8 Things Every First-Time Homebuyer Needs To Know
Being a first-time home buyer is exciting, yet oftentimes stressful too. Deciding to buy a house is probably one of the most significant financial decisions you’ll ever make in your life. From figuring out how much house you can afford, and why you should involve a realtor, there is a lot to consider.
To make becoming a first-time home buyer a little less stressful for you, here are 10 things you should know!
1. Use a Trusted Realtor
I’m not just saying this because I am a real estate agent. Anyways, did you know that commission actually goes to the seller’s agent, not the buyer’s? From finding the perfect neighborhood that you feel safe in, negotiating price, to helping you keep within your budget, or navigate home inspections, using a savvy realtor who works for you can help guide you through the entire home buying process,
2. Don’t Forget that a House Purchase Involves a Contract
When you buy a house there are stacks and stacks of papers to read and sign. A lot of people misconstrue these papers to be “standard” home buying contracts with no wiggle room for negotation. That actually is false. Contracts are meant to be negotiated. You would never just sign a job offer without reading through the terms and negotiating your salary. This is the same type of situation. You are not required to sign a standard agreement. If you want more time to review an inspection or waive a radon test, work that into the terms of your agreement. This is when a savvy realtor can really help (see #1).
3. Consider your Long Term Plans
Buying a home is a big and oftentimes long-term investment. Ensure that you aren’t necessarily buying for the life you have today, but in the future. You should consider where you see yourself in the next 5-10 years and purchase a home with that long-term plan in mind. If you aren’t sure that your house will be the house for you in the next 2-5 years, you may want to keep on looking.
4. Look Beyond the Paint
More than likely your dream house has a room or two that you’re already thinking about changing. While it is fairly inexpensive to fix cosmetic issues, like paint or a light fixture, making changes to kitchens or bathrooms can get pretty expensive. People tend to focus on the cost of cabinets, appliances, and counters, but sometimes forget about the cost of labor which can double or even triple the cost. You shouldn’t discount that fixer upper house you’ve had your eyes on the past few months, but you should factor in those cost when determining whether you can afford to buy a house.
5. Buy a Home you Know you can Afford
This can be extremely different from the price that your mortgage company believes you can afford. Evaluate your finances and determine if you will be able to maintain or increase your income for the next 3-5 years. Some lenders suggest that you can afford mortgage payments totaling 1/3 of your gross income; however, others suggest you can afford closer to 28% for housing related costs. There are so many factors to consider, including projected income, interest rates, property tax, real estate market, etc. Be sure to ask questions and to trust your gut with what you can afford, not your mortgage company.
6. Don’t Fixate on the Home Listing Price
The purchase price is only one aspect of owning a house, you need to be sure to consider all of the costs associated with your potential home, including: cost of insurance, homeowner association fees, real estate taxes, etc. In the Seattle/Eastside area, these costs can really add up! Home improvements and ongoing maintenance also cost money. It’s always best to ask questions about upkeep for extra home features like swimming pools, heating, cooling, etc.
7. Don’t Get Carried Away By Home Mortgage Interest Deductions
According to Forbes.com, “Many taxpayers are tempted to buy more house than they can afford by figuring that they’ll save enough with the home mortgage interest deduction to make up for it. The mortgage interest deduction is only deductible if you itemize on your Schedule A: only about 1/3 of taxpayers claim the itemized deduction. You itemize if your deductions exceed the standard deduction: for 2015, the standard deduction rates are $12,600 for married taxpayers filing jointly and $6,300 for individual taxpayers (those rates stay put for 2016). Assuming that you do itemize, remember that your out of pocket will still be more than your tax savings (if you’re in a 28% bracket, paying $5,000 more in interest will only “save” you $1,400 in taxes). And you can’t count on the same level of savings forever: mathematically, the longer you own your house, the less you will owe in interest. That’s good for building your equity but it means a smaller deduction come tax time.”
8. You Don’t HAVE to Buy a House
There is no rule that says you need to purchase your first home by the age of 30. Buying a home is a very big decision and should not be taken lightly. While it can be a sound financial decision, it’s not for everyone. There is so many factors to consider, including the housing market, interest rates, timing and your future plans.
Ready to Buy Your First Home in Kirkland, Bellevue, Redmond, or Sammamish, Washington?
If you want to work with a real estate agent that you can trust and feel comfortable with, contact me to set up an appointment. I’d love to help you find the house of your dreams that you can feel good about and that you can afford!