Looking to buy a home? It's a decision that comes with excitement, dreams, and a sense of accomplishment. However, it can also be an overwhelming process, even if it isn’t your first time. From understanding the nuances of mortgages to the local real estate market, numerous factors must be considered before taking the plunge into purchasing.
Whether you're a seasoned homebuyer or a novice in the real estate realm, this blog will delve into the essential top five things you need to know for homebuying made easy. We'll provide valuable insights and practical advice to help you make informed decisions throughout your homebuying journey.
So, if you're ready to embark on your first homebuying adventure or looking to brush up on your real estate knowledge, keep reading to discover the essential things you need to know when buying a home.
The advantages for first-time homebuyers
Failing to research or understand the broad definition and the advantages offered to first-time buyers is one of the top homebuyer mistakes to avoid. The term first-time homebuyer confuses many people seeking to buy. While the term refers to anyone who is purchasing a home for the first time, there are some nuances. You qualify for the advantages reserved for first-time buyers if:
- You have not owned a primary residence for three consecutive years
- You have never owned a primary residence
- You are a single parent who owned a home with an ex-spouse
The benefits for first-time homebuyers include assistance programs and mortgage loan options such as Federal Housing Administration (FHA) loans or Veterans Affairs (VA) loans. Other benefits include tax benefits and some credits like mortgage interest deductions. Your agent can help identify if you qualify and direct you to the resources necessary if you do.
Understand the difference between pre-approval and pre-qualification
Another common mistake homebuyers make is confusing pre-approval with pre-qualification. While there are similarities, there are distinct differences that can trip you up if you aren't careful.
The first step in the homebuying process is pre-qualification. A lender performs this and will determine how much you are eligible to borrow. The assessment will include your income, debts, and assets. Pre-qualification does not guarantee loan approval from the lender but provides an initial estimate and analysis.
Pre-approval, on the other hand, is a comprehensive evaluation of your finances conducted by the lender. This is the step where mortgage applications are completed. During this process, you will provide bank statements, income verification, tax returns, and supporting documents related to employment history.
One critical thing to know when it comes to what not to do before buying a house relates to credit and purchases. When you are in the pre-qualification and pre-approval stages, you must not make any other large transactions during that time. A hefty purchase can scare lenders away from approving your loan and delay your approval.
Appropriating enough funds
One of the worst things that can happen during the homebuying process is failing to budget appropriately. Many homebuyers fall into this trap simply because they are not aware of everything they should budget for ahead of time. When planning your budget, don't forget these costs when buying a home:
- Down payments
- Closing costs
- Inspections and repairs
- Moving expenses
Costs can add up quickly when buying a home. It's critical to budget accordingly and to prepare a budget ahead of time. The two biggest pitfalls are down payments and closing costs.
Many homebuyers assume they need a 20% down payment, but this isn't true. There is no rule that requires 20% upfront. On average, most homebuyers make down payments that range from 6% to 17%. The amount will also depend on the type of mortgage loan you are using.
The average closing costs range from 3% to 6% of the total loan amount but vary by state. Pennsylvania's average closing costs are $10,634, but this amount will vary. Your agent will be able to provide a cost estimate so you can budget accordingly.
Research the local market
Researching the local market is a crucial step when buying a home. It provides valuable insights into the current trends, pricing, and inventory in the area you're considering. By understanding the local market, you can make informed decisions about the type of property you want, negotiate effectively, and ensure that you're making a sound investment. Some key aspects to research are pricing trends and inventory levels.
For pricing trends, examine the recent sales data for similar homes in the area. Look for patterns in pricing trends, such as whether the prices are rising or falling and if there are any seasonal fluctuations. This information will tell you whether it is a buyer's or seller's market and help you determine an offer price.
When it comes to the supply and demand of housing, look at the available inventory. Low inventory often means high demand, which can affect pricing and increase competition. However, higher levels of inventory often lend buyers more negotiating power. Understanding the supply and demand will help you understand the local market.
Other aspects of research include the neighborhood. Look for information on amenities, school districts, and more. You'll also want to investigate any planned or ongoing development projects in the area. Knowing the development plans can give you insights into how the neighborhood might evolve and impact property values in the future.
Work with the right agent
Finally, the fifth most important thing to know is how important finding the right agent is in the homebuying process. Real estate transactions hinge on the relationship between an agent, the buyer, and the seller. Finding the right real estate agent is about securing the relationship and can significantly impact your homebuying experience. A knowledgeable and trustworthy agent will provide invaluable guidance, expertise, and support while keeping your best interest in mind.
To start your homebuying journey with the right agent, reach out to Cary Simons. Cary is a top agent dedicated to providing her intimate knowledge of the real estate market to you.
