Buying real estate as a first-time home buyer can be an exciting and nerve wracking experience. Overwhelm can take over with so many things to consider when buying your first home. For many, this is one of biggest financial decisions of your life.
At ADKPP, we get it. Our experienced team excels at matching buyers and sellers with properties that meet their needs, and also at coaching them through the sometimes scary transaction process. To help first-time home buyers navigate these new waters, our office prepared a comprehensive list of things to consider when buying your first home.
Read on for the 5 things we believe are the most important to know.
5 Things To Consider When Buying Your First Home
1. Preparing Financially
This is the most important thing for every first-time homebuyer! Preparing yourself financially will pay off immediately from the minute you secure your pre-approval and throughout the entire process moving forward.
To begin the financial preparations, start looking deeper into your finances. Three key numbers to run down are your debt-to-income ratio, how much you have in assets and what you have saved.
Your Debt-To-Income Ratio (DTI) is how much debt you have versus how much gross income you receive. This ratio is based on your monthly breakdown.
When determining what to include for your debt, include everything from student loans to car payments. Your current rent payment is not be included.
With your debt and gross income figured out, calculate your DTI. For example, if your loans add up to $1,000 a month and you make $4,000 a month in income, your DTI ratio would be 25%.
Lenders need this number to protect you and themselves from becoming house poor. House poor is when a homeowner pays too much for a mortgage and doesn’t have adequate income left to buy necessities like food or household essentials. If your DTI is too high, your lender will pre-approve you for a lower amount.
How much do you have in assets? This includes anything you own that adds financial value. Land, financial securities (i.e. pensions, stocks etc), jewelry, artwork, gold, silver and even your checking account are assets.
Assets are valuable if you plan on getting a mortgage. It gives the lender extra security in extending you a loan. More assets gives lenders reassurance that if any financial troubles arises, you have the resources to sell or keep paying the mortgage until your financial difficulties are resolved.
What You Have Saved
The home buying process can be very expensive. A significant amount of cash may be needed to cover expenses including down payment, closing costs, etc. Make sure you have a good nest egg saved so you can still afford to live after the closing.
There is nothing worse than spending most of your money at closing just to live paycheck to paycheck afterwards. Be sure to save more than what the lenders tell you to ensure you can still cover regular expenses comfortably after closing.
2. Securing Loan Pre-approval
After you have looked at your financials, reach out to a few lenders to see what loan products they are offering. Getting pre-approval is essential before you even start looking at homes.
Pre-approval lets you know how much house you can afford. This saves you and your agent time as you can narrow your search to properties within your price range.
View our guide on How To Get Pre-approved For A Mortgage for an in depth look on how to complete the pre-approval process.
3. Finding A Real Estate Agent
As a first time homebuyer, having someone in your corner who is knowledgeable about the market and the real estate process can save you from making poor choices. A strong agent will support and guide you to choose the right property for your current situation and future plans.
Choosing the right agent will help you feel comfortable throughout every step of the process. With so many things to consider when buying your first home, having an expert on hand is critical.
Our office really embraces the “Forever Agent” mentality of Berkshire Hathaway HomeServices. We treat our clients like family and friends to make lasting relationships instead of just worrying about quick sales.
4. Looking For Regional/ State First Time Homebuyer Programs
There are definitely many things to consider when buying your first home. Doing even more research may not sound enticing, but seeing what your state or region has to offer first time home buyers can really pay off.
Most states or regions in the US have some sort of first-time homebuyer programs available. These are normally based on your income so it is perfect for a first time home buyer who is concerned about covering down payment or closing costs.
New York State’s First Time Homebuyer Programs have multiple options for a variety of incomes. Looking into these programs could get you some financial assistance and put you more in your comfort zone with the amount of money you need to bring to the table.
5. Maintaining Calm & Patience
The real estate process can be a roller coaster, so be ready for some big ebbs and flows. From missing out on properties to dealing with some silly things throughout the process, feelings and frustrations can run high.
Finding ways to keep stay calm and keep your patience are key. Planning ahead as well as having a strong real estate agent can reduce ebbs and flows to little blips making the process a lot smoother and enjoyable.
At ADKPP, helping our clients navigate the home buying process with the highest degree of confidence and comfort possible is our priority. We focus on relationships and doing our best to meet your individual needs. We hope this article on the most important things to consider when buying your first home helps you get started on the right foot.
When you are ready to contact an agent, contact our office and we are happy to partner with you through the home search and buying process.