Buying your first home is exciting and a wonderful experience but it can also be one of the most frightening and stressful time of your life. There are so many steps in the home buying process, through every stage, it can easily become overwhelming. There were six major things that stood out to us that helped us find our home!
Before you start searching for houses and scheduling appointments with your realtor – list out your non-negotiables and your Wants. Non-negotiables are things your new home MUST have and if does not then its a deal breaker for you. Your “Wants” are things you’d love to have in your home but are OK with not getting them. This list will help you digest what matters and what’s important to you in your new home. This will make finding a home SO much easier for you and your realtor.
Pinpoint a specific location, or a few, and research things that matter to you. We knew that we did not want to have a long commute to work, so we wanted something relatively close to our jobs and we decided to look around the 20 mile radius. We did research on elementary and middle schools, we currently don’t have kids but if we were to have one soon they would be going there. Health and fitness plays a huge role in our lives so we researched local gyms and fitness centers. Remember, you can repair/renovate your home but you can’t “fix” a neighborhood to your liking.
We spent a large amount of time speaking and meeting with our realtor. It was very important to us to genuinely like the person and “trust” them. By trust, I mean trusting them to guide you through the process, trusting that they understand what you’re looking for, and that they will go to bat for you during negotiations. We initially had a realtor whom we didn’t love and pushed us towards houses HE believed were best for us and not what we were looking for, he was a true salesman and that was not the right fit for us. We decided to switch realtor and the process quickly became better and more suited around our needs and wants.
Shop for quotes using a broker. A broker will have the ability to shop through different companies to ensure you obtain the most affordable price for what you need.
Insurance: If you were to go through an Insurance Agent from Geico (randomly picked), that agent would only provide you quotes within Geico. Though he may offer you the most affordable pricing within that company, they will not check other company rates. You want to steer clear from direct agents UNLESS you have shopped other ones and found they offer the pricing you want.
Mortgage: The same applies with direct mortgage lenders. They will offer you mortgage rates / loans offered within their own bank. By using a mortgage broker, you will be able to shop a myriad of different companies through ONE person and get the most competitive pricing. This can save you THOUSANDS of dollars in interest and fees.
Once you’ve finally find the house you want, you’ll want to speed to closing to get this process over with and move into your new home. However, after finding your new house, submitting an offer, and the seller accepting your offer – a whole new process begins. This is the due diligence period, which basically is the time you have to do all inspections your heart desires and request information about your property.
I personally went a little overboard during this time because I wanted to make sure our first home wasn’t a complete disaster. I requested a home inspection which led me to order a chimney and request termite certification from the seller. The seller may not be happy with some of the things or inspections you may be requesting because sometimes they may want to hide issues.
This period is key because you can use issues in the house as leverage to open up negotiation. Ensuring environmental items are clear and that permits with the city/town are closed. You can request official public records which will show recent work done at the home and if proper permits were taken out. When I did this research, I found out on my own that there was soil contamination at the property after a removal of a tank, something never mentioned by the seller. My home inspection also allowed me to request multiple things to get fixed that I wouldn’t have known about, unless I was very proficient in construction. Within this period, you are able to walk away from the deal, without losing your deposit, if you find issues in your home that you are uncomfortable with. Use this time wisely!
After deciding what you want in a home, the most important factor is the purchase price. Buying something you can afford is highly recommended. You want to be able to afford a life while you have a mortgage. Your mortgage lender or your realtor might try to push you to your limits, especially if you’re purchasing a multi family home. A multi family home allows you to use 75% of the potential rental income as income to qualify you for a higher loan. Depending on your risk tolerance, that may be an option for you. Attend a First TIme Home Buyer Seminar, there is valuable information and they go over the numbers with you one on one. Some lenders require this and others do not. I highly suggest attending a seminar even if the lender does not require it. The price is apx $100-$300. Putting down 20% is ideal when purchasing your first home so you have sufficient equity (ownership in property which can be defined by money put into your home by down payment or principal payments or by the growth of the value of home). By putting as much as you can for a down payment, you ensure you start off with good equity and your monthly payments (principal, interest, property taxes, and insurance) are manageable *30% of your take home pay is what I used as a key. Pick an amount you want to save for a down payment…and then save some more! There are more costs associate with buying a home like: home inspections, appraisals, environmental inspections, surveys, closing costs, attorney costs, escrowed taxes, and escrowed property insurance to name a few. If you are deciding to buy a home with a price tag of $300,000 and want to put down 20% or $60,000, you should have an additional 5-10% saved for due diligence and closing costs. This is in addition to having to show you have the mortgage payment times 3-6 in liquidity in reserve. This depends on the bank but they want to ensure you have a safety blanket before making a big purchase.
Buying a house can be a very enjoyable process if you know what to look at for. After your first home purchase, you will learn so much and be more fluent in home buying that your second purchase will be a breeze!
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