First-time homebuyers usually have a raft of questions about buying a home. The recent changes in the real estate and mortgage markets have probably created even more questions. If you’re planning on buying a home in the near future, here are a few questions that might help you decide whether you’re ready to buy a home.
1. Is this a good time to buy?
There’s no single answer to this question, but if you’re thinking of buying a home consider this: Falling or steady housing prices in many areas of the country mean it just may be a buyers’ market where you live. In a buyer’s market you’ll have more leverage when buying a home, with sellers motivated to do what it takes to seal the deal. That could mean everything from free extras on a new home to big price cuts, special allowances and seller-paid closing costs on an existing home.
2. How can I avoid paying too much for a home?
A good real estate professional is your ace in the hole when you’re thinking of buying a home. A REALTOR® can help you by researching the asking price and sales price of comparable homes in the neighborhood. Home prices are an ever-changing formula, so the more recent the comparable sales, the better. It’s also important not to let your emotions get the best of you when you’re putting in an offer on a home. Pay attention to the comparable sales numbers and know your limits to avoid paying too much for a home.
3. Is it hard to qualify for a loan as a first-time home buyer?
Qualifying for a loan – and for a good interest rate – has become a bit more challenging in today’s tight credit market. Improve your chances of qualifying for the best interest rate by keeping your credit record clean. That means paying your bills on time, especially loans and credit cards. Don’t overextend yourself financially when you’re buying a home. It also helps to be able to document your income and assets to prove to a lender you’re a good risk.
4. How can I keep my monthly mortgage payments within reason?
If you save enough money to make a 20 percent down payment when buying a home, you’ll save in two major ways. One, that down payment can help you get a lower interest rate. Two, you won’t have to buy Private Mortgage Insurance, or PMI, which can cost thousands of dollars per year.
You also need to make sure you’re buying a home you can afford. That might sound obvious, but it can be difficult to draw the line between what you can actually afford and the home you want. Use our Home Affordability Calculator to get an idea of what you can afford. And remember to evaluate your budget to make sure you can truly afford to write that check every month.
5. What will it really cost me to buy a home?
You might borrow $200,000 to buy a home, but your true home ownership costs will amount to more than your monthly principal and interest payment. You’ll also have to pay property taxes and homeowner’s insurance and perhaps private mortgage insurance if you put down less than a 20 percent down payment. You’ll likely get some of the interest back when you file your federal taxes, but you’re on your own for the rest.