Buying a Home 101
The first thing to remember when buying a home is: You can do it. Daunting legal and financial jargon make buying a home feel like a club you can only gain admittance to if you’re already a member. That just isn’t true. People buy homes every day and — before you know it — you’ll be one of them.
It is, however, completely normal to feel worried or unsure of where to begin. That’s why we’ve compiled this simple list of tips to get you started and point you in the right direction.
Make Sure You’re Ready
Looking for a job? Getting married? Having your first kid? Strangers, experts and family alike love to tell you all the reasons it’s never the right time to take a big life step. Buying a house is no different.
All you need to know about the housing market is that it’s constantly changing. Ignore people who tell you to wait until the market is at the right place before you buy. Spoiler alert: That time will never arrive. The best time to buy a house is when you’re ready, not the market.
How do you know you’re ready?
- You know where you want to look and what you’re looking for.
- You have a stable job that you’ve held for at least 2 years.
- You are able to commit to monthly mortgage payments.
- You have 20% ready to put down.
Find the Right Agent
Don’t pick the first agent that comes up when you open the phone book or enter a Google search. More than anything else, your realtor will shape your homebuying experience and success.
As a first time buyer, you want an agent that will do more than just forward listings and rush through tours. You want an agent that:
- Doesn’t send up any red flags.
- Is willing to walk you through the homebuying process from start to finish.
- Is able and willing to explain legal and financial details in a way you can understand.
- Will use their experience to point out potential home or property concerns that — due to inexperience — you might overlook.
- Will help you negotiate to make sure you are getting the best deal.
Online reviews can be misleading and some realtors cherry pick their references. With that in mind, your best bet is to find a realtor that comes highly and personally recommended by friends, family and/or coworkers. This way you can ask questions and get details about their experience, knowing that you can trust the quality of their review.
Search and Research
Once you’ve chosen a realtor, the two of you will work together to nail down your search criteria.
It’s a good idea to have a must-have list prepared. This list will help you define parameters from price to location (which may be influenced by school district, proximity to work, real estate taxes, etc.), square footage to style.
When considering your criteria, it’s important to do your research so you have a clear idea of how your desires will affect your price range.
For example, do you want a new construction home that’s move-in ready? Or are you looking for an older house you can renovate? A new home may cost more up front, but a fixer-upper could cost you more in the long run. A home that needs cosmetic upgrades to the bathrooms and kitchen will cost less to renovate than a house with a poor foundation or a roof in need of replacement. Be sure to hire a thorough inspector and find out things like the type of roofing, how old it is and the condition, all of which will affect the amount of money you’ll have to put into the house.
As you search you may find yourself looking at options in styles or locations you didn’t originally envision. Just be sure you stick to looking at homes in your price range. Looking at a different style may open up new possibilities. Looking at homes out of your price range either tempts you to spend more than you can afford or makes it impossible for affordable homes to live up to your expectations.
Secure Your Loan
Terms like prequalified and preapproved can be confusing for first time buyers.
Prequalification is a good step to take before starting your search. It will give you a clear idea of your price range and alert you to any concerns in your finances that you should address before officially seeking a loan. A simple error or a troublesome debt can affect your interest rates or approval.
You can get prequalified at any time, but you should not seek approval unless you plan to buy within 90 days. Just like with a realtor, your loan officer should be willing to explain the process clearly and answer any of your questions. If they can’t or won’t, you’re working with the wrong person.
Expect to Pay More
First time buyers tend to assume the down payment is their only cost (before mortgage payments kick in). That assumption is wrong.
In addition to your down payment, your expenses will include inspections and closing costs. Depending on your home or local requirements, you may need to pay for lead, radon or other testing.
Don’t forget to factor in post-purchase costs as well. You’ll find there are a number of tools you’ll need as a homeowner that you never needed when renting, staying at school or living with family. Expect to make a number of trips to your local home improvement store for basic items.
Buying a home is an exhilarating milestone. Although it has its stresses and stumbling blocks, a little research and a reliable realtor will go a long way to ensuring your homebuying success.