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As a prospective first-time homebuyer, getting a step up in the real estate game means gaining access to as much information as possible for a happy house hunting experience.
Buying my house 2 summers ago was fun, exciting, nerve-wracking, and hectic but I would’ve been so lost if I didn’t have knowledgeable people around me telling me what to look out for. Talk to people who have purchased houses before and also friends going through the homebuying process for the first time! You can gain a lot of insight learning from others’ experiences (you don’t have to go through all of those trials and tribulations yourself when they already have)!
It’s all fun and games picking out a house until you:
a) realize you can’t afford it
b) haven’t planned out or budgeted your finances or
c) your offer falls through (it happens…OFTEN so just shake it off if it does)!
So here I am, being a THEE greatest friend to you and sharing all of the ins-and-outs of what you need to know when purchasing your first home (no need for thank you’s, just looking out for you, sis 😉 )! HAPPY HOUSE HUNTING 🙂 🙂 🙂
- You absolutely need a budget. Create a budget for how much you’re willing to spend (and can afford) on a down payment as well as for property taxes, utilities, to furnish a house (if you don’t have furniture already).
Also, include unexpected/miscellaneous costs in your budget, such as inspection and closing fees. Keep checking in on your budget periodically as you zero in on potential houses to stay on track!
- You’re most likely not going to find your dream house in 1 day. Prepare to house hunt for at least 3 months (have to find that “perfect” one) because you can think you like a house but then you see it…and you realize you don’t (this will happen a lot). Then after you choose the perfect home, you have to wait for a period of 30-45 days to close due to paperwork (if your offer has been accepted).
And this is all if everything goes right throughout the process (fingers crossed)! If not, you may have to wait a little longer for the right house to come along but remember everything happens for a reason.
- A credit score of 670 or greater is best. You have a lot more options regarding mortgage loans and down payments with a higher credit score! So, really buckle down and try to raise your credit score as much as possible BEFORE you start looking for houses. Keep your credit card usage below 30% and make multiple payments throughout the month to really jack up your score.
Also, if you’re buying a house with someone, the person has a higher income will be named as the main borrower for the loan. So, their credit score will be used to determine your mortgage eligibility…Hopefully you’ve both been working on your credit scores!
- A low debt-to-income ratio = higher chance of mortgage loan approval. Your debt-to-income ratio plays a big role in whether you’ll be approved for a mortgage and what you can “afford” (i.e. student loans and car loans) so work on lowering your debts as much as possible BEFORE starting the mortgage process.
It’s key to do this BEFORE starting the mortgage process because any significant changes in your finances aka large deposits/withdrawals/payoffs in the last 90 days can significantly impact the mortgage loan you may qualify for and delay the closing process!
- It’s not always what you know but who you know. We were so #blessed to have family friends that directed us to all of the phenomenal people who helped us throughout the house hunting process. Especially our realtor (one of Mike’s close friends is her nephew!). Definitely opt for a realtor.
Our realtor was able to negotiate a lot of deals for us, explain concepts (and terminology) we didn’t understand, introduce us to other people who would give us discounted rates, and just overall made the process so smooth for us. We got linked to a great mortgage loan officer, a thorough inspection company, and a reputable carpet cleaning service set up through her (she’s a one-of-a-kind gem)!
You definitely want people who are going to hold your hand during your first time and also hook you up with some quality, low-priced services from other people (because you need that!)
- Research FHA, VA, and Conventional loans to determine which would be best for you financially (currently, as well as long-term). Depending on the loan type, you may only need a down payment of 3-5% compared to the popularly believed 20%. Investigate and know your options!
- FHA, most common for first-time home buyers (and if you have a lower credit score, you’re more likely to be approved for this one)
- Conventional, requires lower down payment but you need a higher credit score (>670)
- VA, loans available for veterans
- Shop mortgage interest rates from different banks and credit unions. We were able to get our interest rate as low as 3.625%, compared to the 5%-6% we were seeing at the regular, shmegular banks. We didn’t really shop for rates because we trusted our realtor (who recommended our credit union and mortgage loan officer) but it’s best to still do so.
While house hunting and having offers fall through our rates fluctuated between 4% and 6%. Rates kept dropping and going up throughout our entire process! By the time we were ready to close we were able to lock in our rate at 3.625% but who knows how low we could’ve gotten had we shopped around!
- Get pre-approved prior to looking at houses. You should get pre-approved before looking at houses so you know your price range and also have more buying power when putting in offers! When you present yourself as a serious buyer, sellers take you seriously.
- Be prepared to provide the last 90 days of your finances. You will need to gather bank statements and pay stubs to submit to your mortgage loan officer. The bank needs your financial statements to verify your income and that you have had stable employment for the last 3 months (essentially, they want to know you can afford to pay your mortgage if approved).
- Go see every house. Take a trip and physically see every house you have an actual interest in! Almost every house we saw (about 20-30 houses…whew) looked completely different in person from what they looked like in pictures (good or bad). Even for houses you may be iffy about, see it in person because the pictures may not do the house justice.
- Stand firm in your must-haves for your future home. Don’t settle on a house just because of the possibilities you see there (or what your realtor thinks is best for you). Your realtor is going to show you a bunch of houses, but you have to do some searching on the house apps yourself to find out what you do and don’t like. This also helps your realtor learn what types of houses to look for that fits your taste.
Make compromises but don’t buy a house that you settled for (does that make sense lol). If you see a house and you know you’re not going to put in the work to renovate, decide if you can live with leaving the space as is. If not…keep looking at other houses!
