With an average student loan debt near $27,000 per graduate, first-time home buyers are noticeably absent from the slow housing recovery. The days of a pregnant wife with a happy husband strolling into a new home and hanging a “sold” sign on the post are not faded, but have become obscured. First time home buyers face tighter lending restrictions and Wall Street investors that buy properties and flip them before offers can be made. Often these deals are done in cash, and the first timer can’t compete. But there are many reasons why you should consider buying your first home.
For those willing to do the research, and those who possess enough patience, there are still opportunities that you can find. Short sales and foreclosures offer fixable properties with low values that can be gradually improved as long term investments. It’s also important to know what you’re paying for, and scrutinize the terms of your loan. In today’s housing market, closing the deal on your first home takes patience, timing and a little bit of luck.
Form Comparable Lists
A list of comparable properties is crucial to determining what kind of offer you will need to make on a home. Once you have decided on an area, look for a variety of properties in that area to determine their property values. Real Estate search engines, like the MLS, or Zillow work well for this purpose. Much of this housing data is publicly available, you just need to compile it. For a comparable to be effective, it needs to be relative in size to the property you are interested in owning. Look for:
- Square footage
- Bedrooms and bathrooms
- Year built and remodeled if applicable
You should also look at price per square foot, and overall cost of the property. Then you take into consideration condition of the neighborhood and try to form a comparable value. It is an estimate, or a gauge, of what the overall property value in an area should be.
Determine Your Mortgage Payments
Determine what you can actually pay before you start your search for the best mortgage lenders. You should formulate your mortgage payments using a calculator that looks at the loan amount, length of loan, interest rate and monthly payments.
You will also need to determine your down payment. It’s a good idea to budget as much as 20% of the loan amount for your home into your down payment, but federal housing programs may offer loans that require a smaller down payment. Also remember that your home will have unexpected costs that arise, like a broken water heater or issues with the plumbing. You should be able to devote no more than 30% of your household income to housing payments so that you can save for these rainy days.
Clean Your Credit
You can request a free credit report each year that will look at the three major credit bureaus and give you an idea of your credit history. Unfortunately, the credit report housing lenders look at is different than those reports. The good news is that cleaning the negative marks on your credit report will most likely help improve your score over all. Your score will help secure the best possible mortgage rates.
Determine Cost of Insurance
Refer back to your list of comparables and punch some of those addresses into an insurance website. Just like your comparables, you can shop around with different companies to get an idea of what your home owner’s insurance might add to your budget each month. It also helps to call your own car insurance company to see if they can add a homeowner’s policy to your existing policy, which might save some money for you.
One of the last tips is to invest in your home. The average home owner will hold onto a first home for upwards of ten years. Improve the property in that time and sell it at an increase to put toward your next home.
See Also:
- 2 Types of Mortgage Insurance
- More House Hunting Tips For New Families
- Is Now the Time to Take Advantage of the Current Buyer’s Market in Real Estate?
Resources:
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