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Tips for a First Time Home Buyer

Unless you’ve been living under a rock for the last couple of years, you know that there’s a glut of housing on the market right now.  With so many foreclosures, bank-owned properties and motivated/distressed sellers flooding the market and keeping prices low (sometimes fire-sale low), it’s a buyer’s market for the first time home buyer.  No doubt there are all sorts of incentives out there, in terms of first time home buyer programs and first time home buyer tax credits.  But it’s a complicated landscape with all sorts of emotional and financial issues coming into play.  So here are a few things to consider:

  • Think about what your real housing needs are.  What’s the neighborhood like?  Is it close to schools, shopping, and major thoroughfares?  What are the crime statistics for the area?  What kind of house do you really need (size, features, conveniences)?  “Over-buying” a house where you wind up too leveraged on mortgage payments is a big mistake. You could wind up with a large house that’s under-furnished and it winds up being a cold and uninviting place.  Do you want a new house, or an existing house?  If you do a drive-by on a place and you’re sincerely interested, don’t be afraid to knock on doors and talk to your prospective neighbors to get a feel for the street and block.
  • What can you really afford?  Lay out a budget that takes everything into account; food, entertainment, gas, kids, bills, everything.  Draw a hard line between your wants and your needs; will you get enough use out of a Jet-Ski to justify the purchase price, or would you be just as happy renting one at the lake?  Not making these tough calls is one of the biggest mistakes first time home buyers can make.  Think long and hard about homeowner's insurance and what sort of mortgage payment you can take on and how much you can muster for a down payment.
  • Shop around for a mortgage.  Once you’ve got a handle on your budget and how much house you can afford (and checked into your credit score), start looking for a mortgage.  Online resources like Ditech and LendingTree can help a great deal on this.  The current disarray in the banking and mortgage sectors have changed the playing field in this area; shop around and compare!  Especially if your credit scores are good, many are willing to work with a first time home buyer.
  • Find a real estate agent.  Again, don’t just go with the first agent who comes along.  Make sure that he’s willing to work with you, rather than just fishing for a commission.  Look into his prior track record, and by all means get references from previous buyers he’s worked with.  First time home buyers might be intimidated at this step…don’t be!  The real estate agent is there to work for you.  Go with your intuition: if you don’t get a good gut feeling from the one you talk to, move on.
  • Find a home inspector.  Get the ball rolling on this before you find a prospective house.  Use the same criteria you would for a real estate agent…and don’t skimp!  First time home buyers sometimes “fall in love” with a house and overlook problems it might have.  An experienced inspector can find problems that you may not be able to see, problems that may affect the livability, resale value or even the safety of your new home.  Service Magic can be a good resource to help you find a home inspector/troubleshooter.
  • Look into first time home buyer programs.  HUD, FHA and various lenders offer first-time home buyer programs that can make the prospect a bit less daunting.  It’s in your best interest to find out about them.
  • Look into first time home buyer tax credits.   The IRS has long offered first time home buyer tax credits (often bundled in with other benefits in first time home buyer programs). Talk to a tax professional about how you may come out ahead on this.  

 

 

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