For most recent college graduates, purchasing their first home may not be a financial reality or a top priority. But the benefits of homeownership are conveyed to young people in the same manner as anyone else. Owning a home provides a vehicle for building equity, reducing tax liability, and investing in real estate. The following strategies can help young people successfully navigate the real estate market:
1. Save and Establish Your Credit History
The first step to achieving financial independence is to consistently save a portion of your income for future needs. Savings early in life can contribute to increasing the size of your down payment and reducing the monthly payments on your first mortgage. Establish your credit and maintain a favorable credit history by paying all your bills on time, every time.
Perhaps the most critical piece of information in searching for your fist home is what you can afford. Budgeting for your first home requires that you consider all components of home ownership such as mortgage payments, property taxes, home insurance, association fees, repairs, etc. Knowing your upper limits and prequalifying for a mortgage before you start your home search can help save you time and wasted effort.
3. Define Your Purpose and Identify Wants vs. Needs
Once you know your price range, the next step is to make a list of the reasons why you want to buy a home and the characteristics of the property that you would like to find. First time homebuyers often find that they must make several compromises in order to stay within their budget. For example, you may not want to compromise on location, but you might be willing to forego an extra bathroom to buy a house in the neighborhood of your choice.
4. Research and Do Your Own Homework
Today there are many online avenues that first time homebuyers can explore to advance their search. Look for information on comparable sales and for sale by owner websites to get a better feel for how the local real estate market is operating. If the property is for a potential investment, identify the characteristics which would lend to a strong return and resale value. By doing preliminary research on your own, you will be more informed and prepared when you meet with your realtor.
5. Choose a Realtor to Represent Your Interests
Now that you have researched the market, identified your reasons for buying a home, and the characteristics that you value in your first property, the next step is to select a realtor that is best positioned to deliver the results that you require. A good place to start your search is with friends and family, as they are most likely to be honest and forthcoming about their experiences. Always choose a realtor that you can trust and who works exclusively in your best interests.
6. Be Flexible and Open-minded
Despite all efforts to be prepared, informed, and certain of your search specifications, there will almost certainly be additional opportunities to exhibit flexibility and open-mindedness as you begin viewing potential properties. Keep in mind the purposes for which you want to buy a home, and determine how critical location is to this equation. Also, consider the opportunity costs involved with travel time both to work and other places of interest.
7. Follow Through with an Offer
When you finally walk through the door of the house that feels like home, satisfies your requirements, and is within your budget, make an offer! By now you have put in the time, researched the comparables, and teamed up with a realtor ready to negotiate on your behalf. Identify what is most important to the seller (price, closing costs, etc) and negotiate for other concessions that generate additional value for both parties at closing.
Buying your first home is one of the major accomplishments of your life. For first time homeowners, the home buying process may seem daunting at first, especially for young people in their early twenties. However, you can position yourself for success and homeownership by following the simple strategies outlined in this article.
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