25 Tips for First Time Home Buyers
“Success is not a big step taken in the future, success is a small step taken right now.”
I love working with first time home buyers! It brings me so much joy to educate these buyers on the process. Most rewarding is being able to help them find that special place to call home and capture a piece of the American dream. I truly believe home ownership not only increases a sense of community, local economy, and personal wealth, but it is also something everyone has the right to achieve.
After helping many “first-timers”, I have put together a list of tips I feel are important and helpful for anyone who has decided to start shopping for their first home. While this list is not an exhaustive guide, it does cover the most common mistakes, myths, and/or pitfalls that I have experienced first time home buyers make. If you have any further questions or thoughts after reading this list, I encourage you to contact me! I am happy to help.
Tip #1: Explore many homes and neighborhoods prior to jumping into the offer writing stage. It’s critical to understand what you want in a home and what is most important to you. Since you will most likely have to make compromises on your “wish list” (there is no such thing as a perfect home, although it hopefully will come very close), you should still feel absolutely confident in your decision because you have explored or been completely honest with yourself about what you really can’t live without.
Tip #2: Understand the full cost of homeownership. As renters, many first time home buyers only think about homeownership as one expense: your monthly mortgage payment. However, there are many facets of home maintenance and repair that you should be considering. Ideally, you ought to be setting aside money every month for a reserve fund in addition to your monthly mortgage payment to help pay for any unexpected home repair issues that may come up.
Tip #3: Don’t assume you won’t qualify! I often hear renters who believe they cannot buy a home because they haven’t saved enough for a downpayment or prices are too high. You’d be surprised how much home you can buy! A good way to get an idea is to look at an online mortgage calculator. You can compare your current rent with similar monthly mortgage payment amounts to see the price of a home in your budget. (See Tip #4 to learn more about downpayment). Another great tool for renters who aren’t sure if they should buy is Zillow’s Rent vs. Buy calculator. There are many factors that go into making this calculator accurate, so if it seems like you might be on the fence between renting or buying, contact a lender or a Realtor for a more specific look at what is right for YOU.
Tip #4: Start saving for a downpayment early & research downpayment assistance programs. Saving for a downpayment is often cited as the biggest hurdle to homeownership, but did you know you don’t have to put 20% down in order to buy a home? The minimum downpayment needed is about 3.5-5%. There are numerous downpayment assistance programs available to buyers as well. Ask your lender for more information on these programs. I also advise anyone who is even slightly thinking about homeownership at some point in their lives, to start saving for the downpayment. It is never a bad idea!
Tip #5: Don’t get pre-approved at the last minute. I meet many first time home buyers at my open houses who are waiting to speak with a lender once they find the home they love. While this may seem like a good strategy to simply see what’s available first, or to avoid wasting anyone’s time, it is really a disservice to you as a buyer. Speaking with a lender early will ensure that you are getting the best loan and interest rate because it will give the lender a chance to help you correct any issues that may pop up on your credit report. It will also reduce your stress during a period when you are going to be making many big decisions.
Tip #6: Don’t spend your entire budget & determine how much you can afford. I think this one is really important for buyers to understand! Your max budget is a number your lender gives you, but it doesn’t mean you have to spend it all! I would encourage you to try to find a home more in the “comfort” zone first.
Tip #7: Avoid job hopping. Employment history and income are two of the biggest factors lenders look at when evaluating a mortgage application. A steady job history with no gaps over the previous two years is most ideal. Lenders also prefer to see that if you changed jobs, it was within the same industry.
Tip #8: Sweat equity can save thousands. If you have the skills, the time, and the patience to live in a construction zone for a while, then buying a fixer upper can save you a lot of money. Think of it this way: you are doing the work yourself instead of buying a house that has already been remodeled with the cost of paying someone else to do it built into the sales price.
Tip #9: The school district will affect home value. Whether or not you care about the school district, knowing which neighborhoods are highly sought after because of their schools can help you in a couple of ways. First, you will understand your competition when putting together an offer (and know that it might be more competitive than usual). Second, just know that living in a sought-after school area raises your property value.
Tip #10: A land survey will answer boundary questions. Before making changes to your property, it’s a good idea to find out your exact property lines. You can’t always rely on the seller’s knowledge of the property, and title report maps are often not detailed enough to show you exactly whether or not a tree (for example) is on your property or your neighbors.
Tip #11: Check building plans for the neighborhood. Before buying a home, find out if there are any building plans near your home to avoid surprises after you’ve moved in. There is a great website tool here in Seattle for this: Seattle in Progress. What I love about this website is that it tracks your location, so anytime you open it, it will automatically show you all the building plans and permits in your area. If you live outside of Seattle, you should be able to research building permits on your local government website.
