Smart Way to Buy Your First Home

Brown House

Buying a home is almost as daunting as it is exciting. A significant fortune is at stake, but you are also getting a place you can call your own. Therefore, you have to be a savvy buyer. This post helps you become a homeowner and plan your homebuying strategy, market research, property inspection, deal negotiation, and risk mitigation.

Plan Your Homebuying Strategy

A good plan is always the first step towards a successful deal. Working with an excellent strategy helps you get the best possible house and favorable rates. Ultimately, the success and satisfaction you will get from your new home rely substantially on sticking to a good plan. Here are some things to consider:

  • Set a realistic budget. You must work with a budget that matches your current finances. Be sure to keep in mind how much you have saved up and how much you can pay every month.
  • Improve your credit score. An excellent credit score gives you leverage over the mortgage terms. Some steps to improve your credit score include clearing or reducing outstanding balances, managing your spending, and paying bills on time.
  • Save for the down payment and closing costs. It is best to raise a significant down payment to qualify for a higher mortgage loan and better rates. You also want to be able to cover additional closing costs comfortably.
  • Get pre-approved for a mortgage. Contact a mortgage officer to estimate how much you can borrow and the rates you should expect. The factors in play will include income, credit history, assets, and debt.
  • Create a homebuying wish list. It’s such an exhilarating journey, and you probably have a checklist in mind. That’s okay, but you should narrow it down based on your other strategies.

Your Mortgage Deposit

More often than not, your first step will be saving for a deposit. This can be easier said than done, especially when you will need at least 5% of the purchase price of the property.

For example, if your dream home is £200,000, for a 95% mortgage, you will need to save £10,000 of your own money.

Yet we can suggest that waiting that bit longer and saving more can be worth it. Saving for a bigger deposit will allow you to apply for better mortgage deals with lower interest rates.

As a first time buyer, you will have the option to save your money into a lifetime ISA, meaning that when you come to purchasing your home, you’ll be entitled to a 25% top-up (up to £1000 a year) from the government on your savings. This is only entitled to those purchasing a property up to £450,000, however.

Similarly, you’ll also be eligible for other purchasing schemes, including Help to Buy and Shared Ownership.

A Help to Buy equity loan consists of you saving a 5% deposit and then the government will lend you between 15% and 40% of the property purchase price on a new-build home.

Shared ownership is where you purchase a share of 25%-75% in your property and then pay rent on the rest.

Find Out How Much You’ll Be Able to Borrow

To make sure that you’re viewing the right properties and that the process doesn’t end in disappointment, or similarly, you bite off more than you can chew when it comes to money, it is important that you seek some financial advice.

A mortgage provider will only lend you so much, depending on a variety of different factors. These include how much of a deposit you have, your income and your credit score.

Say you are seeking to buy your home with a partner or a friend, your mortgage provider will take into account their finances too, meaning that you will be able to borrow more.

It’s important, however, to be serious about this step, and take your time to consider the costs of buying a property, including conveyancing, surveys and other such steps involved.

Research the Homebuying Market

You have a budget in mind and know what you qualify for by this point. The next step is researching the market for the best deals with competitive prices. You also want houses with the potential for value growth. The following tools might be of help:

  • Online portals: online mediums where you can connect with sellers and lessors.
  • Referrals: ask the people in your circle if they know of great neighborhoods or homes.
  • Real estate agents: an agent could give you a tour of various neighborhoods and houses. They’ll also provide invaluable insight into the housing market conditions.
  • Auctions: here, you’ll find houses for sale and discover what others are willing to pay.
  • Newspapers: you may find pieces on the best places to buy a home and other tips.
  • Property selection tools: these are primarily sites with tools that let you apply filters to narrow down the options based on your preferences.
  • Market research tools: these are tools and resources for conducting market research. They usually cover a broad range of industries, including real estate.

Remember, you don’t have to limit your search for investment opportunities in your own country. There are other regions with extremely stable economies, such as the UAE, Saudi Arabia, and Qatar.

The United Arab Emirates is a popular vacation destination and a real estate hotspot. Dubai has increasingly become a highly sought-after investment destination as more people acknowledge the wisdom of investing in the region’s real estate. This is due to Dubai’s vibrant economy and stable political situation. So if you ever decide to buy property in Dubai, be sure it will be a smart move.

House With A Front Lawn

Research Where You Want to Buy

Buying a home is a serious investment to make. It’s not like renting where if you are not happy with the area, you can simply just move away at the end of your tenancy.

