Are you considering buying a new home for the first time?
I was a first-time home buyer a few years ago, and there’s a couple of tips I wish I had known back then.
1. Start saving early for a down-payment
Saving early for a down-payment is one of the best tips I can give.
A down-payment of 10-20% is a requirement from most banks in order to get a loan at all.
If you have money to pay for a down-payment, you will be able to get much cheaper loans. The more you have, the cheaper loans you’ll get – and the bigger houses you can buy, although I recommend only buying what you need.
2. Evaluate your financials
Get an overview of how much money you (and a potential partner) have available each month after taxes and all living expenses.
Then decide how much you want to spend on housing. Personally, I don’t believe housing should ever exceed 20% of your disposable income, but I know that it is not possible to keep this in all situations.
Remember to keep some money for savings, so you don’t spend all you have every month. I target a savings rate of 50% or more.
3. Explore loan options
Start with checking your credit score to see if there are any things you can dispute. Credit scores determine whether you can get a loan and at which rates you can get it, so make sure to do your best to increase the score.
Once you know your credit score and have optimized it, make sure to compare loans from different providers and find out more about different types of loans – there’s a lot to save over time.
4. Pick a house for tomorrow
Make sure to buy a house that is future proof. Do you expect to have kids in the near future? Do you want to live with a roomie for the rest of your life? Do you want to live in the nature when you get older?
I suggest buying a house with at least a 5-10-year time horizon. The money, time and effort spent with every new purchase is quite significant, so make sure to buy a house that will suit your needs for the next 5-10 years.
5. Do your due diligence
Make sure to do a thorough due diligence of the house you are going to buy. Find out how old it is, what maintenance has been done or are planned, evaluate the condition of the house etc.
I always recommend involving a lawyer and building experts. It might seem like a lot of money upfront, but trust me, it can turn out to be a very wise investment.
Always negotiate when you are buying a new house. You should negotiate the price with the seller. Point out the maintenance needs and use it to get a price reduction.
Negotiate with the bank – get many different loan offers and use them to negotiate the best loans.
Negotiate with your lawyer and building experts to get the best deal.
7. Set aside money
I can’t stress this enough. There will be expenses you don’t expect.
Unexpected maintenance costs will arise often and you need to be prepared.
You or your partner might be fired and need some money to pay the rent until you find a new job.
You might want to refurbish a room or build something new.
So many things can happen, and you need to be prepared. Setting money aside is something you should always do.
Questions? Let me know in the comments – and remember to always bring professionals on board when buying a house (especially for the first time).