Tip #12: Dig deeper during inspection. If you find issues during your inspection, it’s always a good idea to take a closer look. Talk to other experts, or research the cost of repairs. There is a great website that will analyze your full inspection report and give you a detailed report on the cost of repairs. It’s not free, but it can be a very useful tool in negotiation as well as just information for the buyer: Repair Pricer.
Tip #13: Continue negotiating after the inspection. If an issue is discovered during your home inspection, use it to your advantage. Even after inspections, you still have another chance to get a great deal.
Tip #14: Read HOA documents before making an offer on a condo. Reading a big stack of papers may seem like a huge hassle, but carefully reviewing your HOA documents is important if you want to avoid unpleasant surprises down the road.
Tip #15: Secure financing before falling in love with a house. Somewhat similar to Tip #5, I am stating this again because I have met buyers who have started the process of choosing a lender, but fail to get the pre-approval letter. In multiple offer situations, your offer needs to be strong and stand out. One of the best ways you can do that is with a pre-approval letter or even a fully underwritten letter from your lender.
Tip #16: Make sure renovations were professionally done. Just because a home is freshly remodeled does not mean that it is quality work! Take extra care in looking over these homes. If they did sloppy work, or didn’t finish small details, I would be cautious of what other aspects of the remodel were done with the same lack of attention to detail.
Tip #17: A creative bid strategy helps ensure a good deal. The best strategy is to simply understand the sellers wants and needs. A large portion of your strategy will come from your real estate agent, so hiring a professional can be considered part of your strategy as well.
Tip #18: Don’t overlook landscaping. Updates to the exterior of a home can add up just as quickly as the interior. If you aren’t looking to spend much more on the details once you have found a home, look for a property that already has the amenities and the landscaping that you desire.
Tip #19: A higher price point might save money over time. Slightly different from Tip #8, this tip is why it is important to really evaluate what you learn about a house during inspection as well as understand the true cost of buying a fixer upper. After making interior and exterior renovations, many homeowners find that their budget has been stretched way beyond what they initially wanted to pay for a home. For this reason, it can be smart to adjust your price point a little to help you save money over time. By paying a little more upfront for a home that has all the upgrades and extras you want, you won’t have to worry about paying for them down the road.
Tip #20: Low-balling doesn’t always pay off. Instead of looking for homes at the top of your price range and making low-ball offers, it might be better to look well below your top range so you have more liberty to make outstanding offers to sellers while staying within your budget.
Tip #21: Change a bid strategy that’s failing. If you continue to lose in multiple offer situations, it might be time to reconsider your strategy. Whether that is changing the price point you are looking in, adjusting the amount of your escalations, or being more flexible in your offer terms.
Tip #22: Start shopping for homeowners insurance early. Homeowners insurance is something every lender requires, but it is something most buyers forget about. When you begin house hunting, it is a good idea to start calling different insurance companies to learn about their rates. While they will not give you an exact number without a home address, you can still start the process. I always recommend you start with the company who insures your car or life insurance because they will often offer you a discounted bundle rate.
Tip #23: Build a solid credit history. Not only is it important to have a good credit score for better interest rates and ability to get a loan, it is also important to even have credit history! Many first time buyers think that because they do not have a credit card, they have great credit. However, you must show some evidence of being able to pay a debt in order to have a credit score.
Tip #24: Buy to improve your life, not to speculate with your money. This one is very important for first time home buyers to understand. I often hear buyers who are looking for the best return on investment. Having that as a goal isn’t a bad thing, but it shouldn’t be your only motivation. Trying to “time the market” or buy in the neighborhood that is “up and coming” and therefore going to make you the most money, isn’t a favorable strategy because no one can predict the future. Real estate is a long-term investment. The housing market is too unpredictable to buy a primary home purely because you think it will net a big, short-term financial return. You will most likely be living in the home for several years, regardless of how it appreciates, so your first priority should be finding a home that will meet your needs and help you build the life you want.
Tip #25: Reserve some cash for home improvements. This tip coincides with a few that I have already mentioned, but it is so important, I wanted to reiterate! Slightly different from home repairs or maintenance, home improvements are the fun stuff! While you may love everything about your new home, it’s important to budget for the inevitable bathroom or kitchen remodel.
I hope this is a helpful list of tips for you! If you have any questions or would like to talk about starting your new home search, please feel free to contact me anytime.
I look forward to hearing from you!
Amy
