Preparing to Buy Your First Home

Buying a home is an amazing goal, but the challenges of being a first-time homeowner can be intimidating. Let’s take a look at a few guidelines to help take some of the stress out of the decision.

The house you buy may not be your forever home

Because of the soundness of real estate as an investment, many first-time home buyers tend to want to get the biggest house they can. They may be trying to start families or getting more space for their existing family to grow. Whatever the motivation, buying a house is one of the few times when people try to plan their lives 30 or more years down the road.

That’s a really big gamble. Any number of changes might happen in 30 years: Your job or your partner’s job may force you to move, your parents may have medical problems that need greater care, or you may decide to change careers or start your own business. This unavoidable uncertainty means it’s not in your best interest to plan for a future that’s so far away.

Look for a house that suits your immediate needs and understand that every place is adaptable to a degree. A den or an office can become a nursery, a shed can become a workshop, and a basement storage area can become another bedroom. Don’t think you need to plan your life out forever if you choose to buy a home. Make some reasonable, educated guesses about what your life will be like for the next 10 years or so, and buy the house you need for that time.

Don’t become “house poor”

Many first-time home buyers also fall into the trap of figuring out the most that they could afford to spend on a new home, then spending exactly that amount. The reasoning behind this decision is simple: money spent to repay a mortgage isn’t really “spent.” Homes can be refinanced or remortgaged if money gets tight, or repaid when the house is sold. That’s sound reasoning, but only to a point. People who end up spending most of their monthly income on a house payment leave little for other debt repayment, retirement savings or building an emergency fund. They find themselves unprepared for an unexpected medical bill or car repair. They also find it difficult to take vacations or make home improvements. That’s an unenviable position.

Avoid this trap. Understand that your upper limit for housing expenses should only be a worst-case scenario. Buy the house you need, not the most expensive house you can afford. You’ll be happier in your home and in your budget.

Understand the process with OE Federal’s help.

There are a lot of factors that go into obtaining a mortgage. First, you and the seller have to agree on a final price, which includes the money you pay for the house and a host of fees, like the inspection, appraisal and title transfer. The realtor in charge of selling the home can walk you and the seller through the process.

Next, you’ll need to arrange financing. Financers, like OE Federal, will appraise the value of the home, and then compare their estimate to the price you agreed on with the seller. The greater the difference between these two values, the more expensive your home loan will be, but that’s not the only factor. The financing institution also has to check your credit, verify your income and assets, and confirm your employment.

You can help this process by buying a house you can afford, building your credit score by reducing the amount of credit you’re using, staying with the same employer and saving for a significant down payment. You should aim to have at least 20% of the total amount of the sale for a down payment, as this is the threshold to avoid having to pay for private mortgage insurance (PMI). A larger down payment also reduces the risk of the loan to the lender and can help get you a less expensive mortgage. This, in turn, makes for a less expensive housing payment.

OE Federal offers a first-time home buyer program to fit your needs, so when you’re ready to start looking, call us at 800.877.4444.

Don’t go it alone

A lot of big national lending institutions advertise appealing mortgage specials. The rates may seem reasonable and enticing. In reality, these rates go only to borrowers who have exceptional credit, significant income and a considerable net worth. As a first-time home-buyer, you probably will not qualify for the rates those large corporate lenders are using as bait to pique your curiosity.

Given the difficulty of shopping around, make OE Federal your first stop by calling 800.877.4444 or take a look at our real estate options here.