Buying your first home can be very scary, overwhelming, intimidating, even daunting, right? Believe me, when my husband and I first began discussing buying a home, it all seems like a blur because of how big of a decision it was.
In September/October 2013 we began the process of buying our first home, in October we put in our first (and only) offer on a home, and in December 2013, we moved into our first home (mini celebration!), and we learned a lot, so I’d like to share some of the things we learned going through the process of buying our first home; this will be part of a series as I do have many more tips, but don’t want this post to be 4 miles long – stay tuned!
IF you prefer this in “video” format, here you go:
Here’s what we learned:
- Take a “First Time Homebuyer’s Class”
I cannot stress this enough! Taking a First Time Homebuyer’s Class made us feel so much less intimidated because we were informed, we had so much knowledge that helped to ease the process, we knew what to expect, and we could then navigate our way thru this process in the correct [sequential] order. Sometimes I’m a little skeptical of listening to peers/others’ “tips” on buying a first home because everyone does things differently, everyone is in a different type of situation, and to be honest, it’s not a “professional” opinion, so we opted to take the [optional] First Time Home Buyer’s Class. The class we took was affordable, I think it was $25 each (so $50 total for us), it was a few nights during the week (maybe 2-3 nights), and at the end, we received a certificate of completion 🙂 These classes are great, and our instructors are great – they were retired real estate agents and I loved their anecdotes of all types of situations they ran into during their real estate days, to better prepare us for what could happen. I felt so much better after taking that class because I knew what our first step should be, our second step, etc.
- Research Your Areas
Research and information is your friend. Don’t go into this blind. Research:
- Tax rates in the areas that you’re looking at homes – obviously this will only apply to states that have property taxes.
- Crime rate in that area
- School systems – if you’re wanting kids in the future
- Average prices of surrounding homes in that neighborhood, so you know you’re getting a fair price if the properties are similar
- Associated Fees – possibly monthly Home Association Fees (typically in Condos), included/excluded utilities like water, trash pickup, etc.
- Research your Realtor
A [co-worker] friend and I were chit-chatting during our September/October timeframe of thinking of buying a home, and he said to me “your realtor will make all the difference,” and he was totally right! He had such a good experience with his realtor; thus, his first time purchasing a condo was super easy, and just a good experience all around. We had first been in contact with a different realtor than the realtor that found us our house, and that first guy was awful – he was so hard to get a hold of, didn’t make us feel like he was in it for us (he didn’t want to show us houses that we were interested in), and it just made the experience really off-putting. After that horror story of a realtor, we looked elsewhere and did our research on other realtors and found that realtor that got us our home, and boy did it make a difference! She was so great, she had great reviews for a reason – she was in it for us, she was excited for/with us, she had so much knowledge, she put in SO much time sitting with us to really understand our wants vs. needs, and she showed us some great houses that fell right in line with what we were looking for – she knew her shit, basically. DO YOUR RESEARCH.
- Shop Around for your Mortgage
Obviously, you want the best interest rate for your financial situation so it’s best to shop around and compare mortgages from different financial institutions to find what works best for you. You don’t want to just go with the first mortgage you find!! Shop around for the best interest rates, points (you’ll learn about those in your First Time Homebuyer’s Class), which are really just a percentage of the mortgage that is due at the time of signing, in addition to the down payment (for example: if there’s 2 points associated with a mortgage, you’ll owe 2% of the mortgage in addition to the down payment at the mortgage signing), but there are 0 point mortgages, so don’t fret! There are also [discounts or credits] mortgages for First Time Homebuyers, so check around for those!
- SAVE SAVE SAVE for your Down Payment
It is important that you have a good [foundation] Down Payment for your mortgage; 20% of the mortgage is suggested, but let’s be honest, we all don’t have that kind of disposable cash to drop in one day, which ties back into shopping around for your mortgage. If you do not make that 20% as a down payment, they’ll just add something called “Private Mortgage Insurance (PMI)” which is an extra monthly fee added to your mortgage that protects the bank if you default on that loan; you basically pay that fee until that total payments of that PMI fee totals 20% of the mortgage, then it drops off your monthly bill – it’s not a huge deal, you won’t even notice it because it’s built into your monthly payment that you agree upon while going thru the mortgage process with your bank. Saving as much as you can for your down payment helps – EVERY PENNY HELPS. Also, know (and accept) that it takes time to save up for that down payment; it’s not always easy to save a shit ton of money to just drop in one day – be patient and know that it’s going toward a good cause and it will be worth all that hard work saving up! To speed up the process, you’ll have to sacrifice many luxuries that you’re currently used to, and it takes effort to buckle down and save up.
- Use an Online Mortgage Calculator
These are SO helpful because there are so many out there – most banks will have these calculators as well so while you’re shopping for your mortgage, you can utilize the bank’s mortgage calculator, making it super easy and convenient. You can input your financial data (income, debt, etc.) and the calculators will tell you exactly how much you can afford, how the payments are broken down, and how much you can expect to pay each month. This ties back into being prepared/informed – having as much [realistic] knowledge as possible is key. Do not go by what these types of [bank] calculators say you are “pre-approved” for – I find the pre-approval prices are MUCH higher than you can realistically afford and that’s just not preparing you, realistically, for how much house you should look for.
- Be Realistic
Don’t buy a big house because society tells you you need a big house to keep up with the Joneses. Everyone is different and we’re all in different situations – don’t go way out of your means because you’re just burying yourself and you’re only living/working for that house. If you get too much and you really truly can’t afford it, you’re not able to really live, and enjoy that life in that home – don’t do that to yourself. Be realistic when shopping for a house/mortgage; there is no need to bury yourself in debt for a house if you can’t enjoy that home. Buy what you need, not what you want.
- Make a List of Your Wants vs. Needs
This is very helpful for your realtor because it can really focus their efforts to find you the perfect home. Again, be realistic – don’t put your dream Pinterest home on your Needs list. Think of things like off-street parking, fenced in yard, number of bedrooms, storage space, etc.
- Mind Your Credit
Your Credit Score AND Credit History play a large role in your mortgage rates; obviously, banks want to lend to those that have good credit scores and credit history; more important to lenders is your credit history. You can improve your score by paying off debt, but what’s important to lenders is the history of your bill paying – are you late on payments, do you skip payments, did you file for bankruptcy, etc. The worse your credit score and history, the higher your interest rate will be because you’re more of a risk for the lender. Do what you can at least a year in advance to work on your credit history and score – make sure you’re paying bills on time, you’re not skipping payments, etc.
If you’re in the market to purchase your first home, congratulations! You’re not going to regret it; we LOVE our home and being homeowners!