Buying a home and becoming a homeowner for the first time is a huge decision. As one of the biggest purchase decisions you’ll ever make, there’s a lot to think about when it comes to buying a home. With the real estate market booming in many countries, including the United States during a global pandemic, there are many things you’ll want to consider before taking those next steps toward the purchase of your first home. If you’re considering buying your first home, here are three things to think about before making that bid.
1. Getting a Preapproval
The first step in buying a first home is applying for preapproval. Many first-time home buyers wonder, “why apply for a home loan pre-approval in the first place?” The answer to this question is simple. Buyers with a preapproval, also called prequalification, letter in hand have a better idea of what price range they should look at when looking for a new home. That is, in knowing what a mortgage lender would be willing to lend, you’ll have a better idea of your monthly payment and the amount of house you can afford.
Some first-time buyers worry that the approval process for that qualification letter means a lot of work and an inquiry that will hurt their credit. While you will need a hard inquiry on your credit report for a preapproval, lenders understand that a preapproval application for an approval letter is all part of the process, so it won’t hurt your odds of getting a loan in the end.
To apply for a preapproval letter, you’ll want to go through your accounts, financial records, tax returns, and whatever financial information you have on hand in case the bank asks for them. By the time you’re through this process, you’ll have a clear picture of possible interest rates and even what you’ll need for a down payment. All of this will help when it’s time to shop for a home.
2. Understanding the Market
The same way you might browse a Subaru dealership in Hadley, MA if you worked near Boston and needed a new car, you’ll want to put some research into the homes on the market. Where a Subaru Impreza might be the only car you have your eye on when you get to the lot, you might be surprised to learn that you like how a Subaru Crosstrek drives more. The same thing applies to the homes you tour. That is, while you may have the idea that your perfect house is a cape or saltbox, doing some research on the market might tell you that you’d actually be happier in a ranch or colonial.
Take the time before meeting with a realtor for a house hunt to do your research. Be sure to search towns, demographics, and amenities in the area, as well as a variety of home styles that you might be interested in. This way, instead of going into open houses and tours blind, you’ll have a good idea of what you’re looking for and a general knowledge of fair asking prices.
3. Working with Realtors and Other Real Estate Professionals
Whether you plan to hire a real estate agent to find your home for you or hope to arrange a private sale on your own, you’ll still need to be comfortable working with real estate professionals. If you aren’t sure where to start when it comes to touring homes, finding an appraiser, or inspector, the best thing to do is start with a Google search for real estate professionals in your area. Ask friends and family about people they’ve worked with, who they trust, and pay attention to reviews before trusting your home hunt to a stranger. In the end, most first-time home buyers find they are happiest when working with a licensed realtor from a reputable firm because a real estate professional with years of experience is more likely to understand all types of financial situations and buyer needs and wants.
In doing your research and taking time with the preapproval and shopping process, you’re sure to find a home that feels like a perfect fit. If you lose a bid to a competitive market, don’t give up. It just means another home that’s better suited for you is bound to come along. Congratulations on your big purchase ahead.