6 Things Every First-Time Homebuyer Needs to Know

– iStock 670310170 – 6 Things Every First-Time Homebuyer Needs to Know

While it can bring plenty of joy and excitement, the home buying process also comes with stress and confusion. If you are preparing to purchase your first home, it’s important to know the following things, so you won’t be blindsided by unexpected burdens and costs.

  1. Know what you can afford. It’s not uncommon for new homeowners to realize they have purchased more home than they can actually afford. Guard against this outcome by carefully considering how your financial situation will evolve in the years to come. You should use a mortgage calculator to better understand how current interest rates will impact the cost of a home. You should also know how much money you will be able to secure from a lender before you even start looking at properties.
  2. You will owe taxes. It’s important to understand the tax liabilities that come with homeownership. Make sure you know if your property taxes will be rolled into your monthly mortgage payment, or if you will be responsible for paying them every year. Since recent tax laws have impacted the way homeowners deduct property taxes, it’s a good idea to consult a tax accountant to better understand how property taxes will influence the actual cost of your home purchase.
  3. You will need insurance. You will have to obtain a valid homeowner’s insurance policy before you can secure a mortgage and close on your home.
  4. You will have to pay closing costs. Closing costs are any expenses over and above the actual price of the home in a real estate transaction. They typically include things such as appraisal fees, discount points, loan origination fees, title insurance, title searches, taxes, surveys, credit report charges and deed-recording fees. Your mortgage lender will provide a “good faith estimate” that gives you a general idea of what you will owe at the time of closing.
  5. Demand a professional home inspection and full disclosure. While most states require a seller to disclose specific problems with a property, not all homeowners know about – or honestly reveal – existing structural issues. Protect yourself by hiring a reputable home inspector. It will generally cost you between $300 and $600, but the alternative can be disastrous.
  6. Warranties can save you tens of thousands. If you are buying a new home, it should come with a traditional builder’s warranty that will offer limited coverage on materials and workmanship relating to specific home components, including windows, plumbing, HVAC, electrical systems, heating and ventilation. That said, if the home does not have a structural warranty, you could be forced to pay tens of thousands of dollars for repairs related to foundation problems or other structural issues. For this reason, you should verify the extent of warranty protection before agreeing to purchase a newly built home.

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