Best Practices For Buying A First Home
When you buy a home, you lay down roots, commit to community, and make major progress toward both your financial and life goals. It’s a huge step in an upward direction—if you do it right. We’ve come up with some best practices to ensure your purchase positions you for success now and in the future.
Do this before going house hunting.
Get preapproved for a loan (not just prequalified). Preapproval is when your lender verifies your financial information and gives you a letter that details how much money you can borrow. Having this letter shows sellers that you are serious about buying and have the capacity to do it. (And it lets you know how much house you can afford, so you don’t waste time shopping outside your price limit.) To get preapproved, you’ll need to provide your lender with some financial documents that verify your income, assets and debt.
Explore your mortgage options.
There are a variety of mortgage options, including first-time homebuyer programs, that may combine low-interest-rate loans with assistance for down payment and closing costs. Be sure to discuss your financial needs and homeownership goals with your lender and go over all your options before choosing a mortgage that fits your situation.
Respect your budget.
It’s easy to get caught up in the feelings associated with finding a dream home. But that vision for perfection can come with a not-so-dreamy price tag. Balance your wants with your needs, and remember that overspending on your home can create a nightmare for your budget down the road. Many experts advise that your house payment be no more than 25 percent of your take-home pay. Be sure to work with a lender who you trust to break down the numbers so you have a clear idea of what your monthly payments will be.
Save for a down payment and closing costs.
The amount you save largely depends on the price of your home, and the loan program you decide to use. As a first-time buyer, you may qualify for government-backed grants or loans that assist with your down payment and closing costs. Be sure your lender provides you with a clear breakdown of what you will need to pay for both the down payment and closings costs. (A breakdown of your closing costs will be listed on a document called a Closing Disclosure.) Be sure you are maximizing the amount you save by putting your funds to work in a CD account or money market account.
Don’t skip the home inspection.
If you’re buying a house, it’s a good idea to pay for a home inspection, which is an objective assessment of the physical condition of the home, including the structure, plumbing, electrical, heating and cooling, as well as any built-in appliances. If a home inspection reveals an expensive problem to repair, you may be able to negotiate a more fair price for the home taking into account the cost of those repairs. And you may find that you don’t want the house if it doesn’t pass inspection.
Know the neighborhood.
You’re putting down roots in a community. You want to enjoy the quality of living there, and also know your home will be a good investment in the long run. Be sure to observe the livability aspect of it. Visit the home at night and during the day. You may want to ask: How are the schools? What are the local amenities? Is there a grocery store nearby? What’s the traffic like in the mornings? Are home prices rising or falling? Are businesses growing or closing? Is there a homeowner’s association? What are the fees? Think of what matters most to you in a neighborhood, and then see if your prospective home meets those needs.
If you have questions or need further insights on buying a first home, reach out to the lenders at Centreville Bank. Since 1828, this bank has been helping homebuyers in Rhode Island put down roots.
Do this before going house hunting.
Get preapproved for a loan (not just prequalified). Preapproval is when your lender verifies your financial information and gives you a letter that details how much money you can borrow. Having this letter shows sellers that you are serious about buying and have the capacity to do it. (And it lets you know how much house you can afford, so you don’t waste time shopping outside your price limit.) To get preapproved, you’ll need to provide your lender with some financial documents that verify your income, assets and debt.
Explore your mortgage options.
There are a variety of mortgage options, including first-time homebuyer programs, that may combine low-interest-rate loans with assistance for down payment and closing costs. Be sure to discuss your financial needs and homeownership goals with your lender and go over all your options before choosing a mortgage that fits your situation.
Respect your budget.
It’s easy to get caught up in the feelings associated with finding a dream home. But that vision for perfection can come with a not-so-dreamy price tag. Balance your wants with your needs, and remember that overspending on your home can create a nightmare for your budget down the road. Many experts advise that your house payment be no more than 25 percent of your take-home pay. Be sure to work with a lender who you trust to break down the numbers so you have a clear idea of what your monthly payments will be.
Save for a down payment and closing costs.
The amount you save largely depends on the price of your home, and the loan program you decide to use. As a first-time buyer, you may qualify for government-backed grants or loans that assist with your down payment and closing costs. Be sure your lender provides you with a clear breakdown of what you will need to pay for both the down payment and closings costs. (A breakdown of your closing costs will be listed on a document called a Closing Disclosure.) Be sure you are maximizing the amount you save by putting your funds to work in a CD account or money market account.
Don’t skip the home inspection.
If you’re buying a house, it’s a good idea to pay for a home inspection, which is an objective assessment of the physical condition of the home, including the structure, plumbing, electrical, heating and cooling, as well as any built-in appliances. If a home inspection reveals an expensive problem to repair, you may be able to negotiate a more fair price for the home taking into account the cost of those repairs. And you may find that you don’t want the house if it doesn’t pass inspection.
Know the neighborhood.
You’re putting down roots in a community. You want to enjoy the quality of living there, and also know your home will be a good investment in the long run. Be sure to observe the livability aspect of it. Visit the home at night and during the day. You may want to ask: How are the schools? What are the local amenities? Is there a grocery store nearby? What’s the traffic like in the mornings? Are home prices rising or falling? Are businesses growing or closing? Is there a homeowner’s association? What are the fees? Think of what matters most to you in a neighborhood, and then see if your prospective home meets those needs.
If you have questions or need further insights on buying a first home, reach out to the lenders at Centreville Bank. Since 1828, this bank has been helping homebuyers in Rhode Island put down roots.