4 questions for first-time homebuyers
Buying your first house is a major life event, so naturally there are plenty of resources available to help you through the process. Most provide helpful, general information and are great jumping-off points, but everyone’s circumstances are unique. When preparing to buy your first home, do the research, of course. Then ask yourself the following questions to help you decide what’s right for you.
How much can I really afford?
Before you start looking at houses seriously, you’ll want to get prequalified for a mortgage. Or at least determine how much you can afford to borrow using a mortgage qualifier calculator. That will help you focus your search on an appropriate price range. Keep in mind, though, that being prequalified for a certain amount doesn’t mean you can or should buy a house for that price. If it’s your dream house and you’re expecting your income to increase, you may be comfortable cutting back on extras for a while. At a minimum, make sure you’ll have enough to cover your bills, maintain an emergency fund—which is more important than ever when you own a home—and your retirement fund contributions.
What does it cost to own a home?
Even if your monthly mortgage payments end up being similar to your current rent, you’ll need to factor in moving expenses, a down payment, and closing costs, unless you qualify for a no closing cost mortgage.
Plus, you’ll have new expenses when you’re a homeowner, like property taxes, insurance, repairs, maintenance, and sometimes even garbage pickup and water usage. There’s a lot to consider, but online budget calculators make it easier. What a calculator can’t tell you, though, is how much of a cushion you need to be comfortable.
What are my must-haves?
You probably have a wish list of what you’d like in a house. Things like an attached garage, a certain number of bedrooms, and a good school district, for example. Some of your preferences are just that—preferences. Others might be non-negotiable mandatories. How much are you willing to pay for the must-haves? Not just in terms of money, but in the extent of your search and negotiations. In a competitive seller’s market, it can be intense. Try to discern what’s really important—and keep an open mind so your wish list doesn’t limit your opportunities.
What else is going on in my life?
For both financial and emotional reasons, it’s a good idea to avoid any other major life events or changes when you’re in the process of buying a new house. For one, even if you’re prequalified for a mortgage, your lender is required to confirm your credit, account balances, and employment again at the end of the process. You don’t want to do anything that could alter your debt-to-income ratio, like switch jobs, spend down your savings, or rack up credit card charges. Second, while homebuying is exciting, it can also be complicated. It helps when the other aspects of your life are relatively stable—and when you partner with home loan experts you trust.