If you’re a first-time homebuyer, there are some important things real estate agents want you to think about before you hire them – and definitely before you begin your house hunting:
1.   Know what can you actually afford.
As a first-time buyer, you need to know how much you can afford to spend before you start looking for your new home in Kansas City. Have your finances in order and get approved by a lender before you officially begin your search, but know that you do not have to spend as much as you are approved for. Look at your budget, figure out your ceiling and plan to spend what you can actually afford. It’s tempting to exceed your budget for a home you love, but realtors say that’s a huge mistake for first-time buyers. Experts say housing costs should not exceed 30% of your before-tax income, depending on your debts. Spending too much on your monthly mortgage payments can leave you coming up short for things like dining out, gym memberships and saving for retirement.
2.   Understand the true cost of owning a home.
This one is important and why first-time homebuyers should not stretch their budget for that home they fall in love with. Even if you’ve gotten over the biggest financial hurdle in the buying process – the down payment – you’re not safe yet. Other costs include the appraisal, origination and notary fees. And the costs don’t stop when you get the keys and the garage door opener. There are moving costs, new furniture, higher utility payments and any work that needs to be done to the home right away, like replacing the carpet. Realtors say most people underestimate these costs.
3.   Beware of fixer-uppers.
If you watch HGTV, buying a fixer-upper might seem like a great idea, but it is always more expensive than what you imagine, according to experts. If a home needs renovations, you should factor that into the total cost of buying. And keep in mind that a private loan to finance the renovations may be hard to secure after just taking out a mortgage. There are some mortgage options that include renovation expenses, however. For instance, 203k FHA loan allows homebuyers to finance the sale and rehabilitation on a single mortgage.
4.   Don’t drain your emergency funds.
It’s a sellers’ market, meaning there’s a lot of competition and offers may exceed the asking price by as much as 20%, realtors say. While it may be tempting to throw everything you’ve got at your offer to stay competitive, experts say that’s not a good idea. You need something left over after you close on a home. If buying a house reduces your savings account to $1,000, it’s too expensive for you. You should plan to keep at least three to six months of savings the day you become homeowners because you’ll need emergency savings now more than ever. After you close on your new home in Kansas City, any number of things can go wrong or pop up that you have to be financially prepared for.
- Play it cool.
So you think you’ve finally found your dream house. It’s perfect and so you put in your offer. Once your offer is accepted, be cool. Don’t run out and buy a car, put away your credit cards for now and don’t quit your job. Your lender will start the underwriting process on your mortgage. Banks will scrutinize your finances and credit reports, and any big purchases might affect your qualification status. If a purchase nudges your debt-to-income ratio too high, you won’t be able to close on that new home in Kansas City.
Buying a home is likely the biggest purchase you’ll ever make, and it’s not always an easy one, especially the first time around. You need a seasoned pro on your side. Call Team RE to guide you through the process of buying a new home in Kansas City, 913.541.5711 or www.teamre.com.