home’s price from affordable to astronomical.
5. Inspect Your New Home
You could be walking into a money pit with a new home if you are not careful. The few hundred dollars cost for a visit from a home inspector can save you hundreds of thousands if they find major issues like asbestos or poor plumbing. Even if the inspector only finds minor issues, and he most likely will, those can be used as negotiating points on the final price of the abode.
6. Become Insurance Savvy
Take time to interview several home insurance companies, and compare rates and coverage. Or, if you don’t trust yourself to make this money-saving decision, there are insurance groups that will help you make the smartest and most affordable choice based on their relationships with leading insurers.
No matter where you live, be it a small town or a big city like Ontario, home insurance doesn’t have to be complicated. Insurance groups can easily assess the coverage level you need and work with companies to get a fair price. They will even work as your representative if you happen to incur a loss down the road. No matter which type of insurance company you choose, ask lots of questions; you’ll not only get answers but will also be able to assess the level of customer service you can expect when protecting your home.
The key to home-buying is saving. Save up, and save where you can. And if you find yourself spending that savings on video games or sports equipment… maybe rent a little longer.
Barbara Johnson works in real estate and enjoys finding her clients the perfect homes. In addition, she shares her home improvement and gardening tips with others through blogging for Cowan Group.