Are you looking at buying your very first home? This can be a very exciting time for you, but be sure to take your time and make the right choices. Buying a home can be quite complex and it should be done with careful consideration. After all, you might be living in this house for many years to come! It sure would be nice if you could enjoy it rather than stew about all the things you wish you would have done differently. So what are the top things you should do when purchasing a home?
1) Search Below Your Means – Many people, when interested in buying their first home, head to the bank and ask the simple question, “How much can I afford to borrow?” In asking this question, you are really asking the bank, “What is the absolute maximum amount of money that you are willing to lend me?” This is a very dangerous question because their answer is very likely at the top of your affordability. In other words, if they say you can borrow $200,000 and you borrow all of it, you will have to watch your budget very carefully each month in order to make that mortgage payment. Is that how you want to live your life for the next 30 years? I certainly wouldn’t. Instead of asking, “How much can I afford?” ask yourself what amount you would be comfortable paying each month and then work your way up from there. P.S. If you have a spouse and you both work, your “comfortable” number should really be able to be covered by just one of your incomes – do not factor in both of your incomes because life changes. It’s best to be safe rather than sorry!
2) Find a Fixer-Upper – I am a big fan of Dave Ramsey and I totally agree with his advice to find a fixer-upper property. There are often little nuances with various homes that turn off prospective buyers. These are things like holes in the wall, dirty carpet, an old roof, etc. Sure, these things might cost money to repair, but almost always you can the property for far less than the cost of the repair. If you can find a house with a great layout and exterior appeal, but a few problems on the inside, try to buy it at a bargain! After just a few short months you can bring the house to a value that is far greater than what you paid.
3) Secure a Low Interest Rate – An interest rate of 4.5% and 4.8% might seem relatively close, but when you calculate the total amount paid on your mortgage after the full term, this number makes a huge difference! Do your due diligence in order to make your mortgage more affordable – believe it or not, it could save you $10,000 or more!
4) Get an Inspection – Inspections can cost hundreds of dollars, so some people blow them off and just assume that the house is in good shape, but this can be one of the worst assumptions anyone can make. If you find out that your house has mold or termites after you buy it, you will most likely have thousands of dollars in repair (that is, if it is still repairable!). It would be much more wise to pay the money up-front for an inspection than to find problems with the house after you buy it.
If you follow these steps and find the house that is right for you, you will most likely be happy living there for a very long time. Best of luck to you!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.