Tuesday, December 7, 2010

First Time Buyers: How to Shop for your First Home

Great article over at AOL Real Estate on tips for buying your first home. There's more to think about than square footage when you're debating about moving into a home, especially in this market. Here's a good gameplan to follow.

It's tempting to just go out and start shopping. After all, that's the ultimate goal and the most fun part. But doing your homework first will pay off in less stress and more savings. If you're house-hunting, whether for tax reasons, more space or just for the chance to have your own washer and dryer, here are tips to get you started.

1. Know how much you can afford
This should be the first step in buying a house so you don't waste your time, or a real estate agent's, by looking at homes that you can't afford a mortgage on. The Fitzsimmonses visited a real estate broker who helped them determine how much of a loan they would qualify for, based on their income and credit. They also factored in property taxes, maintenance, utilities, insurance and possible homeowner-association dues. They totaled those expected costs and set up an experiment: After paying the rent on their apartment, they set aside money equaling the difference between their rent and the projected cost of homeownership. They did this for a few months so they could get used to making the payments. A loan calculator will help figure out how much a home loan will be.
2. How long will you stay in the home?
The longer you live in a home, the better the savings because you're spreading out the upfront costs of buying a house. They include a real estate agent's fee, closing costs, inspection fees and loan fees -- which can add up to 10 percent of the sale price, or approximately 18 months of rent.

3. Get a loan
Getting preapproved for a home loan helps make buying a home faster and easier, especially if there are multiple offers on a home. Your mortgage lender or broker should be able to give you an estimate, down to the penny, of how much money you'll need in closing costs. Then you'll know how much of your savings to set aside for a down payment, which will help determine how much your loan -- and the monthly mortgage -- will be. Putting down 20 percent will eliminate the need for mortgage insurance, although your lender or broker might be able to find loans at good rates that don't require 20 percent down. This is where it really pays to shop around for the best loan rate and terms.
4. Know the market
After determining where your finances stand, the fun part begins in finding out what you can afford and where you want to buy a house . Research neighborhoods that interest you and find out the median price of homes there. You can research homes on websites such as AOL Real Estate, Zillow, Realtor.com, Trulia.com or others you trust. Finding homes similar to the kind you want, and in the same neighborhood, will give you an idea of how fair the price is when you are ready to buy;
5. Shop around
Every house buy requires sacrifices, and you won't get everything you want. There are many factors to consider, such as how much room you need. Does it have to be a single-family home or will a condo work? Is it near transportation, good schools, parks, shopping and your other essentials? Does the home have the amenities you want, such as a fireplace, dining room, backyard, pool or deck?

Find a real estate agent to represent you, or if you're brave and want to do it on your own, go out and shop on your own. Either way, stick to these five steps and you should be fine.

Buying a house, whether your first home or severl down the line, is one of the most stressful and expensive transactions you'll ever undertake. But if you do your homework and prepare for it with the above steps -- figuring out how much you can afford, how long you'll stay, getting a loan, studying the local market, and shopping for a house -- it should be a lot easier.


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