Wow! You’re ready to buy your first home. Congratulations—it takes a lot of hard work and financial planning to make it to this “first” in life. The home buying process is exciting but also a daunting task if you’re not prepared.
8 Tips for Buying Your First Home
Unlock the door to an easy, stress-free home buying experience with these key steps:
1. Your Budget Knows Best
Before downloading real estate apps like Zillow and scheduling tours of dream homes that aren’t in your budget, it’s important to know how much house you can afford.
According to the latest American Housing Survey from the U.S. Census Bureau, the average monthly mortgage payment is $1,030. Most financial experts say your monthly mortgage and other debt/expenses, like student loans, should not exceed 36% of your gross monthly income.
There are online calculators that can help estimate what you can afford based on where you want to live (taxes), your income and expenses.
Once you know this, you can set savings goals and look for ways to cut costs. By bundling your expenses, Rural Mutual agents can help you save money on insurance costs. Learn more about discounts on auto and home and life insurance, including multi-policy, multi-vehicle and more.
2. Get a Pre-approved Loan
Reach out to a mortgage lender at least three months before you’d like to make an offer on a home to get loan pre-approval. That will put you in a stronger position against other bidders when it is time to make an offer. This pre-approval means you are good for your loan based on your credit score and how much home you can afford. Whether or not you are pre-approved is one of the first questions a real estate agent will ask you.
What is debt to income ratio?
Mortgage lenders will look at your debt to income ratio to measure your ability to pay the monthly mortgage payment. Your debt to income ratio is all your monthly debt payments divided by your gross monthly income.
3. Offer on Your Dream Home
After you determine the down payment and mortgage you can afford and receive pre-approval, it’s time to work with a real estate agent to find your dream home. Make a list of the things you’re looking based on your needs—a fenced-in yard for the dogs, four-bedrooms for your growing family, etc.
To make the right offer, do your research and rely on your real estate agent to track what similar houses are selling for in the neighborhood. The more you shop, the better able you will be to set your competitive price point for the type of house you’re looking for based on your budget and market conditions.
4. Proof of Insurance
The hard part is done. You’ve made an offer and it was accepted. Now it’s time to make sure your investment and family are protected:
5. Get a home inspection
Don’t skip this important step. The $350-$500 professional report can help identify necessary repairs and maintenance costs. If the costs are excessive, you have the power to back out of the deal, renegotiate the price, or ask the seller to make the repairs or cover closing costs.
6. Know what homeowners insurance covers
Did you know you are responsible if your neighbor’s tree falls into your yard?Proof of homeowners insurance is required at the time of closing. It helps cover the cost of accidents like this and protects your home from perils like fire and wind. It also covers personal items in the home and liability (any injury on the property).
7. Talk with your agent about endorsements
Rural Mutual’s homeowners policies automatically cover equipment breakdown. Your local agent also can work with you to add endorsements for things like boats if you live on a lake and sewer or sump-pump back-up failure
8. You’re Ready to Close the Deal!
At the time of closing, proof of insurance and all closing documents are required—be sure to review them closely before signing. The term escrow may be used. It’s an account first-time home buyers often use to manage their large expenses including property taxes and homeowners insurance. After you cross the t’s and dot the i’s, grab those keys and get ready for the next stage of home buying—packing up and moving in!
Contact your local Rural Mutual agent today for more information on homeowners insurance or if you have any questions about buying a home.