Finding a home for the first time can be a very confusing and overwhelming process. It is important to make sure you understand the process to avoid making any bad decisions. The good news is that there are a wealth of resources to help first time home buyers such as yourself.
The average inexperienced or first time home buyer looks at ten homes on average before making a decision. It is important to explore your options, and make sure you are truly happy with your purchase decision, and will be for an extended period of time.
Below, we will cover what you need to keep in mind when thinking of buying a home. In addition, we will address a few of the most commonly asked questions from first-time home buyers.
What are the advantages of buying over renting?
A home can be thought of as a long-term investment. However, when you rent a home the money that you pay every month is gone forever. When purchasing a home the money that you spend on your mortgage can be deducted from your taxes, including your federal income taxes and even your state taxes in some cases. This will actually end up saving you a lot of money every month.
Also, the taxes you’ll be paying as a homeowner can be deducted as well. If you do ever decide to sell your home, the value should increase over the years which could allow you to make a nice profit.
When you do decide to buy a home, make sure you do your research for the price of other homes in the area. This will give you a good idea of what your home should be priced at as well as the price you should be offering.
Why should I use a certified real estate agent?
A certified real estate agent can greatly help you during the buying process and make it much less stressful and overwhelming. There are so many minute details of buying a home that are very easy to overlook. A real estate professional will both educate you on the process and help you get the best deal possible.
When choosing between a real estate agent and broker, the choice might be a little confusing. A real estate broker has the ability to work for himself and for other brokers, while a real estate agent must work under the wing of a real estate broker. Brokers can be more qualified than salespeople; however, most brokers engage with more managerial type work than directly interfacing with clients. Any certified real estate agent will be qualified to assist you, though it does help to interview a few candidates in order to find the highest qualified agent that is right for you.
A real estate professional can help you with many steps of the process, including:
- Help in locating properties to suit your needs
- Help arrange home inspections
- The writing of required legal documents
- Assist with obtaining the necessary financing
In the end, deciding to work with a real estate professional will make the home buying process less stressful and actually enjoyable.
What do I need to know about my mortgage?
Your mortgage is going to be your main monthly payment. Essentially, your mortgage is a loan that you’ll use to finance the purchase of your home. The main elements of a mortgage include the principal, interest, insurance and taxes.
The principle is the amount of money that you borrowed in order to buy your home. The down payment you make takes away from the total amount of money you’ll have to pay back. The interest rate depends on the amount of money you borrowed and the percentage rate that your lender is charging. The interest rate and the principle make up most of what you’ll be paying every month.
Your property taxes are set by the community you reside in and are based upon a percentage of the value of your home. Lastly, home insurance covers any damages that might occur against your home, including losses from fire, bad weather, or theft.
The three main types of loans you’ll be seeing are conventional, FHA and ARM. Fixed rate means you’ll be paying the same interest rate for a certain amount of time, usually 30 years. FHA are insured by the government and have less requirements to qualify for. Lastly, ARM loans have a lower starting interest rate and increase over time, with the principal being paid in a lump sum at the end of the loans terms.
What costs are involved in buying a house?
When buying a home there are a few varying costs involved that you’ll want to be aware of. There are three main costs, including earnest money, the down payment, and closing costs. The earnest money is the deposit that you make when you submit an offer on a home. The down payment is a certain percentage of the home’s total cost that you will have to pay when it goes into settlement. Lastly, the closing costs are the final costs that are grouped with processing the paperwork to finalize your home buying.
Usually, your earnest money will be put into an escrow account and applied towards your other costs, if the deal ends up going through. It is always beneficial to keep in mind that the more money you can put towards your downpayment upfront, the lower the costs will be on your monthly mortgage in the long run.
We hope this article has been valuable and you have a better understanding of how the home buying process works, and how to make the best decision when it comes to buying your first home.
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Dallas Hunter Clounch
This post was written by Dallas Hunter Clounch, a licensed real estate agent and co-founder of Local City Agents. Local City Agents is a professional network of real estate experts based in the Phoenix, Arizona metro-area.