If you’re exploring new areas or neighborhoods where you haven’t spent a significant amount of time before, we recommend spending a night or two in a local hotel or holiday home to make sure that you are happy with the commute, local shops, community and the general atmosphere.

Even if you’ve lived near the area for many years, you may still wish to do some research just to make sure that you are completely happy before you sign on the dotted line and commit yourself.

This can include school catchment areas, transport links, local infrastructure, flood zones, future development plans and crime levels.

House with a pool

Apply for Your Mortgage in Principle

Once you know how much you are able to borrow and therefore where you can/want to move to, the next step is applying for your mortgage in principle.

A mortgage in principle is a confirmation from the mortgage lender to confirm that they are willing to lend you a specific amount of money. You may have heard of this referred to as a decision in principle or a mortgage promise. 

Especially as a first-time buyer, having the reassurance of a mortgage in principle can appear incredibly attractive to a vendor and their estate agent.

Get A Mortgage Pre-Approval

Another vital tip for first-time homebuyers is to get a mortgage pre-approval. A mortgage pre-approval means that your lender has reviewed your financial information and determined how much money they’ll lend you. This amount depends on several factors, including income, debt, and credit score.

This step is often overlooked, but it’s crucial if you want to ensure that you’re getting the best deal on your home loan. On the other hand, the benefits of getting a mortgage pre-approval are twofold.

First, it’ll help you narrow your search to homes that fall within your budget. Secondly, having a pre-approval shows sellers that you’re a serious buyer, which could give you an edge in a competitive market.

Inspect Your Potential Properties

Next on the list is inspecting potential winners. This step allows you to manage risks and ensure safety and security. It involves conducting a thorough scrutiny of the house to establish whether it’s worth the price. You also want to confirm that it meets safety and security standards. Here are some tools to consider:

  • Inspection tools: ranging from a simple flashlight and ladder to an electric circuit tracker and moisture meter.
  • Appraisal tools: tech tools that facilitate a fair home valuation and help eliminate bias.
  • ROI tools: they provide you with the property’s estimated return on investment.
  • Professional help: a professional property inspector would do much of the heavy lifting and help you conduct a higher-quality inspection.

Look For Motivated Sellers

To get the best deal on your first home, looking for motivated sellers is essential. These are sellers who need to sell their homes quickly, usually for reasons such as job loss, divorce, or relocation. Motivated sellers are often more than willing to negotiate on price. It’s also possible they’re open to other concessions, such as paying closing costs or making repairs.

Meanwhile, to find motivated sellers, you can search online listings and look for properties that have been on the market for a long time. You can also talk to your real estate agent if they know some homes for sale in Abbotsford that they think might be a good fit if you’re finding your first home in this area.

Negotiate Your Homebuying Deal

Once you have found your perfect fit, it’s time to start the negotiations. Your realtor should not only provide the best terms but also remain flexible enough to allow negotiations. Talks are vital to satisfying your financial and legal interests, ensuring the deal does not strain you. Let’s look at some top negotiation tips:

  • Conduct market research. Acquiring knowledge about the market helps prevent the seller from taking advantage of you.
  • Be flexible. It’s only a negotiation if both sides keep an open mind and maintain flexibility to accommodate each other’s terms and expectations.
  • Create urgency. You could project a sense of urgency by pointing out that you have another deal in mind. On the other hand, your seller could do the same if they have another potential buyer. They could also provide a limited discount.
  • Use contingencies. Include a clause in the offer outlining that you can back out of the deal if it changes or fails to meet specific terms.
  • Hire a closing agent. Having an experienced agent on your side helps make a team of tough negotiators.
  • Review the contract terms. You don’t want to sign anything you haven’t reviewed. Ensure that you fully understand the terms of your purchase.

Protect Yourself from Homebuying Scams and Frauds

The eagerness to own a home can distract you from perceiving scams and frauds, putting your safety and security at risk. Ensure you remain shrewd throughout the process and watch out for common homebuying scams such as:

  • Identity theft: the seller impersonates the actual owner.
  • Title frauds: the scammer provides a fake title deed.
  • Fake listings: some online listings include properties that don’t exist or are not for sale by the owner.
  • Money transfer frauds: a scammer poses as a realtor, hoping to convince you to close through a fraudulent account. The scammers often trick new home buyers through wire fraud.
  • Phishing emails: malicious emails designed to get you to surrender personal information and account credentials.

To Sum Up

Now you know how to become a homeowner. Remember, buying a home involves a lot of money, so you have to maintain sharp judgment every step of the way. Ensure you plan, research the market, inspect the potential home, negotiate the deal, and protect yourself from scammers. And remember, an experienced agency on your side makes for a formidable team.

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