5 Things Every First Time Home Buyer Should Know
This post is brought to you by our friends at The Chattanooga Property Shop.
So you’ve decided to ditch the landlord and buy your first home, but you may not know how to tackle the biggest purchase of your life thus far. Don’t worry. You’re not alone.
Buying a home for the first time can be a nerve-wracking experience filled with unfamiliar lingo and surprise expenses. Doing a little homework and knowing what to expect throughout the home buying process is key to a smooth transaction. Here are 5 things to consider before you buy your first home.
1. Ask Yourself: Are You Actually Ready?
Before falling in love with the idea of becoming a homeowner, it’s important to know that you’re prepared—not just think you are. Do you have a steady income? Do you pay your bills on time? Do you have low to medium debt and cash for a down payment and other transactional expenses? Do you have enough cash in the bank to cover two months of principal, interest, tax and insurance payments? Do you have the ability to make mortgage payments? If you answered yes to all of those questions, you’re good to go! If you didn’t, don’t fret. Knowing your financial status and what you need to work on is the first step on the path to homeownership.
2. Where to Start: Find a Realtor
Finding a realtor you can trust throughout the home buying process is key to the success of your purchase experience. Your realtor should feel like a fast-friend—one that you know will always act in your best interests. Once you find an agent that you genuinely like, it is important to remember that you’re working exclusively with that individual. A reliable realtor will recommend a trusted mortgage lender to you to begin the pre-approval process. As your realtor finds homes that match your criteria and negotiations begin, keep communication open and give honest feedback.
3 – How Much Money Do You Really Need?
Many first time home buyers start house hunting thinking they will just need enough cash for a down payment. While having the cash for a down payment IS vital, you will need cash for many other fees throughout the buying process as well. Buyers need cash for earnest money, inspections, appraisals, a home warranty, and occasionally for closing costs.
4. How to Talk Financials with Your Lender
Good news! Many mortgage lenders offer programs designed especially for first-time homebuyers. Step one: get pre-approved. The only way to know how much home you can afford is to ask a lender. Getting pre-approved lets you know what you can afford before you start house hunting. Step two: work with your lender to determine your monthly mortgage payment. Step three: understand the other costs that come along with homeownership. Most lenders suggest that it will cost about 1% of your home’s purchase price per year to maintain your home, plus various monthly utilities, insurance, and property taxes.
5. Benefits of Home Ownership
Landlords can raise your rent and throw a wrench in your budget whenever your lease expires. As a homeowner, you can predict your monthly mortgage payment for up to thirty years. Each year, homeowners get to write off on their taxes many expenses that come along with homeownership, like property taxes and the interest on their mortgage. Over the years, homeowners grow equity and wealth through the appreciation of their property. Currently, the Chattanooga market is appreciating much quicker than average properties at 18% – meaning if you bought a $100,000 house last year, you could sell it for $118,000 this year.