The prospect of buying a first home is always exciting, especially during periods when supply outnumbers demand. When the real estate trend favors buyers, it’s hard not to be tempted to snap up a great deal even when it isn’t something you planned for.
To help you make a wise homebuying decision, whether you’re in the market for real estate in Irvine, California, or elsewhere, here are the top three tips you need to consider as a first home buyer:
1. Clear your debts and save up for emergencies
We know that you want something everybody dreams of: your own home. It also seems more practical to buy than to continue renting, especially when your rent can go toward mortgage payments and accumulating an asset. However, things are not as simple as they seem. Homeownership comes with a host of expenses, primarily for maintenance and upkeep.
Also, getting a mortgage on top of your existing debts can put a lot of stress on your finances. So, even if you’re raring to go for a really great property deal, pay off your debts first. After that, work on saving for an emergency fund that is ideally equivalent to three to six months of expenses. An even better scenario is, you have insurance coverage for you and your family and a savings account on top of your emergency fund. Once you have these sorted out, you can seriously look into purchasing your first home.
On the other hand, if you have the money to purchase a home right away, by all means, go for it. But make sure you budget your money appropriately as owning a home involves a lot of expenses, including your monthly utilities, furnishings, etc. Don’t be too disappointed if you can only afford to furnish one room at a time, and do your best to avoid relying on credit.
2. Calculate exactly how much you can set aside for a home purchase
Looking at houses for sale online, driving by houses for sale, or going to open houses is fine as long as your purpose is to gauge what’s on the market and for how much. Don’t let yourself get emotionally attached to a beautiful house that seems to tick all the right boxes.
Remember, you need to be realistic and consider your future monthly budget for housing expenses (taxes, insurance, HOA fees, etc.) on top of your existing monthly expenses (which may increase with homeownership, too). Ideally, only 25 percent of your monthly take-home pay should be earmarked for monthly housing costs. You also need to include the down payment, closing costs, and other related initial expenses in your calculations.
To get a more accurate estimate, you can always get the input of your real estate agent and insurance company.
3. Get your loan pre-qualified
When you’ve saved up enough cash for 20 percent of your home and closing costs, you can already start talking to a mortgage service provider. Getting pre-approval shows your serious intent as a buyer, and this is a major plus point for getting a good deal with a real estate agent even if you’re a first-time homebuyer in a competitive market.
Of course, to get pre-qualified, you need to prepare financial documents such as taxes, proof of income, etc. So get these ready when you meet with your prospective lender.
Find your dream home and own it!
Planning for a first home purchase is a big deal, and you need to be adequately prepared for it. Hopefully, with these tips, you’ll be able to cover the bases so you can confidently embark on your first home purchase.
If you need help buying Irvine, CA real estate, or have questions regarding property-related matters, reach out to us at Hanu Reddy Realty.