So you’re buying your first home. Here are a few important things that all first-time homebuyers need to know before they wade into the market.
Buying your first home can be both exciting and daunting. You might have lofty dreams of a dream home in the perfect neighborhood, but it’s probably the biggest purchase you’ve made in your life, to date. Once you start looking, it can be easy to become disheartened or frustrated, but armed with knowledge and the right attitude, you’ll be able to navigate this experience and end up with the perfect home for you.
Follow these important tips when you’re buying your first home.
1. Get a preapproval letter before you start to look.
Many first-time homebuyers think that they can start looking for homes and deal with getting approved for a loan after they find the home they want. The truth is that most real estate agents won’t take you on as a client without having a letter confirming your preapproval and loan amount in hand. On top of that, sellers will definitely not consider your bid without one.
You can apply for loan preapproval (not to be confused with prequalification) through most lenders online. Once you get your documents in order, you’ll receive a letter within 24 hours. But be sure you don’t apply until you’re ready to buy—your preapproval typically lasts 90 days.
2. Find the right agent for you.
Some buyers and sellers flirt with the idea of buying or selling their home without the help of an experienced real estate agent. Don’t make that mistake. Any money you think you’re saving on commission fees will pale in comparison to the costs that will arise from your lack of experience.
A good real estate agent has your best interests at heart and will work to get you into your dream home at a reasonable price. They know how to prepare an offer, what contingencies to include, and how to negotiate so you’re taken seriously. A good agent will also help guide you through the process, knowing that as a first-time homebuyer, you will have a lot of questions.
If you don’t feel like your agent is representing you well, you’re welcome to find another one. Don’t contact a seller or their agent directly or show up unannounced. Not only is it unsafe, it also comes off as unprofessional and is a clear indication that you don’t know what you’re doing, which will give you much less bargaining leverage.
3. Be aware of lending and market trends.
The real estate market can change at the drop of a hat. This is where the internet will become an invaluable resource for researching market values and current trends, providing crucial information that will help you decide whether or not to move forward with a particular property. Be sure to research:
- Interest Rates: Strike while the iron is hot with historically low interest rates. It could make a difference of tens of thousands of dollars over the lifetime of the loan.
- Different Types of Loans: Finding a loan isn’t a one-size-fits-all process. At any given time, certain loans are written more on average than others. Never take on a loan without understanding what you’re getting into.
- Real Estate Trends: Know what the houses you’re interested in are going for in your market. Don’t just look in one neighborhood. Often, you’ll find you can save as much as 10 percent on a home price just by moving one or two neighborhoods over.
- Neighborhood Trends: Is the neighborhood white hot? Or is it on a decline? There are many factors that go into understanding neighborhood trends, but one of the easiest ways to tell is to look at comparable properties. If houses are flying off the market within days or weeks of being listed and are selling at or above asking, then you know the neighborhood is hot. Alternately, if there are a lot of for sale signs up in the neighborhood and none seem to be moving, or moving very slowly, then it could be a sign that the neighborhood is on the decline. Ideally, you’ll do best to find a neighborhood in between.
4. Don’t rule out up-and-coming neighborhoods.
These “in-between” neighborhoods are the ones where you will get the most return on your investment. Real estate is a game of supply and demand, so you’ll get in cheaper than the most in-demand neighborhoods.
As long as a neighborhood shows signs that it’s growing, the demand will turn it into a popular neighborhood, sending your property values through the roof. Be warned though, there are no guarantees that these neighborhoods will be the next Brooklyn story. That’s why it’s important to do your homework. Indicators that a neighborhood is on the rise are:
- a growing number of restaurants, cafes, and bars,
- unique architecture,
- a growing arts district,
- close proximity or easy access to a major city,
- steadily decreasing crime rates, and
- good schools.
5. Make the location a priority.
Location really is everything in real estate. You might be disheartened to learn that you can only afford a small townhome in a major city instead of the single-family home you wanted in the adjacent affluent suburb. Don’t immediately let that lure you into a less established suburb. While the price tags in these neighborhoods can be hard to resist, you need to factor in the difference in lifestyle, commute times, and other things that attracted you to your dream neighborhood in the first place.
Investment-wise, the smaller townhome in a central neighborhood has a higher probability of selling at a profit in a few years. Building equity and making a profit with your first home will open the possibility of buying a bigger home in a few years. Smart buyers think of a first home as an investment, and location is the most important part of that equation.
