Buying your first home might seem scary, but don’t worry! There are special things to help first-time buyers, like you. Before you buy, it’s important to know what to think about and what happens when you’re buying. Here’s a simple guide to help you understand everything you need to know before and during the process. So, you can feel more confident and less worried about making mistakes when you buy your very first home!
See also: Home buying guide for a nuclear family: Key things to remember during home search
Know your requirements
Before you start looking for a home, it’s important to know exactly what you’re looking for. First off, think about what kind of home you want. In India, there are different types like villas, bungalows, penthouses, and apartments. Apartments, which are also called flats, are quite popular because they’re often more affordable and come in different sizes and layouts. But when you’re choosing, make sure to be realistic about what you can afford.
Next up, consider how big and how you want your home to be. This depends on how many people are going to live there. Bigger apartments give you more space and privacy, but smaller ones might be just right if you’re living alone or with a partner. Also, there are some terms you might come across like carpet area, built-up area, and super built area. These terms tell you how big the different parts of the apartment are, so it’s good to understand them to know what you’re getting.
Finding the property
Now comes the fun part: searching for your dream home! There are a few ways to do this. You can check out real estate websites online, talk to real estate agents, or even go to property exhibitions where lots of homes are showcased. Once you start looking, think about where you want to live. Is it close to your work, schools, hospitals, or public transportation? These are important things to consider. Also, take some time to really look into the neighbourhood where the home is located. You want to make sure it’s a good fit for you and your family.
Prioritising needs over wants
When you’re looking for a home, it’s tempting to dream big and think about all the fancy stuff you want. But it’s really important to focus on what you actually need first. Make a list of things that are non-negotiable, like how many bedrooms you need or how long you’re willing to commute to work. These are the things that are essential for you and your family to be comfortable in your new home. Once you’ve got your needs sorted, then you can think about the extra stuff you’d like to have if it fits within your budget. But always remember, needs come first!
Smart financial planning
Before you make any big decisions about buying a home, it’s really important to take a close look at your finances. Start by figuring out your debt-to-income ratio. This means comparing how much money you make each month to how much you owe in debts. Then, you need to work out how much you can afford to pay each month for your mortgage. You want to make sure it fits comfortably within your budget. One way to help with this is to save up a good-sized down payment. The more you can put down upfront, the better interest rate you’ll likely get on your mortgage. So, take your time, crunch the numbers, and make sure you’re in a good place financially before you take the plunge into homeownership.
Getting mortgage pre-approval
Before you start hunting for your dream home, it’s a smart move to get pre-approved for a mortgage. This means you’ve talked to a bank or a mortgage company, and they’ve looked at your finances and said, “Hey, we’ll lend you this much money for a house.” Having this pre-approval letter is like having a golden ticket. It shows sellers that you’re serious about buying their home and that you can actually afford it. Plus, it gives you some extra bargaining power when it comes to negotiating the price. So, check out both banks and online mortgage brokers to see who can offer you the best deal. Getting pre-approved is a crucial step in the home-buying process, so don’t skip it!
Choosing the perfect location
Picking the right location for your new home is a big decision, and it’s important to think strategically about it. Sure, a cute, walkable neighbourhood might seem perfect, but you’ve got to be practical too. Start by researching what essential things are nearby, like grocery stores and schools. You want these things to be within easy reach. Also, keep an eye out for any sneaky extra costs that might come with the location, like expensive parking permits or high property taxes. Sometimes, you might find a great deal in a neighbourhood that’s not as trendy but still has everything you need.Â
Balancing technology and reality in home search
When you’re starting your search for a new home, technology can be a huge help. Online real estate platforms make it easy to find properties that match what you’re looking for and fit your budget. But remember, it’s important not to rely solely on what you see online. Virtual house-hopping can be tempting, but it’s no substitute for seeing a place in person. Make sure to schedule in-person visits so you can spot any details that might not show up online, like potential structural issues or strange smells. By combining the convenience of technology with real-world observations, you’ll make sure you find the perfect home for you.
And if you need help with your online real estate search, why not check out Housing.com? We’ve got a ton of great tools and resources to help you find your dream home.
Preparing for closing expenses
As you near the finish line of buying your new home, it’s essential to be ready for the closing costs. These expenses can add up fast and catch you off guard if you’re not prepared. Take some time to research what typical closing costs are in your area. This might include things like loan origination fees and title insurance. Once you know what to expect, make sure to factor these costs into your overall financial plan. If possible, try to negotiate with the seller to cover part of the closing costs. It could help lighten the financial load and make the whole process a bit smoother.
Becoming a skilled negotiator
When it comes to buying a home, negotiation skills can make all the difference. Start by doing your homework and researching similar properties that have recently sold in the area you’re interested in. This will give you a good idea of what a fair price is. Don’t be afraid to make an offer below the asking price, especially if it’s a buyer’s market. Negotiation is about finding a compromise that works for both parties, so keep the conversation polite but firm. By approaching negotiation as a collaborative process rather than a battle, you’ll increase your chances of getting a deal that you’re happy with.
