If you have been saving up for a deposit to buy your very first home or an investment property, there are exciting times ahead. There’s often not much that’s quite as thrilling (or nerve wracking) as signing on the dotted line and picking up the keys to one of the biggest purchases you’ll ever make.
However, when you’re a new buyer, it’s easy to get overwhelmed by all the information and steps involved, and to rush through things without thinking them through clearly. In order to help you make the most of your money, read on for some handy tips you can follow today.
Be Clear About Your Goals and Budget
For starters, to ensure you make the best decisions possible when it comes to real estate investing, you need to work out what your goals are for the purchase in the first place. For instance, are you searching for your dream home that you and your family can live in for the foreseeable future, or a property that you can buy, do up, and then on-sell for a profit in a few months or years? Perhaps you’re interested in generating more cashflow each year, or in getting a big capital gains return in a short period, or even in buying land that you can develop at a later date?
Once you’re clear about the results you want to achieve from buying your first property, you will have more direction, and know what to look for when evaluating your options. In addition, don’t forget to put a budget in place before you go shopping for a property. This will ensure you don’t end up overextended, or buy something with plans to renovate, only to find you don’t have enough cash available to do so.
Buying real-estate is one of the biggest financial decisions you’ll make. You have to keep this in mind when choosing what property to invest in and what this would mean for the long-term. As you build a family for example, and your financial situation improves, the first property you invested in may or may no longer be suitable for the primary purpose it served when you first bought it. When faced with decisions on what to do with it, you may consider transferring your property to your heirs by using a quitclaim deed. By quitclaiming your property to your children or any heir, they will be ensured a property on which they themselves may consider re-investing back.
Understand the Various Types of Properties
Following on from the above tip, make sure you are also clear about the various types of properties you can purchase, and your preference, before you sign on any dotted lines. While single-family homes, apartments, and townhouses are the most commonly-purchased real-estate options, there are other choices to consider too, each with their own pros and cons.
You might want to consider commercial property, such as offices, warehouses, whole unit blocks, hotels, parking garages, and retail spaces; or you can think about buying landing to build your own property on. If you don’t have a big budget and are worried about whether you will be able to really afford a property, you might also want to check out real estate investment trusts, where you can pool your money with other people to invest in a property portfolio.
Preparation is Key
Another important step in buying a property for the first time is preparation. In particular, make sure you have all the paperwork you’ll need for a loan in place so you don’t waste time or get knocked back straight away just because you weren’t organized.
For example, make sure you have, ready to present, things like your tax returns from the last three to five years; a compilation of your various assets and liabilities; 12 weeks or so of recent pay checks or other documentation to prove your income level; and potentially details of your venture’s trading history if you’re self-employed.
It pays, too, to check your current credit score. While banks and most other lenders will take a look at this anyway, it helps if you’re aware of what will come up in your credit report so that you can take steps to improve your score if required.
Find the Best Financing Deal for Your Needs
Of course, one of the most crucial aspects of buying a property for the first time is finding the best financing deal for your needs. Because everyone has a different budget and situation, remember that what may work best for others won’t necessarily suit you. As such, you should do plenty of research to find a mortgage product you feel comfortable with.
You’ll need to look into the various different lenders on the market (and keep in mind that these days there aren’t just banks to consider, but also online and alternative lenders), and think about whether you want a fixed-rate or adjustable loan. In addition, don’t forget that some federal, state, and even local government assistance programs are available for first-time home buyers to take advantage of.
Once you have your loan approved and have purchased your property, it is also important to remember that you can always refinance as time goes on too. While the loan you sorted out initially may have been the best deal for you then, over the years as new options become available and your situation changes, you may find another product fits better. As such, keep an eye out for harp refinance options and other financing choices which can save you money.