Tips for First Time Home Buyers
Buying a house is one of the biggest purchases you’ll ever make. As a first-time buyer, the decision can be scary. You don’t have to be a real estate expert to get a good deal, but having some basic knowledge of the housing market can help you feel more confident in the process. That’s why we’ve compiled a list of our top tips to help you avoid the mistakes people often make:
Create a list of what you want in a home
When the time comes to start the search, you’ll want to be flexible, but not blind. Set your priorities beforehand and have an idea of the kind of home you want. What are deal breakers for you? Write down features you can’t compromise on, things specific to your family like number of bedrooms or location, and start a targeted search based on those. Also, consider other preferences or things that would just be nice to have. These won’t disqualify a house but will help you make a better decision when presented with options.
Plan for other expenses
While saving for a down payment, you’ll also want to think about the other expenses that come with purchasing a home. Many first-time buyers make the mistake of overlooking closing costs, which are often 3-4% of your home’s purchase price. That’s a sizeable chunk of money to not account for. But it’s not just closing costs that catch buyers off guard—there’s also move in expenses, routine home repairs, and taxes. All of these can create additional financial stress that can easily be avoided by saving as much as possible and planning ahead.
Keep an open mind
If you’re looking for the perfect property, you’ll be looking forever, because it doesn’t exist. Many buyers pass up great homes because they aren’t ‘up to their standards.’ It’s good to know what you want, but being too demanding can narrow your choices to the point where you have none. Most cosmetic issues, or even minor layout issues, can be fixed through renovation after purchasing the house. Instead of fixating on the details, keep in mind things you can’t change like neighborhood quality, commute times, and size.
Get the information you need
Never buy a home without doing your research! What looks good on the surface may have major problems lurking beneath. Look at houses in the area online, meet your potential neighbors, and learn more about the neighborhood. If you visited during the day, drive by at night and take a second look. Notice any red flags—are there constantly loud noises that would make living there uncomfortable? Are the people unfriendly?
Remember there’s only so much you can find out yourself. Ask your agent questions when you have them, and pay attention to the results of the home inspection. Going to multiple sources will give you the information you need to make the smartest decision.
Don’t rush into buying a property
For as many good reasons there are for buying a home, there are just as many bad. If you’re buying a house because mortgage rates are low, or because you feel like it’s what you should be doing as the next step in adulthood—don’t. Buying a home isn’t just something you do overnight; it’s a big decision that takes time and will affect you for years to come. If you’re going to purchase property, do it because you want to and are financially ready for the burdens that go with it, not because you feel pressured to.
Once you do decide to start the process, write out a plan or timeline no less than a year in advance. Give yourself time to pay off debt, boost your credit score, and save enough to cover the down payment and other home-related expenses.
Think long term
Your home is an investment, so think of it like one. Buying the lowest priced home in a good neighborhood leaves a lot of room to add value, even minor changes to cosmetics can up the selling price when you decide to move, five, ten, or fifteen years down the line.
But a house isn’t just a financial investment; it’s also a life investment. You’ll spend a lot of time in your home over the years, so keep in mind what you may need in the future when searching. For example, if you and your spouse are considering having kids in the future, you probably shouldn’t purchase a one-bedroom home. As a general rule, it’s better to buy a house you can grow into than to buy one that fits you exactly as you are now.
Stick to your budget
Getting so wrapped up in a home that you abandon your budget is a recipe for disaster. Making a decision based on emotion will not only blind you to other important details, but it will hurt your financial stability in the long run. Keeping to your budget is essential. Instead of focusing on the maximum loan you qualify for, think in terms of monthly payments you can afford.
If your monthly payments are so high that they entirely deplete your savings, you’re in dangerous territory. There are hidden costs that come with owning a home--HOA fees, trash collection costs, landscaping, and housekeeping, among other things. According to a study from Bankrate, the average homeowner spends approximately 2,000 on these additional costs. You can’t plan for everything, so leave some room in the budget for the unexpected that will inevitably occur.
Don’t start the search until you’ve been pre-approved for a loan
It’s unwise to start the house hunt before you’ve been pre-approved for a loan. You’ll either waste time and form unrealistic expectations by looking at homes you can’t afford, or you’ll end up behind other buyers when you do find a home you want to make an offer on. Either way—you’re setting yourself up for disappointment. Do yourself a favor and spend your time researching rates and getting your finances in order before you jump into house hunting. Getting your finances in order first will show sellers you’re serious and give you a better chance against other potential buyers.
Don’t make other financial changes
As much as possible, keep to the status quo of your finances. This applies not only in the months prior to applying for a mortgage, but all the way through closing day. Having a preapproval doesn’t guarantee you the mortgage. Lenders will notice if you’ve taken out any new loans, closed accounts, or missed payments on other bills. Don’t take the risk. Just play it safe and be responsible.