Discovering first-time homebuyer assistance
If you’re a first-time homebuyer, there are lots of programs out there that can give you a helping hand. Government and local initiatives often offer things like down payment assistance or tax breaks to make buying your first home a little easier. Take some time to look into these programs and see if you qualify. They can really boost your buying power and help you become a homeowner sooner than you might think. So, don’t hesitate to explore what’s available – it could make a big difference in your journey to owning your own home.
Terms related to home buyingÂ
| Term | Definition |
| Down Payment | The upfront amount of money a buyer pays towards the purchase price of a home. Typically, a 20% down payment is ideal to avoid private mortgage insurance (PMI). |
| Earnest Money Deposit | A good faith deposit that a buyer gives to the seller to show they are serious about buying the home. This money is typically held in escrow by a third party until the closing. |
| Pre-Approval | The process of getting a lender to conditionally approve you for a mortgage up to a certain amount. This shows sellers you are a serious buyer and helps you understand how much you can afford to spend. |
| Mortgage | A loan from a bank or lender that helps you finance the purchase of a home. You will repay the loan with interest over time. |
| Private Mortgage Insurance (PMI) | An additional monthly fee that is required on some conventional mortgages if the down payment is less than 20%. PMI protects the lender in case the borrower defaults on the loan. |
| Debt-to-Income (DTI) Ratio | A ratio that compares your total monthly debt payments (including housing expenses, car payments, student loans, etc.) to your gross monthly income. Most lenders prefer a DTI ratio of below 43%. |
| Closing Costs | The fees associated with buying a home, such as loan origination fees, appraisal fees, title insurance, and recording fees. Closing costs can vary depending on the location and the loan type. |
| Real Estate Agent | A licensed professional who helps buyers and sellers with the home buying or selling process. Real estate agents can represent both the buyer and the seller (dual agency) or just the buyer (buyer’s agent). |
| Buyer’s Agent | A real estate agent who works solely on behalf of the buyer to find a home, negotiate the purchase price, and guide them through the closing process. |
| Home Inspection | A visual examination of the property’s condition by a qualified inspector. A home inspection can reveal potential problems with the foundation, roof, plumbing, electrical system, and other major components of the home. |
| Appraisal | An estimate of the market value of a property by a licensed appraiser. The appraisal is typically ordered by the lender to ensure that the loan amount is not greater than the value of the home. |
| Title Insurance | Insurance that protects the buyer from any ownership claims on the property by other parties. |
| Escrow | A neutral third party that holds onto money or documents until certain conditions are met. In a real estate transaction, escrow typically holds onto the buyer’s down payment until the closing. |
| Closing | The final step in the home buying process, where you will sign all of the necessary paperwork and officially become the owner of the home. |
| Fixed-Rate Mortgage | A mortgage with an interest rate that remains the same for the entire loan term. |
| Adjustable-Rate Mortgage (ARM) | A mortgage with an interest rate that can adjust periodically, which can mean your monthly payment could go up or down. |
| Homeowners Insurance | Insurance that protects your home from damage caused by fire, theft, vandalism, and other covered perils. |
| Property Taxes | A tax that is levied on real estate by the local government. Property taxes are typically paid annually. |
| Homeowners Association (HOA) | An organisation that governs a community of homes. HOAs typically have fees that homeowners must pay to cover the cost of maintaining common areas, such as pools, parks, and landscaping. |
FAQs
A 20% down payment is ideal as it eliminates the need for private mortgage insurance (PMI), which is an additional monthly fee. However, some loan programs allow for a down payment as low as 3%. The more you can put down, the lower your monthly mortgage payment will be.
Most lenders prefer a DTI ratio of below 43%. This means that your total monthly debt payments (including housing expenses, car payments, student loans, etc.) should not exceed 43% of your gross monthly income.
Yes, getting pre-approved shows sellers that you are a serious buyer and helps you understand how much you can afford to spend.
In addition to the down payment and mortgage, there are other costs associated with buying a home, such as closing costs (loan origination fees, appraisal fees, title insurance, etc.), property taxes, homeowners insurance, and homeowners association fees (if applicable).
A real estate agent can represent both the buyer and the seller, while a buyer's agent works solely on behalf of the buyer.
Look for an agent who specialises in working with first-time homebuyers and who is familiar with your desired area. Ask for references and interview several agents before choosing one.
There are a number of government programs that can help first-time homebuyers with down payment assistance or tax breaks. Examples include the Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans, and USDA loans for rural areas. How much should I save for a down payment?
What is a good debt-to-income (DTI) ratio?
Should I get pre-approved for a mortgage before I start house hunting?
What are some of the hidden costs of buying a home?
What is the difference between a real estate agent and a buyer's agent?
What should I look for in a real estate agent?
What are some government programs that can help first-time homebuyers?
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
