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2018-07-06 08:37:46
Personal Finance Tips for First Time Homebuyers


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Personal Finance Tips for First Time Homebuyers


Buying your first home can be nerve-wracking, and for many people, it is the largest financial decision they have ever made up until this point. And buying a home should be a financial decision, not an emotional one. While you can’t plan for every bump in the road, you can prepare for the home-buying process by sorting out why you want to invest in a house and then getting your finances in order. These simple personal finance tips will help first-time homebuyers make smarter investments in real estate.


Is Buying a Home Right for You?

People -- especially those of the younger persuasion -- often act outside of their best interests. They make decisions based on what that they think they should do, based largely on their limited scope of the world. However, just because all your friends are doing it doesn’t mean you should. This is especially true when it comes to buying a house. A lot of people don’t need to buy a house or even necessarily want to buy a house. Home buying is seen as an inherently “grown up” thing to do. Ergo, some people think that buying a house proves to the world that they are an adult.


Fact: Buying a house is not always a good investment. While your home may appreciate in value over the years, you will have to pour a lot of cash into it during that time. And it’s not just renovations and repairs -- buying a house means you are going to have to spend more on taxes, utilities, and insurance every single year.


To determine if buying a house is right for you, ask yourself the following questions:

  • Do you have 10 to 20 percent of a home’s total value available to use as a down payment?
  • Is it a buyer’s market where you are looking?
  • Do you plan on staying in the same town -- and possibly the same job -- for at least five more years?
  • Can you afford the extra costs that come with owning a home, including taxes and insurance?
  • Do you and your partner want to get married or have children in your first house?


If you don’t have the money saved, if you think you may want to move in the near future, or if you and your partner are unclear in regards to what you both want, it’s not the right time to buy.


Conduct the Right Research

The better you know the market, the bigger your frame of reference is when you start looking at individual homes. If the property you’re interested in is listed at an average price based on the market, you may be able to negotiate something lower if the house needs renovations or if it’s been listed for an excessive amount of time. While your buying agent will do the talking in negotiations, you are responsible for pushing your agent to do the most they can for you. If you know that a number of homes in the area recently sold below their asking price, that is a valuable card to play when you are at the negotiating table. In addition to knowing what other homes in the neighborhood sell for, also have estimates for necessary repairs in the home ready by getting quotes from contractors for both materials and labor.


Of course, negotiating isn’t always possible. For instance, only 1.8 percent of homes sell below their listing price in Huntington, New York. So if you are looking in that area, expect to pay what they ask. You won’t really know what to expect unless you do your research and look up the average down payment in your target area, the percentage of homes that sell under their list price, and estimated costs for renovations.


Get Pre-Qualified for a Mortgage

Mortgage pre-qualification is the first big financial step you should take before buying your first home. It is simply an informal evaluation of your creditworthiness and how much home you can afford. In the past, you had to call up a bank or lender, provide them with your financial information, and wait for pre-qualification. Today, you can use a simple online calculator to help determine what kind of mortgage rate you can expect.


Being pre-qualified doesn’t guarantee you anything, but it’s a great way to figure out what your budget needs to be going forward. Remember: just because you are pre-qualified for a house priced at a certain number doesn’t mean you have to spend that much. When picking a house, you want to get something with just enough room to be comfortable. The less your home costs, the further your down payment goes and the smaller your mortgage payments overall.


Check for First-Time Homebuyer Benefits

As a first-time homebuyer, you may qualify for private or government benefits that can ease the financial burden of buying a home. These benefits may come in the form of rebates or reduced interests rates that make it easier for first-time buyers to pay for their home and while continuing to contribute their cash to the economy. After the 2008 housing crash in the United States, many young people began feeling apprehensive about investing in real estate. These incentives and benefits aim to make the process more comfortable while wooing Millennials into giving up their renting habits and instead taking the plunge towards home ownership.


Buying your first home is a huge decision that shouldn’t be taken lightly. When deciding if owning a house is right for you, use your financial sense and leave emotions out of it. If you don’t plan on sticking around in your area or aren’t in a financially stable position, you should put off buying a house as well. Before you look into buying, do your research regarding the neighborhoods you like, the average listing price, and how likely a seller may be to negotiate on their asking price. Getting pre-qualified for a mortgage can give you a good idea of what you can afford -- but only buy the amount of space you need, not the amount of space you can get. Finally, as a first-time homebuyer, look into incentives and benefits that government and private agencies have to offer.

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