33% of homebuyers are first time homebuyers.
As a Realtor in Sanpete County, Utah, I see it all the time… Information Overload!! 80% of home buyers start their home search online, and many of those buyers are on the market for the first time. The vast amount of information available online can quickly lead to buyer confusion.
The good news is you don’t have to be stressed out as a first time home buyer. You just have to know where to look for the right information and find an agent that can help direct the process.
Here are some questions you should ask yourself when starting the home buying process.
1. Why do you want to buy a home?
This seems like it should be straightforward, but you would be surprised how many people can’t answer this question. Many go out and buy a home because they believe it is expected of them.
Write down why you want to buy, and keep that answer in the forefront of your mind while looking for a home. This will help you make necessary decisions throughout the process.
Main Reasons People Want to Become Homeowners
- Ownership: Instead of a landlord taking your hard earned money every month, you will pay your mortgage and slowly build equity in something you actually own.
- Equity and Appreciation: With exceptions, homes tend to increase in value, or appreciate. As you pay down your mortgage and your property value grows, you will build equity in your home. The national average increase in home value was 6.5% from 1972 to 2005, according to the Nation Association Of Realtors. Even from 2013 to 2014, home values rose on average 6.6%. 1
- Stabilized Housing Costs: Rents tend to increase from year to year, sometimes even from month to month. A fixed rate mortgage will lock in your housing payment for the term of your mortgage. Remember that items like insurance and property taxes may still rise.
- Freedom: When you buy a home, it is yours! Decorate it as you choose, expand it as you choose, and make it your own.
2. How can I be more prepared to be a homeowner?
You’re mentally prepared to take on one of the biggest purchases of your life, but how can you really get ready? Here are some steps to help make the home buying process go smoothly.
Items To Prepare Before Becoming a Homeowner
- Credit Rating: You should monitor your credit rating. Fix errors and improve your score when possible, so you can take advantage of better mortgage programs and lower interest rates.
- Current Monthly Budget: Chart out your monthly expenses to see what you can actually pay for. Remember, just because you can get a big loan doesn’t mean you can afford it.
- Ongoing Costs of Homeownership Budget: Make sure your monthly budget has room for some or all of the following:
- HOA costs
- Homeowner insurance
- Flood insurance
- Utility costs
- Property taxes
- Mortgage insurance
- Home maintenance costs
- Anything else you might need for your new home
Don’t just budget for the purchase, budget for every month after the purchase.
- Documentation: During the home buying process, you will need to provide tons of documentation. Gather the following items:
- Tax returns for the past two years
- Pay stubs
- Bank statements
- Investment statements
- Credit reports
- Down payment information
- Pre-approval and Pre-qualification: Learn what it means to get pre-approved and pre-qualified, and decide which is right for you.
- Home Buying Binder: Get a binder and place all homebuying correspondence, information and paperwork together to stay organized.
- This Article: Answer the other 2 ½ questions presented here… :P
3. What do I need and want in a home and neighborhood, and how will these needs and wants change over time?
Chances are that you may have to make some sacrifices to your wants or needs when purchasing your first home. So I suggest creating a Need vs. Want list.
A family of 4 may need only 3 bedrooms, but they may want a 4th bedroom to accommodate guests. Prioritize these needs and wants so you are aware which features, or missing features, are deal breakers. This will save you time as you sift through available homes on the market.
Don’t forget to consider your future needs when you make this list. If you plan to grow a large garden or expect to expand your family, make sure you take those things into account. Your new home should be a place that fits your current needs and growing needs.
Location is one of the main factors that drives people to buy one home or another. It makes sense, because you can remodel and expand a home, but moving it across town is usually out of the question.
Use your Realtor to gain insights into neighborhoods and communities. Consider your work commute and drive it during rush hour to try it out. Even the perfect home can’t really be your dream home if the location disrupts all the other parts of your life.
3 ½ . Where can I find quality information on real estate?
Finding quality information online has always been a challenge. Anyone with a computer and a little know how can blog or post information about real estate. Make sure to validate the information you find online. Not everyone on the Internet has your best interest at heart. Shocking, I know!
Here are a few great places to gather information about mortgages and real estate.
Of course, there are many more trustworthy information sources online for real estate information. Just make sure to vet them first.
As a real estate agent, I serve many first time homebuyers. I hope these 3 1/2 questions will help clarify your decisions and lead you down the road to rewarding home ownership.
Do you have any thoughts on preparing to become a first time home buyer? I would love to hear from you in the comments.
12014 Market Report