Buying a home is obviously one of the most expensive purchases you will ever make and it is important for you to be aware of what you are getting yourself into. Knowing how much you have to spend and working the market carefully will benefit you in the long run. Getting in over your head is no place to be especially in the times of the pandemic and beyond. Inventory is slowly rebounding so while the market is hot you need to know when to walk away from a deal if the bidding gets too high or the terms are no longer to your liking. Here are some things first time homebuyers should keep in mind before they step into the real estate market.
Before you even tip a toe into the market you should first take an honest look at all your financial obligations as well as certain non essential expenditures that perhaps can be curtailed. You need to know exactly where every part of your paycheck is going and what that means to a bottom line. On average, and this varies depending on the type of debt you may carry, you should not spend more than 30% of your before tax income on your housing costs. If you find yourself spending too much on a house payment then you can find yourself in too deep and unable to set aside money for your future savings like your retirement and emergency savings. It's also important to note that just because you get approved for a certain amount for a mortgage DOES NOT mean that you should max that amount out. Know what you are comfortable with and stick to it. Although this might lead to you having to walk away from a home that you have fallen in love with it is not worth falling into financial issues because of it.
While you may want to leave everything on the table when it comes to the perfect offer you ultimately want to be able to hold some back. This may mean that you will have to save and or cut in certain areas in order to build up savings that can weather a down payment and other closing costs that take a huge chunk out of. If after you buy a house you are only left with the dredges of your checking account then you may find yourself in a pinch if your hot water tank decides to stop working the first few months of home ownership and you have to go into deeper debt to fix it. As a homeowner even the little things can add up so it's best to have a much larger nest egg to draw from once the deal is done.
The reason for such caution when it comes to the amount of money you plan for having and using for everything is because a lot of people do not have a conceptual realization of what it all entails. Hidden costs that you may never realize are just waiting to appear. While everyone has the basic knowledge of the down payment you may not realize that there are appraisals, credit checks, home inspection fees and other items that need to be paid for. Once you have possession then there are the moving costs, new furniture purchases, cleaning and the settling of any current housing that will also need to be dealt with. It is always best to prepare for the worst so that you can not be surprised by anything. Having a well seasoned real estate agent to consult with is key as well. They can advise you on what to expect and give a realistic outlook to base your savings on.
Being a first time home buyer is at times a tricky situation when it comes to the give and take of a real estate deal. Like we have said you have to know what you are capable of maintaining in order to not become house poor - a situation where most of your finances are caught up in your home leaving nothing left to live properly on or save. Keeping everything in sight and on budget at all times will help you make sure that you get a good deal, a proper home and a manageable life. If you are looking to get into the real estate market as a first time home buyer please check out our Offices and Agents page or the Contact Us page to find someone that is just ready to assist you in your endeavors. Good Luck!
