Ok, so you’ve made the decision to take the leap into homeownership. Great! What might seem like a daunting task really isn’t once all is said and done. Like anything else having the right mindset and mentorship moving forward can make all the difference in the world. Here are some lessons my clients and I have learned over the years.
1. Take your time to research what you want and disregard background noise.
As soon as others find out you’re planning to buy a home you’re bombarded with family and friends giving “advice” on what you need to buy. Disregard the chatter, this home is for YOU, and only YOU should buy a home that fits your needs. The only opinions that matter are your and your spouse’s.
Don’t be afraid to tour neighborhoods and open houses to find out the type of environment and home you want to live in.
Come up with a list of priorities you’d like to have in your next home with things like:
- School districts
- Condition and style
- Number of bedrooms, bathrooms, and square-feet
- Proximity to work and public transit
2. Know what you are willing to spend
THE most important piece to buying your home is finding out how much you can afford. Without knowing how much can afford there’s a good chance you could end up wasting a lot of time, energy, and attention on neighborhoods and listings you may not be able to afford. One of the first things to do is to find a reputable lender that can get you pre-approved for a mortgage. Then you can find your price range and have the mortgage pre-approval letter to make an offer.
- How much you can and are willing to use for a down payment and closing costs
- How much you are willing to spend every month on all homeownership expenses…including mortgage, taxes, maintenance, insurance, and association dues.
- How much Private Mortgage Insurance could end up costing over the life of a loan.
- What rent costs hrs ownership costs would be.
- How much cash you might need to use in case an appraisal comes in low for those using lower down payment mortgage options (in competitive markets).
- What type of mortgage option best fits your situation.
3. Find a knowledgeable and attentive agent you “connect with”
This aspect is often overlooked and is one of the first steps in your home search. Many people don’t realize how much work, coordination, and negotiations are done by real estate agents. To get started on the right foot, it’s important to find a reputable real estate agent that is not only knowledgeable on your search area but matches and complements your temperament. During the search and escrow process, there are many instances and deadlines requiring quick and decisive decisions to be made. You need to be able to “click” with your agent when you need them. You’ll need someone who will not only respond to your questions in a timely manner but who will proactively lead you through every step of the way. You might find a newer real estate agent who doesn’t have a ton of clients to be more helpful than a client over-saturated veteran agent unable to timely get to your questions and concerns.
Most of all trust your “gut” and instincts. Choose someone who works in the market you’re interested in that you feel comfortable with.
4. Be careful with “For Sale By Owner” sales and foreclosures
I’ve heard of For Sale Sale By Owner sellers walking out of a closing when they found out they had to pay an agreed-upon closing cost amounts. Walking out of a closing is performing a breach of contract. Attempting to do an experienced professional’s job is risky. It’s almost like representing yourself in court, you can do it but it’s not recommended and usually unsuccessful.
Do not disregard For Sale By Owner listings but realize there is a higher potential for misunderstandings, liability, and disputes. Having a real estate agent on both sides of the transaction helping to guide sellers and buyers before and during the home selling process provides clearer understanding and is highly recommended.
When looking at foreclosure properties it’s understandable that everyone wants a deal. What’s not well known is the lenders and banks who own foreclosure properties will generally not make repairs on known and requested issues. Buyers are also not privy to any sellers disclosures, which is a form of disclosure illustrating known issues and repairs. There’s no doubt deals can be made in buying foreclosures, but to buyers that are looking for homes expecting negations or a foreclosure might not be the best option. You open Pandora’s box when pursuing a foreclosure property.
5. Expect it to be stressful and time-consuming
No matter what anyone says the home buying process is stressful, especially in a competitive market. When hiccups occur, take a step back, breathe, and move on. Real estate agents are there to help get you through the process from beginning to end. There are many pieces to the search and purchase process, the chance for something to go wrong is high. More times than not a “snag” or delay is hit and a closing timeline is stretched a few days. It’s quite normal. When you expect it to happen, it won’t be as bad. The best advice I can give you is to stay flexible, do not purchase any furniture, order renovation work, and stay as emotionally disconnected as possible until you close and your keys are in hand.
6. Ask questions
Being that you don’t buy homes every day it’s understandable if you’re not familiar with most aspects of home buying. When questions arise so not hesitate to ask. The worst question is the one that isn’t asked. Contact your agent or lender when you have a question at any time. It’s better for all parties when there’s complete understanding all around.
8. When you think you’ve found the one, visit it at multiple times of the day and night
At a showing or open house, a home is meant to be seen at its best. But don’t hesitate to check the neighborhood at night or during off hours. You might discover nuances that you didn’t see before. It’s apart of doing your research.
Look at things like:
- How many kids are passing by?
- Is there a noisy bus stop nearby?
- Are your would-be neighbors hosting loud parties late into the night?
- Could there be loud work or events happening just outside of the home at odd hours of the day?
9. Try to save enough for a down payment or use your VA loan if eligible to avoid PMI.
Save yourself some serious money by avoiding Private Mortgage Insurance if you can. PMI is insurance for a lender in case you default on your mortgage. It’s automatically included into your payment if you are using a loan with less than 20% down payment. Until you have 20% in verified home equity it cannot be removed.
PMI isn’t charged to veterans using their VA loan. VA loans rather charge a one-time 1.5% funding fee in place of PMI.
I hope you found this information to be helpful. Feel free to leave for questions and tips in the comment section.