As a first time home buyer, there are things that are important to your successful ownership of your first home. The most important things that will make you successful in homeownership understand your market, understanding your mortgage, and knowing what you can and cannot handle.
Why is understanding your market important? Understanding your market is important because it is important to understand your leverage. By leverage, I mean, knowing whether it is a buyer’s market or a seller’s market. Knowing the difference can mean money in your pocket or money left on the table. Let’s examine.
In a buyer’s market, the buyer must be aware that being in a buyer’s market doesn’t make the buyer’s job any easier. It just gives the buyer more flexibility. Remember in a buyer’s market, there may be several buyers for one property or only one buyer for a property. If there are no other buyers for a property by virtue of the length of time the property has been on the market then a low offer may come in to the seller. Sorry sellers. However, sellers that do not mean that you have to give your properties away, but it may mean that you may have to settle for less than you anticipated selling your home.
Another thing that makes a buyer’s market advantageous to the buyer and not to the seller is that there are a lot of homes to choice from that may meet the buyer’s criteria.
In a seller’s market, on the other hand, the seller has the upper hand. The seller can price their home significantly above market value and negotiate the purchase price to exact what the seller wants the purchase price to be. Sorry buyers. If the buyer really wants a home in a seller’s market, the buyer must succumb to the seller’s terms in order to get the home. As a matter of fact, in a seller’s market the inventory of homes for sale that may meet the buyer’s criteria are fewer.
Why do you need to know what you want in your home? It is important in a word to eliminate or limit competition. If the buyer knows what they desire in their new home sooner in the buying process they can narrow their search criteria and bid on the property of choice instead of witness the home being purchase by someone else. In addition, only you as the buyer know exact what features you want in your new home. You, as the buyer know if your family needs three or four bedrooms one or two bathrooms, but more importantly you know what you can afford.
Why am I talking about “what you can afford?” Well, the reason is that your pre-approval letter has a different meaning than you think. The pre-approval is determine by your income to debt ratio true enough; however, are you aware that all your debt is not considered? What debt you ask? The debt that I am referring to is the light bill, water bill, phone bill, grocery bill, cable bill, clothing bill, etc. And that may be more depending on where you live.
Now the latter statements puts the pre-approval letter into a new prospect doesn't it? Don't get discourage. Just do your homework. Buy where you are already comfortable and be patience. With the present market being a buyer's market, you will find a home that is in that comfortable range in no time. For instance, if you can enjoy life and drive the car you want, eat out when you want at $800.00 in rent, then look for a home where the mortgage payment with principal, interest, taxes, and homeowner’s insurance is at or near $800.00.
Next, you must determine what type of loan you have an adjustable rate, a fixed rate. The difference is that the adjustable rate will do what adjust and a lot of time it is not down, but up. If you choice the adjustable rate, find out what the maximum rate is and determine whether you can afford the adjustment. The mortgage and your realtor can show the difference in payment.
The fixed rate is just that fix. The rate will stay the same for the life of the loan.
Lastly, know what you can handle includes not only the mortgage payment, but the now new responsible of maintenance of the property. Therefore, I recommend having an inspection of the home to make sure you did not bite off more than you want to chew. The home inspection will tell you the condition of the home to include the condition of the roof, the condition of the plumbing, condition of the electric, etc. With the home inspection, you will get a detail report of the condition of the home, and it may include all items that may need deferred maintenance.
Deferred maintenance is important because those repairs can go before or after projected time range that the inspector gives, so it is important to be prepared financially. Because all repairs first time home buyer is on you not a landlord.
Do not get me wrong buying a home is a happy and great experience, but it can turn into disaster if you are not prepare, so I hope this helps.
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