Going through the process of buying your first home can be a daunting experience. There are myriad variables you need to determine before making your final decision. Where will you buy? How much will you save for a down payment? Should you buy a fixer-upper?
While you need to consider all these options, there are also external factors that can significantly impact your choice. For instance, currently there is low level of inventory on the market, leading to increased demand and rising prices. According to The Washington Post, it would take a mere five months to currently sell all available houses on the market, below the optimal six months of inventory. A low supply of homes pushes prices higher, evidenced by the median existing home price having increased 7.9 percent year over year. As you move through your personal checklist of qualities your first home should have, remain aware of these economic forces so you can purchase the best house you can.
Here are four things individuals looking to purchase a new home need to know:
1. Know your budget
The last thing you want is to end up in your perfect home but being unable to afford the monthly mortgage payment. Be sure to carefully calculate your monthly expenses before you go house hunting so you know what you'll be able to pay without breaking the bank. Housingwire recommended ensuring you include additional costs such as property taxes, homeowners insurance premiums and upkeep and repair costs. These expenses add up and can take a big bite out of your wallet if you don't properly factor them into your budget.
2. Know where to buy
First-time homebuyers generally purchase what are known as starter homes. These are generally a bit more inexpensive, requiring a smaller mortgage and lower monthly payments. This allows new homeowners to build up equity, which can be used when buyer a bigger house later on in life. Although many U.S. cities are seeing a rise in home prices as the median price rises, several nice counties still remain well below the national average. Investor's Business Daily noted places like Ashtabula, Ohio, Hernando, Florida in the Tampa metro area, Clayton, Georgia in the Atlanta metro area, and Lackawanna, Pennsylvania in the Scranton metro area all have home prices that are much more affordable than the median price.
3. Know the breaks
Even though there are numerous costs associated with buying your first home, there are also quite a few instances where you can save money, including several valuable tax breaks. According to TapInto, the IRS allows you to deduct various payments from your tax returns, including the interest on your mortgage, your property taxes and if you pay any points on your mortgage. Take advantage of these deductions to save yourself a significant amount of money.
4. Know your credit
Your credit score is extremely important in determining how much you'll end up paying. Be sure to obtain a copy of your credit report. Review it to ensure there are no inaccuracies, and if there are, get them fixed before you try to obtain a mortgage. You want your credit score to be as high as possible, and any blemish may end up costing you in the long run. If you have a solid score - one over 720 - don't settle on the first lender to approve you. Instead, try to find a lender who offers the lowest interest rate on your mortgage.
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