10 Things You Must Know When Buying Your First Home
Congratulations on making the decision to purchase your first home! Not only will you experience great perks from home ownership, such as equity and tax deductions, but you’ll also have a place of your own to retreat to every day. Before you buy, though, make sure you understand the basics of home ownership.
Otherwise you might end up purchasing a home that’s overpriced or that has significant structural problems that will require a lot of money to fix. To make sure you have the best possible experience, here are 10 things you must know when purchasing your first home.
1. A Home Sale is Final
With most sales, you can cancel your purchase within a certain period of time. This isn’t true for home sales, though. Once ownership of a house is transferred from one person to another and the closing documents are signed, the sale is final. You can’t simply return your home if you move in and discover structural damage that you didn’t notice during your walk-through. That’s why it’s so important to hire a reputable home inspector to conduct a thorough inspection of your home before you sign any paperwork. He or she will check for problems with the interior electrical system, insulation, structural components and more.
If significant problems are found during this inspection, you may want to look elsewhere unless the seller is willing to negotiate the price or make all specified repairs before you buy. If the seller agrees to make repairs, don’t just take his or her word for it. Make sure you have a skilled home inspector walk through the home again after the repairs are made to ensure they were done correctly and in accordance with your agreement.
2. It Can Take Months to Transfer Home Ownership
Once you find the house of your dreams, you’ll probably be eager to move in right away. However, it’s normal for transfer of home ownership to take one or two months after the seller accepts your offer. There are a lot of documents to be signed and legal processes to complete. You can use this time to give your landlord notice that you’re leaving and make arrangements with a moving company. Just don’t expect the transfer of the home to occur overnight.
3. There Are Multiple Ways to Find Your Dream Home
There are many ways to look for a new home, so don’t limit yourself to just one avenue. You can browse through home listings online or look through newspaper classifieds. You can also search directly on real estate agency websites or talk to a trusted broker about homes for sale in your preferred area. You can also take a more hands-on approach and simply drive the streets of your favorite neighborhoods in search of “For Sale” signs in the yards. One nice thing about online searches is that you can typically limit the search to fit your criteria. That way you won’t waste your time looking at homes you can’t afford or that are in an undesirable part of town.
4. Appliances May Not Be Included
When purchasing a home, keep in mind that appliances may not be included, even if they’re in the home during your walk-through. Don’t assume that a seller will leave anything behind, including wall-mounted electronics or any freestanding objects. Some sellers might even take their light fixtures with them when they move out. To avoid last-minute surprises, write down every appliance or item you want to keep when you make your offer. If the seller agrees to your offer, you can be sure the items you requested will remain in the home.
5. Prepare for Closing Costs
In addition to saving up to make a down payment on a home, you’ll also need to prepare to pay closing costs. Normally, closing costs equal up to five percent of the home’s selling price. So, if your home cost $200,000, you could pay up to $10,000 in closing costs. Depending on the type of mortgage you’re getting, you may be able to roll some or all of the closing costs into your mortgage. If this isn’t an option, you may be able to convince the seller to pay some of the closing costs in exchange for closing the sale quickly. This is often referred to as “seller’s concession,” but it usually only works if the seller is motivated to close the sale quickly.
6. Some Warranties May Be Provided for Free
There are many sellers who offer home warranties without charging you any extra money. Ask the seller if they are willing to offer any such programs before you sign your paperwork. These types of programs cover things like kitchen appliances, water heaters, HVAC systems and more for a period of time. Even if you’re moving into a brand-new home, it’s helpful to have the peace of mind these warranties provide. If the seller doesn’t offer complimentary warranties, you can purchase them separately as desired.
7. Pre-Approval May Help You Get the Home You Want
Getting pre-approved for a home loan may seem like an unnecessary waste of time, but there are some sellers who will only accept offers from pre-approved buyers. These types of sellers don’t want to waste their time on potential buyers who may not quality for a loan. To maximize your chance of a seller accepting your offer, request pre-approval as early in the process as possible. It will take you a little time up-front, but could save you time during the closing process and could give you a better chance of getting the home you want.
8. It’s Easy to Overestimate What You Can Afford
It’s easy to overestimate how much home you can comfortably afford if you don’t take all the potential costs into consideration. That’s why so many first-time buyers end up “house poor.” To avoid this, factor in all potential costs that come with buying a home. For example, if you’re moving to an area owned by a homeowner’s association, you’ll need to factor HOA fees into your budget. You’ll also need to consider expenses like property taxes and insurance.
In addition, take home maintenance costs into account. This can include new appliances, repairs, siding replacement, HVAC tune-ups, etc. Generally, the older your home is when you buy it, the more you’ll need to put aside for maintenance. Home ownership also comes with utility costs (water, power, gas) and trash disposal costs. You can minimize some of these expenses by cutting back on your power and gas usage, but you should still make sure you have room in your budget to cover these recurring bills.
Finally, if you plan to have someone take care of your yard or install professional landscaping, you’ll need to factor this into your overall home ownership cost as well. After making these calculations, you’ll be able to figure out how much you can afford to pay for your home and still be financially comfortable.
9. You Can Use Some Retirement Money for Your First Home
If you have an IRA, you may be unaware that it can help you purchase your first home. Regulations prohibit you from removing money from your retirement account early without a penalty. However, you are allowed to withdraw up to $10,000 from your existing IRA and put it toward your first home purchase without paying a penalty. This is a great way to come up with the money you need for your down payment. If your spouse also has an IRA account, he or she can take up to $10,000 from that account as well. Keep in mind that this is not a requirement, so if you’d rather keep your retirement savings where they are, you are free to do so.
10. Real Estate Agents Play an Important Role
Hiring a real estate agent isn’t imperative when buying a home, but it can be very helpful. This is especially true if you’re a first-time home buyer and don’t know what to expect. If you try to do it all on your own, you’re likely to become overwhelmed and may end up getting a less-than-fair deal on a home.
A real estate agent can help you navigate the competitive real estate market and find a home that fits within your preferences and budgetary restraints. He or she can also help you negotiate with sellers and submit offers that are likely to be accepted. Contrary to popular belief, the seller pays the commission for the real estate agent, not the buyer (unless a different arrangement is worked out up-front). It’s worth mentioning that the commission fees are already included in the property price the agent advertises.
Start Your Search
Whether you’re purchasing a home for the financial benefits or for the fulfillment that comes with owning and caring for your own space, now is a great time to buy. Interest rates are still low and loan terms are generous. Copper State Credit Union offers a convenient, easy-to-understand application process for first-time home buyers. Our friendly and knowledgeable representatives are standing by to help you choose the right loan for your situation. To begin your no-hassle pre-approval process, contact us today.
This article is intended to be a general resource only and is not intended to be nor does it constitute legal advice. Any recommendations are based on opinion only.
Rates, terms and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.