Becoming a homeowner for the first time is an exciting and stressful process. That’s why it’s essential to surround yourself with a team of experts – including both a mortgage and real estate professional – to walk you through the steps to home ownership, answer all of your questions and concerns, help you decide what kind of home you can afford and get you pre-approved for a mortgage.
If you’re about to become a first-time homeowner, you might assume the experience of home ownership will be just like renting, except that your monthly payments will build equity. But the reality isn’t quite so simple.
From learning how to fix a leaky toilet to making financial adjustments for long-term annualized spending, home ownership is a totally new ball game. The best way to make a smooth transition to your new home starts before you buy.
Budget Before You Buy
A monthly mortgage payment isn’t the only thing you lock yourself into when you purchase a home. You’re also committing to years of property taxes, homeowners insurance, maintenance and repairs, and increasing utility bills.
Because you don’t want to wind up “house poor,” make sure to take all expenses into account when budgeting. You should build home maintenance and upkeep into your monthly budget.
A basic rule of thumb for your maintenance budget is to put aside 1 percent of your home's purchase price per year. This means if your home costs $300,000, then you should put aside about $250 a month for major home repairs.
Don’t Under Estimate the Importance of the Home Inspection: A proper inspection can alert you to problems that already exist with the property. New homes shouldn't have many issues, but it's always wise to get an inspection anyway to ensure that everything has been installed properly. After inspection, you want to work on your budget.
Another difference between renting and owning is your financial state. The first year you own a home your taxes will be much different, so even if you do file your taxes yourself, this year might be the year to turn to a tax professional.
You'll also have to have money to spend to fill up your new home! Chances are you have a lot more square footage to work with now, and you may need additional furniture or even appliances if your new home didn't come with them. Start reading reviews and comparison-shopping early on for things like washers, dryers and lawn mowers if you can. Buying a lawn mower in May is far more expensive than buying one in January. While it might seem silly, the last year models are usually very similar when it comes to appliances, so figure out when the new versions are released. Floor models (appliances that have been out for people to look at) are also a great choice, as they haven't actually been used.
The best part of owning your own home is that it is all yours. You can paint, arrange and decorate to your heart's content. However, the worst part of owning your own home is that it's all yours, and if there's three feet of snow to be shoveled, water pouring out of the toilet or a dryer that just won't dry, these are all problems you'll have to figure out how to fix—with a little help from the pros, of course. First-time buyers are bound to encounter some hurdles in the process of acquiring new homes. With the right mindset and team to help you, it is possible to streamline the process toward owning your home.