The purchase of your first home marks an exciting milestone. You finally have your own place that is yours to do as you please. It is difficult to navigate the housing market and to know what to look for in a quality home without overpaying.
You can never research enough when it comes to negotiating and buying a home. Since buying a home is one of the largest investments you are likely to make in your lifetime, taking the time to learn more about the resources designed to make the process easier and affordable is worth it.
The Department of Housing and Urban Development (HUD) is a vital resource for first-time homeowners. Finding homes offered below market value are great for starting. For more information on what to expect as a prospective homeowner, check out the following resources.
Advice When Buying Your First Home
Be as informed as possible when you begin to search for your first home. As a first-time homebuyer, you can easily avoid pitfalls and mistakes if you know of these issues in advance.
When you begin the process of house hunting, create a price range. When you look at generating a range, consider what your mortgage payment is going to be as well as other ongoing expenses. Consider any other debts you pay on monthly, such as:
- Student loans.
- Auto loans.
- Monthly insurance payments.
Your housing costs should not be more than a third of your monthly income. This means the taxes for the property, mortgage payments and interest on the mortgage should not be above a third of the total income earned.
You must consider a down payment as well. Down payments must be paid up-front, and if your payment is lower than 20 percent of the total home value, then you may not be granted a mortgage. If a lender does accept a down payment less than 20 percent, then you may be looking at higher mortgage rates, leading to overpayment.
Try to find out the range of houses you can afford early on to roughly calculate the down payment of potential homes. Ideally, it is best to continue to save money until you can comfortably pay the down payment.
If your credit score is lackluster, then try and improve it as well. Better credit scores generate lower interest rates when you take out a mortgage.
How to Get a Free Copy of Your Credit Report
What to Negotiate as You Buy a Home
Negotiating the price of the home seems obvious but you can potentially save on other aspects as well. The number one tip is to never be afraid to negotiate. If the seller feels what you are asking for is reasonable, then most of the time he or she has no issue accommodating.
Factors to consider in negotiations:
- Existing home appliances. Many times, you can opt to keep the existing appliances in the home and negotiate out a settlement with the seller. If you already have appliances, then lower the price by removing existing appliances.
- Any furniture. There may be a home where you want to keep some of the furniture or have the sellers to remove. You may be able to alter the asking price by including them in the negotiations.
- Home repairs. If the repairs are necessary, then try and insist the repairs be carried out before you close the deal. It saves you from having to do it later on if the repairs are taken care of beforehand. It is a bad investment to purchase a home in need of major repairs because you are worried about the deal falling through.
Another tip is to work quickly. Many quality homes have multiple offers and if you negotiate quickly, you are in a better position to close the deal before other offers arrive.
Learn About the Benefits of an HUD Home
HUD homes are an attractive offer for people to obtain fabulous homes for a fraction of the market value. A HUD home is put on the market is a mortgage goes into foreclosure. The foreclosed homes are sold through HUD in an attempt to recoup the losses from the foreclosure.
HUD homes come without warranty or repair, but most are in excellent condition. HUD homes are located in a variety of areas and homebuyers looking for a primary residence are given priority when placing a bid.
If you do decide to purchase a HUD house, then you are not offered financing options by the HUD. You must provide a home loan or personal financing to pay for the home.
The Federal Housing Administration does offer mortgages to HUD homes for prospective homeowners. To qualify, your credit score, down payment, and monthly income are considered.
Another program, Good Neighbor Next Door, provides up to 50 percent of a HUD home listing price if you intend to live in only this home for a minimum number of years. Additional savings are offered to police officers, emergency medical technicians, firefighters, and teachers from Pre-K through 12th grade.
The Importance of Home Inspections
It is recommended that you look into first obtaining a quality home inspector. A home inspection assesses the value of the home alongside the state of it. If any issues exist with the home itself, then you want to be informed right away.
- Exteriors including the roof condition.
- The attic.
- The foundation.
- Included appliances.
- The basement, if applicable.
- Heating and cooling systems and the electrical systems.
Do not skip on a home inspection when you have decided upon a unit. Home inspections ensure the unit you wish to invest in is a viable investment.
Home inspectors alert you to any hazards in need of immediate repair before you close on your home. If the repair is serious, the foundation of the home for example, then negotiate for a lower price or for the current owner to fix it before the closing date.
Quality home inspections are a minimum of three hours long. Be present for the inspection and take notes of any issues uncovered. The inspector relays which issues must be taken care of before you move in and which ones you can repair yourself.