Janet Corniel asked: If you are about to embark on purchasing a home for the first time, congratulations! It is a wonderful feeling to own your own home for the first time. However, there are many hidden costs that are associated with purchasing and moving into your new home that you may not be fully aware. The best way to mitigate these costs is preparation and education.
Interest rates are historically low right now, which will work in your favor. However, before you even shop for a home, run your credit score. This is key. You do not want to fall in love with a home and find out you can not pre-qualify to purchase it. Lenders are extremely picky these days. Look at your debt-to-income ratio. Make sure it would be acceptable to a potential lender.
After you clear that first hurdle, look for a reputable realtor. You may choose to go it alone to prevent paying commissions but I suggest you reevaluate that choice, especially as a first-time home buyer. It is so important to have someone represent your interest and educate you in the process to prevent losing money. I also suggest you have your realtor just represent you and not both parties (seller and buyer). We have done both and even with a good realtor, this situation is just not optimal.
Once you are pre-qualified, have your realtor and found the home for you, be prepared for all of the steps and costs involved. You will have to do a home inspection, which will cost approximately $400-$500. You do not want to skimp on this. It is important to note the costs may seem large at first but when you apply it to the overall percentage of the cost of the home, it is minimal. It is worth paying $500 for a home inspection in order to find out the home may be in such disrepair you can’t afford to fix it.
Closing costs are another expense that may be the difference of getting the deal done or not. Make sure you review your good-faith estimate carefully. This will detail all of the closing costs and what you will have to bring to the table. If you have any questions or if there are some discrepancies take it up with your lender right away. You do not want to be surprised at the closing table. A good realtor will help guide you through the process.
After you make it through your closing and get your keys, you are not out of the woods yet. You still have moving and settling-in costs. If you are moving yourself, there are many options out there for you, evaluate which is best for your circumstances. Distance and the amount of things you own will dictate the best option for you. There are ways to save yourself money. If you have a moving company move you, make sure you get competitive bids and evaluate them carefully. You can also pack it yourself and use a portable storage device that will move to your location. You can also do everything yourself and rent a truck and pack and move. If you are just starting out, the later may be best for you. However, if you are combining households and/or have a lot of stuff you may have someone do the heavy work for you. Either way, set a budget and work within it. In the stress of a move, it is easy to spend if you do not set up limits ahead of time.
Settling-in costs are another expense that will sneak up on you if you are not careful and budget for it. These may include but are not limited to carpet cleaning, painting, window treatments, appliances, landscaping, restocking a kitchen, furniture, insurance and utilities. When you are looking at homes to buy, keep these settling costs in mind. Take a notebook with you and write these possible costs down. It will help you plan and decide on which home will be the most cost-effective for your budget. It may also give you some negotiating power in a buyers market like we are in now. Due to the economy, builders are really willing to work with buyers. Many are now throwing in upgrades like granite and landscaping packages. So keep them in mind when looking at homes.
In any event, it is so important to do your research ahead of time. Set a budget and prepare yourself. The more prepared and informed you are, the less likely you will lose money.
Gilbert
