For many, buying a home is considered a rite of passage. Not only does it provide a sense of security, but a home can also be a source of personal pride. Owning your own home is a mark of achievement as someone who pursues the American Dream.

However, the process of buying a home is not necessarily easy. As well as the cost of buying a home, first-time buyers also face the complicated process of closing a deal. From finding a home that suits their needs to negotiating the best price, people who are new to the real estate market need to know how best to face the challenges of securing their dream home.

If you are planning to buy a home in today's market, it pays to know how you can make the experience less stressful and costly. For that, you will need to invest in a few crucial skills as a first-time homebuyer.

1. Goal-setting

As with any other life-changing phase, buying a home requires lots of time and money to pull it off. You wouldn't want to decide based on the wrong reasons. Instead, you need to set clear goals that make the process worth the effort.

For this, consider what you want to do in the long term. If you’re planning to settle down with your family, perhaps you would like to purchase a home, stay there for some time, and sell it when you have built enough equity to upgrade to a bigger home.

No matter the case, your decisions should be based on what you want to achieve in the future. Without a clear set of goals, you could end up wasting time and money on a home you don't even like.

2. Financial Forecasting

Apart from setting long-term goals as a homebuyer, you also need to check if you are in the right financial position to afford your first home. According to Zillow, the average price of a home in the US is $356,026. However, the cost could be even higher than this average, especially if you are looking for a home in large metropolitan areas such as the Greater Los Angeles area or Dallas-Fort Worth.

You need to check if you generate enough income to afford a downpayment and make recurring mortgage payments. You also need to factor in other costs, including home insurance premiums, water, and energy costs, as well as HOA fees and property taxes.

To be sure, ask for advice from your financial planner and review your credit standing. Your ability to maintain ownership will depend on your financial health. Once you have a better understanding of how much you can afford in the long term, plan a strategy for saving money for your home purchase and making monthly payments.

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3. Mortgage Shopping

At this point, you need to pick a loan that fits your current financial situation. Depending on factors such as your monthly income and credit record, you may qualify for loans at higher or lower interest rates. A lower credit score usually means higher interest rates. Ensure to shop around to find the best mortgage rate available.

Choose a home financing option you can afford in the long run. Aside from private money lenders, first-time homebuyers in the US should consider government programs under the FHA which require a lower minimum credit score along with lower up-front costs.

If you are a former service member, you can opt for a VA loan. On top of having more relaxed credit requirements, this type of mortgage does not require a down payment and, if you decide to pay your mortgage in full, is without repayment penalties.

You need to get pre-approved first before you finally decide on buying your first home. With a pre-approval letter, you let home sellers know you already have the means to purchase the home you love.

4. Planning an Exit Strategy

Your first home might not be your last. You might be thinking of transferring to a larger one if you feel as though you have outgrown your first home. Until then, it is important to come up with an exit plan in case you decide to change your priorities.

For instance, in case home values fall and you can no longer afford to make improvements to your home, you may consider selling the property.

If home prices increase in your area as demand picks up, you may have earned enough equity to upgrade to a larger home in an ideal community. You can sell your home to investors or rent it out so it creates an extra source of income. With an exit strategy in place, you can avoid running into financial problems if the market doesn’t work in favor of homeowners.

5. Finding a Good Real Estate Expert

It’s possible to purchase a home without a real estate agent, but with the amount of time and effort it takes to close a good deal, you might as well get one. While you and the seller may need to pay the agent’s commission, it’s still a good price to pay if it means getting the best possible deal out of the transaction. That’s because a real estate professional can help you negotiate better terms.

There are many ways to find a good real estate expert in the market where you will be buying your home. Apart from doing a simple Google search, you can also ask for referrals from people who have just closed a deal on their first home.

6. Making Decisions

Your ideal home could have a price tag that’s out of your reach. As much as you want to live in a home that matches your preferred lifestyle, you need to focus on the best possible option in today’s market. Manage your expectations. If your first choice won’t close because the seller refused your offer, you should keep looking.

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As a first-time buyer, make sure to follow these tips before venturing toward the American Dream.

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