Buying your first home can be exciting. Not only are you investing in a property purchase that will one day show a significant financial return, but you’re also getting a place that is your own, where you can paint the walls any color you want and play loud music without upsetting neighbors on the other side of the wall.
Of course, taking on so much debt can also be pretty stressful the first time around. Are you making wise financial decisions? Can you really afford a home purchase? What if you lose your job?
There are many concerns associated with this major purchase, but there are also a lot of benefits to be gained. Plus, there are plenty of resources to help you choose wisely. Here are just a few dos and don’ts to get you started.
DO: Hire a Realtor
As a first-time home buyer, you don’t even know what you don’t know. A knowledgeable and experienced Realtor can bridge the gap, helping you through the process. This professional will find you suitable listings, offer advice on how to proceed, and ensure that you understand the ins and outs of purchasing real estate before you’re done.
DON’T: Rely on Emotions
There’s no denying that purchasing a home can be an experience fraught with emotion, but you have to be careful not to let your emotions dictate your choices. Buying a home is a major investment and you need to make wise financial decisions if you want your investment to be successful.
DO: Get Pre-approved
Before you start looking at listings, you need to get pre-approved for a mortgage loan so you know how much you have to spend. Pre-approval also means you can put in a bid as soon as you find a property you want. If you have to wait for approval at that point, you could miss an opportunity to buy.
DON’T: Confuse Lending Approval with Your Budget
You might think that lenders know what they’re doing when they approve you for an astronomical mortgage loan, but don’t get caught up in the hype – be smart.
You’re the one who’s going to pay the price if you miscalculate your budget, so take the time to figure out what kind of mortgage you can really afford, bearing in mind that additional costs like homeowner’s insurance, property tax, and an HOA fee could have an impact.
DO: Save Up for a Down Payment
Having a sizable down payment not only saves you money on your monthly mortgage (and possibly insurance payments in the long term), but it could also help you to avoid paying mortgage insurance which is required by most lenders if your down payment is less than 20% of the purchase price.