Tips for First-Time Homebuyers

Buying a home is an exciting time, but it can also be a nerve-wracking experience. We know investing in real estate is likely one of the biggest purchases you’ll make in your lifetime, and here at Anderson, Bagley & Mayo (ABM), we want to make sure you enter into this decision feeling confident. The trusted team at ABM has put together a list of tips to help first-time homebuyers securely sign on the dotted line.

Tip #1. Create a Budget and Stick To It

Before you start picking out your dream home, you’ll want to take a look at all your finances and create a realistic budget. You can determine how much house you can afford with these simple guidelines:

  • Maximum Mortgage Payment — When looking at your gross monthly income, the amount you make pre-tax, your monthly mortgage payment should not exceed 28%.
  • Maximum Total Housing Payment — Next, your housing payment, which includes your monthly mortgage, insurance fees, homeowners or condo association fees, and property taxes, should not exceed 32% of your gross monthly income.
  • Maximum Monthly Debt Payment — Finally, your monthly debt payment should not exceed 40% of your gross monthly income. When calculating this number, you will want to include your mortgage payment, housing costs such as taxes and insurance, as well as any additional monthly debts you may have – car payments, student loans, and credit cards are the most common. 

It is important to note that some lenders use different debt-to-income ratios when determining your maximum mortgage approval amount. Other factors that play into the lender’s approval decision are credit score and payment history. While you work on saving for your down payment, you’ll also want to keep an eye on your credit score and continue to pay down any monthly debts to show the bank that you are reliable and credit-worthy. When determining your budget, don’t forget to account for things like closing costs, realtor fees, and moving expenses!

Tip #2. Know Your Non-Negotiables

Once you have determined how much house you can afford, you’ll want to start thinking about all the things you want in a home. It may even be helpful to create a list of non-negotiables. Taking the time now to determine desired location, purchase price, square footage, number of bedrooms and bathrooms, and yard size will help you narrow down your search in the future.

Tip #3. Use an Experienced Realtor

Next comes the fun part — looking for homes! Without an experienced realtor, shopping for homes can feel overwhelming and rather time-consuming. Do some research, talk to friends, and find a realtor that understands your unique needs and is familiar with the area you are looking to move to. This will be extremely helpful when it comes time to negotiate price, find comparable homes, and set up inspection and closing dates.

Tip #4. Get to Know the Neighborhood

Once you’ve narrowed down your search to a specific neighborhood, do your research. Look at prices of other comparable homes in the neighborhood. Are homes going for well above or below asking? Does there seem to be a lot of competition vying for the homes for sale in the neighborhood? Having a strong understanding of the local real estate market will help you make more informed decisions as you get further along in the home buying process. An experienced real estate agent can also help with this part of the process, as they are generally more privy to real estate market information and data.

Tip #5. Don’t Forget to Speak to Your Insurance Agent Before You Sign an Agreement

Last, but not least — insurance! We know you have just spent a large chunk of change on the perfect place, but now it’s time to make sure that your home and belongings are properly insured. That’s where we can help! An ABM insurance agent can help give you the peace of mind you want and need by walking you through all the coverage options available to you as a homeowner. Often times, we can also help you save some money by combining your home and auto insurance policies with the same insurance carrier.

At Anderson, Bagley & Mayo, we understand that buying a home can be a stressful time, which is why we want you to know that we are here to help. If you are looking for more information, have any insurance questions about a new homeowner’s policy or perhaps interested in taking advantage of a bundle-and-save option, contact us at one of our three convenient Massachusetts locations at 978-534-2800 (Leominster); 978-632-1098 (Gardner); 978-874-2921 (Westminster) — we’re happy to help!

4 Responses to “Tips for First-Time Homebuyers”

  1. Leviticus Bennett

    I found it interesting when you said that the size of a yard and square footage should be taken into account when buying a home. Those are the sort of details that I think most people would not consider. It goes to show how having a real estate professional would be a smart plan if you want to avoid overlooking important details.

  2. Jenna Hunter

    I appreciate your advice on creating a budget when thinking about buying a house and to find a mortgage payment that doesn’t exceed 28% of your income. My sister is thinking about buying her first house and doesn’t know where to start when it comes to mortgages and finding a good real estate agent. I think that she should start with the basics of simply making a budget and seeing how much money she has to go towards a mortgage.

  3. Georgia B

    Oh, I’m glad you mentioned talking to your insurance agent before signing on the house! My husband and I are trying to study up so that we’re prepared to start looking for our first home. I had totally forgotten to factor in home insurance into our monthly budget, but it would be really good to know that our house and everything in it are protected!

  4. Heidi Bookenstock

    My husband and I are planning to take some steps toward moving out of our apartment and buying a home. Neither of us have done this before, so we aren’t really sure where to start. I like the tips in this article, especially about knowing what is non-negotiable for us, like location and square footage and things like that, so we can plan for those things when we create our budget.