The decision to purchase a new home together is going to be one of the biggest investments of your lifetime. Not only from a financial standpoint but from the point that THIS home is going to be the beginning of many, many happy years together!
When beginning the process of home buying, consider these important talking points:
1) Know What You Can Afford: Sometimes it’s hard to put the daydreaming aside…but now it’s time. First things first: talk to a lender. Let them help you establish a comfortable price range for your new home. And don’t just factor the Principle & Interest of your loan. Try to get a understanding of what your potential annual tax bill, insurance cost and HOA dues (if applicable) will be. To make life easy on you, we suggest having your taxes and insurances be paid through an escrow account; meaning when you make a monthly mortgage payment, that payment will include PITI (principle-interest-taxes-insurance) and the lender will pay those expenses on your behalf. This makes life simpler and you don’t feel the need to save up one large lump sum due at the end of the year. Out of sight, out of mind!
2) Interview Real Estate Agents: They’re a dime a dozen. Some are worth their weight in gold. Others…not so much. Avoid the part-time agents and stick with agents with at least 5 years experience on a full-time basis. Your agent represents you and ONLY you. Don’t get yourself into situations where an agent tries to represent both you and the seller (yes, this happens)! You want an agent who is looking out for your interests only. And most importantly, find someone you enjoy being around…you’re going to be spending a lot of time together!
3) The Home: Statistics show that first time (newlywed) home buyers will stay in their first home together for 3-5 years. So when purchasing your first home, also consider resale. Will this house be “sellable” in the next 3-5 years? Is it in an area that will appreciate? If possible, try to stick to more traditional styles/layouts…min. 3 bedrooms, 2 full baths. When considering your first home, just be cognizant of how YOU are eventually going to have to sell it!
4) Financing: Interest rates are at all-time lows but how do you know which financing option is best for you? First and most importantly: You do NOT have to use the first lender you speak with. Truth be known, you should speak with 3-4 lenders…make them compete for your business. Ask them for a GFE (Good Faith Estimate) that breaks down your payments and closing costs. While it’s good to speak directly with banks, also bring a mortgage broker into the mix…mortgage brokers have access to different monies that bank institutions do not. (Warning: When speaking to these 3-4 lending options, ask them not to pull your credit while they provide you GFE’s. Pulling your credit reports in short amount of time periods can negatively impact your credit score).
When it comes to the financing itself, it’s always best to try to put down at least 20% downpayment. This means you avoid paying what is called PMI (Private Mortgage Insurance). This is just another monthly expense that is tacked on to your mortgage payment and does not apply towards your principle balance. Realistically, not everyone has that kind of cash on hand. If you are short on funds, explore FHA financing options. With FHA, you only need a 3.5% downpayment. Many 100% financing options went away with the real estate crash, but some do still exist like Suntrust’s Physician Loan Program. Point being, take your time when exploring your financing options…money is cheap right now and it’s a great time to consider buying!
5) Inspections: Do not…we repeat, do NOT forgo your opportunity to get the proper inspections done on the home you are now under contract on. Yes, they can be somewhat expensive, but we promise, it is the best money you will spend! The inspections are a great time for you to learn the in’s and out’s of your new home. Make sure at least one of you can be there!
This is one of the most exciting times in your lives. Buying a new home isn’t as daunting as it may sound. Educate yourself first before going into it and hopefully some of the tips above will help you down that path towards home ownership. Good luck!