6. Be patient and realistic.
Most first-time homebuyers begin the process with high expectations. But once the process begins—especially in a competitive market—you can begin to feel disheartened and in over your head. The reality is that most people have to scale back their expectations for their first home. Sometimes that means trading in the hardwood floors you always wanted for aging carpet or two bathrooms for one to be able to get into the neighborhood that you want. It’s not the end of the world, and will be worth it in the long run.
However, don’t settle either. As long as you’re being reasonable—something your agent can help you manage—you shouldn’t feel pressured to buy something that you don’t want. If you know that homes within your budget are available with two bathrooms and hardwood floors in that neighborhood but you just haven’t been able to find any yourself yet, keep looking. Sometimes buyers just hit cold streaks. Stay patient and the right home will surface.
7. Look beyond cosmetic issues.
It’s easy to be turned off by a house that has mustard yellow walls and brown shag carpeting. Some people even have trouble seeing past the current owner’s furniture. But these are all easily changeable problems. That’s why they’re called cosmetic issues.
Repainting and tearing up carpeting are improvements you can do yourself or hire someone to do for relatively cheap. Turning down a home that checks all the boxes just because you don’t like the décor is a huge mistake. A house with good bones and ugly paint beats a well decorated home that has a cracked foundation any day.
8. Look, and then look again.
Now that you’re able to see past the paint color, you need to look a little closer. Very often, new homeowners are so overwhelmed, exhausted, excited, or all of the above, that they don’t really look at everything there is to see.
Remember that you’re viewing a new home with fresh eyes. Once you’re moved in, there will be issues that surface. Keep a checklist when you go to viewings that includes:
- Checking the water pressure. Turn the faucets and shower on and off.
- Checking all closets. Is there enough room in each closet? Are there enough closets including a coat closet and space for linens and toiletries?
- Checking all cabinets. Will there be enough room for all of your kitchen supplies, mixers, pots, pans, and gadgets?
- Checking all windows. Make sure that all of the windows open and close.
- Checking the attic, basement, and crawl space. Is the attic missing insulation which could save big on heating and cooling bills? Is the crawl space easily accessible for home inspection? Is the basement finished? Are there signs of water damage?
- Checking the doorbell. Does the doorbell or home security system work properly?
9. Keep an eye out for any hidden variables.
Closing on a home doesn’t mean the bills stop there. Beyond your mortgage, there will undoubtedly be unanticipated expenses and variables. Prepare for additional costs and issues by asking your agent and the seller about following:
- Utilities: What are the average heating and cooling costs for the home?
- HOA Fees: Is the home part of a homeowner association? Ask to see the contract and review all the rules and regulations before agreeing to buy the home.
- Your Surroundings: What are the neighbors like? Are there strange things about the neighborhood you should know about? Drive past the home multiple times during different times of the day to get a feel for your street and neighbors.
- Flood Insurance: Some areas require flood insurance. You will be mandated to get it as a part of your mortgage. However, some places only recommend flood insurance but don’t mandate it. Inquire about any flood issues with the house, the street, and what flood insurance will cost.
10. Consider the curb appeal.
A home with good curb appeal is ideal. But what does the exterior and landscaping of the home entail, exactly? The curb appeal of the home should reflect your lifestyle and finances. If you can afford to put a lot of time and money into the upkeep of a very meticulously landscaped exterior and like the look of lush lawns and well-trimmed hedges, that’s great. But if you can’t afford to maintain these things, reconsider what you might be committing to.
11. Get a home inspection from a reputable inspector.
Once you’ve gotten past the actual house hunt and you’ve found the house that you want to move forward with, there’s still a huge step to take before you sign the contract and begin the loan process: the home inspection.
The inspector is trained to check all of the things that are beyond your scope—from the foundation to the electrical system. Your inspector will check that the house is up to township and state codes, there’s no mold, the roof and foundation are solid, and the wiring and plumbing are functioning properly. These are just a few things that will have to pass to ensure you’re not buying a money pit.
While rare, some people skip this step in order to speed up the process or make their offer more appealing in a competitive market, but don’t make that mistake. If the home passes inspection, you can move forward with peace of mind. If the inspection uncovers problems, however, you could be saving tens of thousands of dollars in costly and frustrating repairs.
