5 Steps to Prepare
First Time Home Buyers
First time home buyers must focus on preparation and education before they begin their home buying process. Your home buying experience will be determined by how informed you are as a first time home buyer. The more you educate and prepare yourself the smoother the process will flow. In contrast, jumping in without preparing and learning will lead to possible frustration, mistakes and defeat...but, if you keep reading that won't happen to you!
1. DECIDE HOW MUCH HOME YOU CAN AFFORD.
Generally, you can afford a home equal in value between 2 and 3 times your income.
For example: If your salary is $30,000 a year you may be approved to purchase a home valued around $60,000 (2x’s your income) or $90,000 (3x’s your income). As a first time home buyer remember this important fact: this is your first home. You will be able to upgrade in years to come. Purchase a home that you can comfortable afford. Give yourself the opportunity to absorb the responsibilities of homeownership on a smaller, more affordable scale for your first home.
2. DEVELOP A WISH LIST OF WHAT YOU'D LIKE YOUR HOME TO HAVE.
It's easy to become super excited when beginning the home-buying process. It's easy to think that you "must" have everything in your first home. This is common for a lot of first time home buyers, because they want to achieve their "dream home" with the purchase of their first home.
However, that is not usually the case when purchasing a home for the first time. Write down a complete list of home features you admire. Then prioritize the features on your list from most important to least important.
For example: Number of bedrooms, bathrooms, fireplace, hardwood floors, garage, and/or fenced backyard. For more helpful and fun ideas visit New Home "Wish List."
3. SELECT 3 to 4 NEIGHBORHOODS YOU'D LIKE TO LIVE IN.
First time home buyers may easily become mesmerized by a particular home and forget to assess the location of the home. Consider items such as schools, recreational facilities, shopping, area expansion plans, re-sale value and safety...safety being a top priority!
Remember...LOCATION! LOCATION! LOCATION!
4. DETERMINE IF YOU HAVE ENOUGH MONEY SAVED TO COVER A POSSIBLE DOWN PAYMENT AND CLOSING COSTS.
For example: You should consider opening a “Housing Savings Account” where you commit to saving a certain amount each month or per pay period. Another way to kick off your savings is to set aside a large portion of your income tax refund. Also, keep spending during Christmas under control.
If you have children involve them in the family home buying process by teaching them the importance of saving for your new home. Explain to them that "cutting back" on buying all the latest toys and electronics will help to achieve the "family goal." You will be surprised by their effort and support of your parental decision!
5. START SAVING FOR YOUR CLOSING COSTS. CLOSING COSTS COULD AVERAGE BETWEEN 2% to 7% OF THE PURCHASE PRICE OF THE HOME.
For example: If the purchase price of your home is $100,000 dollars then 2% of ($100k) = $2,000 in closing costs and 7% of ($100k) = $7,000 in closing costs. Most sellers will contribute a percentage toward paying your closing costs. However, until you submit an accepted contract you won't know how much (if any) will be contributed. Therefore, be prepared by saving now!
YOUR HOMEWORK ASSIGNMENT:
Take out a notepad and begin to write down your POA - "Plan of Action." Decide how much you can afford (on monthly payments), what areas you like and why, how much you can realistically save each month...and don't forget your wish list!
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