Expert Tips for First-Time Home Buyers

First Home Buying Guide

     Buying a first home is one of life's achievements, topping almost everyone's bucket list. Buying a house can be fun, but it can also be a bit scary. However, it is the biggest financial move you will ever make. And maybe this article can help you buy a home. Here are seven key factors that can increase your skills and confidence on the exciting journey to home ownership.

10 Things to Know Before Buy a House for the First Time

Check out your savings

Never consider buying a house before you have an emergency savings account with three to six months of living expenses. When you buy a home, there will be substantial upfront home purchase costs, including a down payment and closing costs. You need money set aside not only for these expenses, but for your emergency fund as well. The lender will need it. (investopedia.com)

Home Purchase Down Payment

Down payment for home purchases is still one of the big obstacles for potential buyers. Millennials, in particular, have a hard time saving. Millennials have not only graduated from university through one of the worst recessions in American history, but they are saddled with student loan debt.

If that's not enough, the underwriter becomes harder to work with, and the loan makes it impossible for you to keep enough cash for a down payment. In an effort to make the extra down payment “affordable,” several parties announced that they intend to support loans with down payments as low as three percent. Additionally, the Federal Housing Administration (FHA) plans to lower the premiums owed on mortgage insurance. This journey should make "owning a home" a lot more affordable for buyers.

Buy a home in the right area

Find out where you want to live before you start searching for a home. Consider things like the college you want your children to attend, as well as the "to" and "from" trips to your workplace before deciding.

Think about the commitment.

I'm not only talking about your mortgage. When you get married, your state's laws generally determine how your properties are treated - and ultimately how they are distributed at the time of divorce. The same rules will not always apply if you are not married. That means you need to think for the long term.

When you're buying a house with someone who isn't your spouse, make sure you have an exit plan in case things don't go the way you expected. It's good to have settlements with respect to certifications, mortgage payments, and liabilities, repairs and the like: it's good to have them in writing (and yes, I'd recommend getting a lawyer).

Be careful with hidden fees

Try to find out about so-called "hidden costs" before you buy a house. Transfer fees, delivery fees, deposits for electricity and water, all must be paid, and must be considered. Think about what you want before buying a home, and make sure you have enough cash to cover any additional costs.

Long stay

While it is often overlooked, the amount of time you plan to spend at home is one of the most important factors to consider when you are buying a home. Basically, does a long stay make a purchase cheaper than a rental? Of course, there's no easy solution to such a common question. Each market is different, and will require further evaluation to decide if buying a home is the right choice.

It's possible to consider whether or not the time you plan to spend at home warrants a purchase. On average, it takes four to seven years to break even in a home, at which point you've earned enough appreciation that it can pay you back on transaction fees and ownership fees. If you're wondering about buying a home, selling it in two years and assuming it'll be cheaper than renting, that's highly unlikely.

Don't be lulled by the reduction in mortgage interest rates.

Many taxpayers are tempted to buy more homes than they can afford, considering that they will save enough on their reduced mortgage interest to make up for it. Mortgage interest deductions are only deductible if you itemize it on your Schedule A: only about 1/3 of taxpayers claim the itemized deduction. You're damaged if your withholding exceeds standard withholding: for 2015, the standard withholding rate is $12,600 for co-filed married taxpayers, and $6,300 for individual taxpayers (rates remain in effect for 2016).

Assuming you're unhealthy, remember that your expenses will still outweigh your tax savings (if you're in the 28% bracket, paying $5,000 more in interest will only "save" $1,400 in taxes). And you can't count on the same level of savings: mathematically speaking, the longer you own the home, the less interest you'll have to pay. That's true for growing equities, but that means less tax time deductions.

Never rush into a deal.

It's a big deal. Take your time and don't allow anyone, including an agent or seller, to "force" you to buy something if you're not sure about any aspect of the home. You can get a lot of information from home buying sites. Think things through before making a decision, and make sure you really want the house before you bid.