It seems like everyone is buying a new home! For Sale and Sold signs are everywhere. You’ve been saving, planning and the time has come for you to jump in to buy your very first home. But hold on, there are a few questions you need to ask yourself before you sign on the dotted line:
How much is all this going to cost me?
Buying a home is more affordable than ever with historically low interest rates, meaning you get more bang for your buck. However, you still need to calculate how much you’re comfortable spending per month before falling in love with a house. Keep in mind things like: insurance, taxes, association fees, water and electric bills. And as a good rule of thumb, you will spend 1% of the assessed value of your home on maintenance and repairs.
Don’t forget about the things you’ll need to make your new house a home. Does the house have curtains? Will it need a fresh coat of paint? Does your winter exercise plan include shoveling snow or will you need a snow blower? Even things like new locks, throw rugs and shower curtains can add up when it seems your money is going out, faster than coming in.
And then there’s the pesky down payment and closing costs. Depending on the type of mortgage, you will spend anywhere from 3% to 20% for a down payment. For example, on a $200,000 home you will need up to $40,000. A typical closing can run from 2% to 5% of the purchase price. That’s a lot of cash to be dishing out!
I can qualify for a mortgage, right?
Before you begin your home search, you need to sit down with a mortgage company. A good mortgage lender will walk you through your options and help you determine the right mortgage for you. They will review your income, debt, assets, employment and credit history to determine how much of a home you can afford. They can then determine your monthly payment, down payment needed and closing costs.
Once your approval process is complete, you will receive a pre-approval letter. This shows sellers that you are serious and that you have cash to buy a home now.
And remember, you don’t need to buy a home at the top of your price range. Make sure you are comfortable with the monthly payment so can cover the unexpected costs that inevitably show up.
Where is my home sweet home?
Now that you know how much you can afford and have your pre-approval letter, the fun can begin! Start by asking yourself the big questions about your new home:
- Where in the world do you want to live? Take a drive around potential neighborhoods and start narrowing down your target area. How far are you willing to commute?
- How many bedrooms/bathrooms? Plan for a house you can live in now and in 5 years. Experts agree, in order to recoup your costs, you should plan on staying in your new home at least 5 years. So could that office be changed into a playroom?
- How big is just the right size? The housing trend is shifting to less but better utilized space. Keep in mind, heating and cooling in the peak season can add up quickly. And how much time do you want to spend cleaning?
Next figure out what features you are looking for: granite countertops, wood floors, main floor laundry. Know what you will compromise on and what you won’t.
Can someone please help?
It’s never too early to call a realtor! Good real estate agents want to be your partner and help you make the right decision for your unique circumstances. Make sure you work with one that knows their business and loves what they do. We can provide you with helpful information and the right resources.
The best way to find a trusted realtor is by word of mouth. Check around with people who have had a recent real estate transaction and see if they were happy with their realtor. Watch the paper, billboards, advertisements and online searches to find a realtor in your target area. Meet with realtors before deciding who is right for you.
The Twin Cities is currently in a seller’s market, meaning houses are going quickly, sometimes before they even have a sign in the ground. You need a realtor who is connected and who will move quickly on new listings before they are gone.
Most of the first time home buyers we work with are young professionals or young families who are looking in the Minneapolis or the first ring suburbs. These areas are perfect for those looking to be close to work, shopping, the lakes, and all that our vibrant downtown as to offer.
Contact us and let our connections and proven home buying process start working for you to find your first home!