10 TIPS FOR THE FIRST TIME HOME BUYERS
To all our first-time home buyers, we know that you’re probably feeling excited and nervous at the same time. Overall, first-time home buyers are usually certain about the big picture but unsure of the details. We can honestly tell you we know how it feels getting ready to buy your first home, we’ve both gone through it feeling all those emotions. Here are 10 tips to help you get prepared and educated.
1. GET PRE-APPROVED BEFORE YOU START HOUSE HUNTING
One of the first steps of getting your future home is to get pre-approved by a proven local bank. By doing this you’ll have enough time to address any potential credit issues, have a clear idea of how much to set aside for the down payment, and get a good idea of how much your monthly payments will be once you find the perfect home. Once you know how much you can and want to spend it will help you focus your search accordingly, and you will be ready to make an offer when you find your dream home.
2 BUYER’S REPRESENTATION IS FREE
When choosing a Realtor, make sure you find someone that is looking out for your best interests. I often hear from first-time home buyers that they don’t reach out to an agent when starting their search because they don’t have the extra money. What you may not know is that the seller has already negotiated the commission they pay to both buyer and listing agents long before you see the house on the market. That means the SELLER pays commissions to the buyer’s real estate agent. In the case that the buyer doesn’t have an agent representing them, and contacts the listing agent to purchase a home, that agent typically keep the full amount. This situation makes a very happy listing agent, but more importantly, there is a buyer that may not really have anyone protecting their best interests because that listing agent will want to sell as high as possible for their seller. There is a fine line of ethics at play here, and this is another reason it is so important to select an agent that you can trust!
3. SIT DOWN WITH YOUR AGENT AND LET THEM WALK YOU THROUGH THE PROCESS
First-time home buyer or not you probably have a lot of questions, and several of your questions are probably about the pre-buying process. Our job as Realtors is to help you navigate through the transaction and prepare you for what’s to come. We can explain what to expect from each checkpoint of your transaction and set realistic timelines and expectations for your process, all while breaking down every step into easy to digest actions. If your Realtor is “too busy” to answer these questions or doesn’t put a priority on educating you, then you may want to consider interviewing someone else who can offer you meaningful knowledge and will work hard to make sure you completely understand the process. This way you will be confident when moving forward.
4. BE PREPARED TO ACT QUICKLY
Homebuyers (and their agents) should be able to act as quickly as possible. Recently it has been a seller’s market – meaning it’s very common to see a bidding war on homes and some sellers are even getting considerably more than listing price for their houses. Buyers should be prepared for tough negotiations, dealing with stiff competition, and being resilient during their home search. Being the first bid in has its advantages, and if you are able to submit a strong offer before any competing buyers it may help you get the home that is the perfect fit.
5. BE SYSTEMATIC IN YOUR APPROACH
Make sure that you’re putting logic before emotions. Too often, first-time homebuyers will be overcome by emotions and become attached to a house, then pay too much for it. That house may even be in a less than desirable area, or in poor condition. As we mentioned in Step #4 (Be Prepared to Act Quickly) it is sometimes necessary to pull the trigger quickly to get the home you want, but purchasing a home should never be a rushed process. Spend some time to research the local market trends (so you don’t pay too much), clearly define exactly what you are looking for before you start shopping, and talk to your Realtor to make sure that the whole plan that is in place will guide you to the outcome that you want to achieve. Then if you feel the emotions bubbling up, be sure to step back and review that process to make sure you are making a good decision.
6. GET A SECOND OPINION
You certainly don’t have to do this but after you find the home of your dreams, you may want to get someone else’s opinion. Having a family member, friend or a trusted colleague, they may notice something that you didn’t the first time around. Great bonus is that if they love the house then you can rest easy knowing that you’re making the right decision.
7. KEEP AN OPEN MIND WHILE SEARCHING FOR HOMES
It’s important to have an open mind when you’re looking for your new home, especially for many first-time buyers who are on a budget. If you’re reading this blog, then it’s probably safe to assume that you’re doing your homework and keeping your options as wide open as possible. Be careful not to expect what you see on the 30 minute HGTV, because you will likely look at more than 3 homes before you write an offer, and be realistic for what is available in your area. Stay within your budget, but give yourself some “wiggle room” to go a little up or down in pricing, especially if the market is competitive while you are shopping. We typically recommend to our buyers to have no more than five “must have’s” in their potential home (ie. “must have 4+ beds, a large yard, quiet neighborhood, etc.). Any more than five then your search may become too narrow. So before you start shopping write your list of “Five Must Haves”, stick to it, and use it as a guide throughout your shopping process.
8. YOUR FIRST HOME LIKELY WON’T BE YOUR LAST HOME
You are probably excited about the thought of owning your very own home, and even though we haven’t even found yet, keep in mind that your needs will change in the coming years. We often hear buyers say, “This is my forever home,” but it’s hard to predict where our families, jobs, or lives will take us 5 or 10 years down the road. So we usually suggest to our first-time home buyers to look for a house that suits what they need now and for the next few years, and don’t buy something that will be hard to resell in the future. If it truly ends up being your forever home then great! But this way if your needs change over time you’ll have the flexibility to do so; maybe move out of town, get a bigger house, or maybe you’ll want to build a beautiful home that suits you.
9. SHOP AROUND FOR HOME INSURANCE
One thing that we’ve noticed is that many first-time home buyers will automatically go to and use the company that has their auto insurance to cover their home insurance as well. This may be a good option (because, bundling right?…) but prices can vary dramatically between companies for the same coverage. So be sure to check with 2-4 different companies to get the best deal. This can make a big difference in your mortgage payment since you will likely set up an escrow account at closing, which will include your home insurance payments.
10. KNOW YOUR BUDGET AND FACTOR IN ALL HOUSING EXPENSES
As mentioned before, in this market, it’s easy to get excited about a particular home after you’ve been bidding on homes for a while and possibly losing a few. Sometimes you’ll need to step back and refer to the meeting with your lender when you first got pre-approved. After looking for a while you may decide you want to increase your purchase price or bid a home up, but don’t forget to ask yourself, how much are you willing to spend on your monthly mortgage payment? Although you may be qualified for more it might not be the best option because your higher monthly payment could make you “house poor,” and make it tough for you to afford other expenses. Also, remember to factor in property taxes, mortgage insurance, and other expenses like water, gas, electricity, cable/internet, etc. Get a number that you will be comfortable with and stick with it so when the time comes for placing an offer, you are ready to go.