In the transition to adulthood, there may be no bigger milestone than the day you sign on the dotted line to purchase your first home. For many, it’s a rite of passage and a proud accomplishment to literally hold the keys to the American Dream. But before you cruise the open houses and begin your hunt, make sure you’re up for the task of buying and committing to home sweet home, both financially and emotionally. To help assess your readiness for homeownership, consider these tips gathered from some of the top real estate and financial experts:
1. Reality check the cost of homeownership.
Go in with eyes wide open by having a complete picture of the costs associated with buying and owning a home. This includes everything from inspections to closing costs, realtor commissions to renovations and, not to mention your ongoing mortgage, taxes, and maintenance costs. Be sure to budget for all of these expenses before you start looking so you have a clear picture of what you can afford before you fall in love with your dream home.
“You will need to have a decent amount of money that you need to use during the process and for closing costs…you will need to hire an attorney, a home inspector, and mortgage lender.” – Cornelius Camp
2. Determine what you can really afford.
Next, make sure you’re financially ready to take on all of the costs of homeownership. This means getting a detailed picture of your financial situation including assets, income, expenses, cash flow, debt. You’ll also need to know your credit score because it will factor into what kind of loan and interest rate you can get.
Qualify yourself. By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly. – Shevna Steiner, BankRate
3. Get to know your mortgage lenders.
Shopping around last minute for a mortgage can put you in a defensive position. Take the initiative to start building relationships with lenders early, so you have time to do your homework and get pre-approved before you start house hunting. When comparing options, be sure you understand all of the fees involved with each lender.
“Because lenders are eager for your business, some will even offer a cash incentive for going with them, such as $1,500 back to you at closing. In fact, if one lender is offering cash back, but another one isn’t, ask the lender who’s holding out—he may change his tune if it means earning your business”. – Kate Ashford, LearnVest
4. Make sure the timing is right.
It’s difficult to time the housing market or the stock market for that matter. Instead, think seriously about how long you plan to stay in your home. Home ownership can have a number of financial advantages over renting but only if you plan to stay in your home for a number of years. Otherwise, you’ll likely take a hit from closing costs and potentially a market adjustment that doesn’t work in your favor.
“Make sure you’re ready to buy, both emotionally and financially. If you expect to relocate in a few years, this may not be the right time for you to buy”. – Teresa Mears, USNews
5. Be ready to negotiate.
Come prepared for the negotiating process with your real estate agent by doing your research and knowing your priorities and limits. When you find a home you want, use tools like Redfin, Trulia, and public records to understand the neighborhood, history of the home and the seller. Be ready to move quickly, but also be prepared to walk away. If you’re buying in a home where transactions are known to move swiftly, it may feel like you’re not in control. So get ready to buckle down and stay focused on what’s most important to you. If you don’t ask, you won’t get it.
“Paying the asking price doesn’t mean you’re overpaying. A smart seller needs professional advice when listing their home. That’s why you should focus less on getting a “deal” and more on getting a grip on what you feel is fair market value. If the asking price is on par with what you expected, it’s A-OK to offer that. – PureWow
Do you have go-to resources that have helped you prepare for homeownership? Share them with us in the comments below or connect with us on Twitter!
The materials in this article are provided for informational purposes only and do not constitute financial advice.