- Property taxes can affect if you can afford a home, even if you can afford the home’s sales price. Just because the bank approved you for certain amount, does not mean you can afford that as well as the additional expenses of the home on a monthly basis. This includes property taxes, utilities, cable, and any other things that pop up. Your mortgage loan officer and your realtor should be able to tell you the property tax range you should stay in to still be able to afford your home on your monthly income.
- Traffic and noise level check. When walking through the house, listen to the noise outside and pay attention to how much traffic your street gets with the windows both open and closed. Determine if the noise is tolerable (or too quiet for your liking) and if you’re okay with heavy traffic if your neighborhood has that.
- Don’t blow ALL of your savings on your house. Remember that budget I spoke about? Yeah, budget and make sure you leave yourself some funds to fall back on
(I suggest saving at least 4-6 months of your home’s expenses). You want to sit back and enjoy your home. You don’t want to struggle to make ends meet in an empty house because you couldn’t spare much to furnish it and be happy!
- Research private home insurance. More and more banks are accepting private home insurance which is a big plus because they provide much lower rates compared to other home insurance agencies that banks may suggest. Lowering your costs in any way you can is the goal (you want as much left in your pocket as possible).
- You don’t want a bidding war. A bidding war for a first-time home buyer is a f**ing nightmare! We went through a bidding war with the first house we gave an offer to and it was basically an omen for what was to come with that house (nothing good). Those sellers kept trying to negotiate for more and more money even after the appraisal for the house was way below asking price (about $40,000 below!)!
In the end, we found the house of our dreams and didn’t have to fight hundreds of other buyers for it. Don’t fight for the house unless you absolutely love it. Look at your options but if you love the house (and can envision yourself actually living there) then PUT IN AN OFFER ASAP, don’t wait for other buyers to realize how great it is!!
- Bring up all of your concerns you found during inspection. If you find broken windows or an appliance needs to be fixed, they may be able to be negotiated into the price. The seller may lower the price or compensate you for the costs of certain repairs you may have to do later on!
- Make sure you have quick responses and can send paperwork back to your lender ASAP (within 24 hours).Mortgage lenders, lawyers, and realtors work with a lot of people going through the home-buying process so they may be delayed in their responses, but don’t let it fall on you. Don’t let you be the reason the process is delayed.
Send back paperwork as soon as you receive it, respond to every email within an hour, and try to answer every phone call. Also, try to follow-up and make sure they receive it. Even if they don’t respond, they’ll see it in their inbox and can handle whatever they need to with the information you provided.
It can be hard trying to reach them and you don’t want your process delayed because you waited 2 days to respond and then they took 2 days to respond. Cover your bases, follow-up, and try to get everything sent back the same day you receive it.
- Arrange furniture delivery 2 weeks from closing day. Once you put an offer in and the countdown starts to closing day, start making tentative arrangements for furniture placements and purchases (if needed) as well as carpet installments/carpet cleanings. Schedule new furniture delivery about a day or 2 after closing day so you have time to move your current home items in but don’t have to sit on the floor too long.
- It’s not your house until closing day. Anything can fall through during the waiting period such as the appraisal not being ideal, issues found during inspection, issues with mortgage paperwork, etc. Remember to stay calm and be excited but be prepared for things to pop up throughout the process that may be less than ideal (fair warning, sis).
- Drive around your prospective neighborhood during different weather conditions to determine flooding issues, for example. Driving around the neighborhood helps you prepare for what it would be like living there (if you still want to), whether you would need special insurance like flood insurance, and what’s going on in the neighborhood.
Or you come across unexpected “squatters” like we did. The previous owner (who bought the house as a quick flip after the actual owner foreclosed) was renting our house out on AirBnB while we were under contract! This is ILLEGAL, but we found out from our neighbors after-the-fact so…we were just thankful there was no damage inside and was basically brand new (minus a few scruffs here and there).
- You want an appraisal that is either the same amount as the sale price or higher. If it comes back lower, you will have to pay the difference as your lender won’t pay for the rest). For example, if you intend to buy a house for $400,000 but the appraisal comes in at $380,000, you will be expected to pay the $20,000 difference, pay for an additional appraisal (in hopes that it comes back higher), or you can negotiate for a lower sales price with the current owner of the home.
- Expect to sign paperwork for at least 2 hours on closing day. You (and a co-borrower, if you have one) will be meeting with your realtor, your lawyer, the title company, the seller, their realtor, their lawyer, and the mortgage lender at the bank or credit union who will be providing the mortgage loan. They’ll have about 10 lbs of papers stacked and ready for you to sign. Your hand will be tired, and you will basically read none of it as your lawyer will probably give you the gist of what you need to know on each page.
- You receive your keys AND can move in on closing day! I hope you called out of work and cracked open that bottle of champagne because you finally popped your homebuying cherry and can move into your new house! After signing all those papers, the seller hands you the keys and that’s it! You worked hard throughout this process and deserve every bit of peace after (because house hunting is not for the weak)!
And there you have it! Hopefully, I prevented your future self from having any homebuyers’ remorse… Because now you’ll be well-informed before deciding on your starter or forever home! Research and get as much information as possible so you’re completely comfortable making this huge decision (it’s so worth it when it’s the right home 🙂 ).
If you’re house hunting, what do you find most stressful or confusing about buying a house?
If you own a home, what do you wish you knew before buying your house? Let me know your thoughts in the comments!