The idea of buying a house can be overwhelming and even intimidating. It’s natural to feel that way as home purchases are still the biggest purchase people make in their lifetimes. Here are some tips that first-time homebuyers should keep in mind when buying their first dream home.
#1 Ask yourself what type of home fits your lifestyle
How do you live your life day-to-day and what does that say about the type of home you may need? Do you like to entertain friends and family members? Then you may be searching for a house with an open kitchen and big dining room space. Do you commute to your job or do you work from home? You might settle for a smaller space or need more space for an office. What are your hobbies? Do you need parking for a boat, camper, or trailer? A condo or townhouse might not be what you’re looking for.
These types of questions are often not thought about by first-time buyers as they often focus more on location, bed and bath count, square feet, and cosmetic finishes. Asking questions more about yourself and your family’s needs will help you identify the right home regardless of square feet.
The first step in buying a home is to identify a lender and get preapproved. At the same time, you should be interviewing real estate agents. An agent should be able to guide you to a great lender if you don’t want to use your bank, and lenders can often guide you to some agents to interview. Once you have chosen your agent, he or she should be able to provide you with a list of questions to ask yourself to help you better identify what kind of house you need. When you work with Timber & Rose Realty Group you will receive a book we wrote titled, “Your Guide to Buying a Home” that walks you through the buying process and has all the questions you need to think about.
#2 Stick to your budget
A critical rule of home buying is: don’t spend more than you can afford in the future. You might be wondering, “How is this even possible, why would the bank give me more than I qualify for? And won’t I be making more money in the future?”.
First-time homebuyers tend to shop on the amount that a lender is willing to advance them. The common misunderstanding is that because the bank/lender asks you for so much information (income stubs, credit score, debt-to-income ratio) and then says you can afford a certain amount of house, then everything is accounted for. The reality is life (and homeownership) gets expensive.
Other costs that are needed to be taken into account include any fixes needed to the house before moving in. These costs can be for serious matters such as sewer or radon mitigation, or just really old gross carpet that needs to be replaced. Either way, a buyer is often looking at a few thousand dollars for any of these fixes. Other costs might just be Homeowner Association Dues that can add hundreds of dollars to the monthly amount you thought you were going to pay just for the mortgage.
So in the case that you are competing against several other buyers and you have to stretch your budget to win the house you want, the best course of action is to stick to your budget because after you move in there will always be more costs you don’t see coming. Water heaters fail, kids are born and daycare is expensive, etc. Consider looking at properties below your comfortable monthly payment. That way, you will have some wiggle room for bidding in a competitive market and when life happens after moving in you won’t feel house-poor.
#3 Have some money set aside for endless expenses
We touched on some of the expenses that happen after your offer is accepted under the "sticking to your budget" section. Now let’s talk briefly about the additional expenses of buying a home you should be prepared for.
Once your offer is accepted by the Seller you will be required to submit your Earnest Money Deposit. Earnest money is usually 1-2% of the purchase price. The point of it is to show the Sellers that you are invested in the purchase of the property and are willing to put some money on the table. The 1-2% of the Earnest Money Deposit is part of your down payment. For example, if you are planning on buying the house with a loan that requires a 5% down payment, then you would deposit 1% into escrow at the acceptance of your offer (beginning of escrow) and then pay the other 4% at the time of closing (end of escrow).
Other costs that will come your way will include closing costs, which are the fees and expenses you pay to finalize your mortgage (typically 2%-5% of the loan amount), moving expenses, as well as some immediate home repairs and upgrades, an increase in utility costs, and homeowner’s insurance.
If you want to discuss these costs in more detail, like how much each one might run you as a homeowner, please feel free to reach out to us at Timber & Rose Realty Group.
#4 Make the most of 3D tours and open houses
The Covid-19 pandemic helped popularize online 3D home tours. This wonderful tool will take you to a virtual walk-through of a home at any hour and you can observe details that regular photos don't catch. Of course, you will still want to visit the property, but this way you can narrow the list of homes to visit. We usually have a couple of 3D tours of currently listed houses on our website, TimberandRose.com, if you’d like to check them out. It’s fun to go to open houses and tour homes, but it can also be exhausting. When we tour with clients we generally try not to see more than six or seven homes in one day. Otherwise, you may not remember much about each one. With so many homes to look at, we recommend you spend more time online utilizing the 3D tours and getting picky about the homes you actually visit in person.
When it comes to going to open houses, the homeowner will have typically cleaned, decluttered, and have everything in top-notch condition. It is natural to want to focus on the really cute staging decorations in the home, that’s what the Stager wants you to do, but really try to look past the décor, wall colors, etc., and look for any cracks in the ceiling, what the floor feels like (any soft spots or squeaks), any weird smells (like mustiness or fresh paint), as these things will generally cost you more to fix than the cosmetics.
#5 Pay for a home inspection
At Timber & Rose Realty Group we really see this as a mandatory part of any home purchase. In a very competitive market, the home inspection contingency can be waived to make the offer seem strong to the Seller, but in reality, it just makes both parties more vulnerable to a lawsuit in the future. It’s best in our experience to have the opportunity for the buyer to know upfront everything that is wrong with a house and then decide whether it is worth it to the buyer to move forward with the purchase.
A home inspection is a thorough assessment of the structure and mechanical systems. Generally, there are three separate inspections that we do: General, Sewer, and Radon. For more information about what the home inspection covers and how long it takes, please reach out to us. We’re happy to answer any questions you have about buying a home. The average cost for all three home inspections usually runs about $800.
#6 Take A Home Buying Class
One of the best things you can do when you start out your home search is to take a class. At Timber & Rose Realty Group we offer a fun and brief (45-60 minutes) class that covers all of this information and much more like the home buying process, the current market trends, financing, and answers questions any attendee has. You can check out when the next class is here.