Being a first-time home buyer can be intimidating. It’s the biggest purchase you’ll ever make!
What if you make a mistake? No need to worry. We’ve compiled a complete list of the best tips for first-time homebuyers.
- Be Prepared to Act Quickly
- Be Systematic in Your Approach
- Buyer’s Representation is Free
- Communicate Clearly with Your Agent
- Get Pre-Approved Before You Start House Hunting
- Do Your Homework
- Sit Down with your Agent and Let Them Walk you Through the Process
- You Don’t Need 20% Saved for a Down Payment
- Have Cash in Reserves
- Get a Second Opinion
- Take the Time to Research The Market Before You Contact an Agent
- Shop around for home insurance
- Your first home likely won’t be your last home
- Keep an open mind while searching for homes
- Make sure you know the process
- Know Your Budget and Factor in All Housing Expenses
- Narrow down, narrow down, narrow down
- Buy the home you think you will need 3 to 5 years from now
- Choose an agent that you connect with on a personal level
- Don’t Skip the Home Inspection
- Make a list
- Be methodical as you rate your selections
- It’s ok to not know everything when you are buying your first home
- Find a lender you can trust and who is responsive
- Know Your Credit Score
1. Be Prepared to Act Quickly.
Today’s market is a seller’s market. Inventory is low, and we are seeing bidding wars, where the seller ends up selling for a higher price than the initial listing price. Agents and homebuyers should be available as quickly as possible so that they can act quickly. Buyers should be prepared to lose a few before they purchase the home they truly want.
2. Be Systematic in Your Approach.
Too often, first-time homebuyers will be succumbed by emotion and become attached to a less than desirable property. Spending the time to research the local market trends and getting their finances are suitable for a home purchase will result in a significantly more agreeable situation. Unless there are extenuating circumstances, purchasing a property should never be a rushed process. First-time homebuyers are typically in the initial stages of their careers, so diligently researching and utilizing the advice from real estate professionals can either set the foundation for prosperity or create a detrimental fiscal situation for years to follow.
3. Buyer’s Representation is Free.
Make sure you have someone looking out for your interests. After almost two decades in the business, I am still surprised to hear from first-time homebuyers that they don’t reach out to an agent when starting their search because they don’t have the extra money. The seller has negotiated the commission they pay long before you see the house advertised, and if the buyer doesn’t have an agent, the listing agent keeps the full amount. This leaves you with a thrilled listing agent, but also with a buyer that has nobody protecting their interest.
4. Communicate Clearly with Your Agent.
Tell your Realtor exactly what you are looking for so they can best help you find your dream home. The more specific you can be, the more your Realtor can be helpful. Remember, when they’re working for you in the market talking to other Realtors, they need to filter their search and refine their requests to narrow what is available. Simply telling your Realtor, “I want a three-bedroom house with a yard” isn’t going to get you anywhere.
5. Get Pre-Approved Before You Start House Hunting.
Before engaging in any serious home search, first-time buyers need to have the necessary liquidity for the down payment, have investigated and addressed any potential credit issues, and spoken to a mortgage company (preferably several) and obtained a pre-approval letter. This process will also help determine the maximum price they can afford, which obviously will help them to focus their search accordingly, and to be prepared to make an offer when they find their dream home.”
6. Do Your Homework.
Despite the busyness of life, do a little research on your own. If you question whether a room is permitted or not, find out before you sign on the dotted line. Be proactive. Ask questions, check the internet, and if meet some of your potential new neighbors. If you view the property during the day, you may want to drive by in the evening. Never, ever, forego having the home inspected, inspections reveal with your natural eyes cannot see.
7. Sit Down with your Agent and Let Them Walk you Through the Process.
As a first-time homebuyer, you’ll have a lot of questions, and our jobs are to help you navigate through this and prepare you, as best as possible, for what exactly you’ll be experiencing — we will set realistic time frame goals and expectations on what your money can buy. If your agent is “too busy” or doesn’t have the desire to educate you on what buying a home looks like, you may want to consider interviewing someone else who truly cares about you having the best experience possible.
8. You Don’t Need 20% Saved for a Down Payment.
There are many first-time homebuyer programs out there, and with government loan programs, a first-time buyer can often get into their new home with 5% or less down. Speak to a mortgage advisor or take a First Time Homebuyer class to educate yourself. You may be able to get on the property market and start gaining equity sooner than you think.” Get Approved for a Low Down Payment Mortgage
9. Have Cash in Reserves.
Before you start looking at homes (months ahead) is to save as much as possible and have cash in reserves that extend well past closing costs. That way, your wallet isn’t stretched so thin, and you can still feel financially comfortable even once making one of the biggest investments of your lives.
10. Get a Second Opinion.
Even after you think you’ve found the home of your dreams, get someone else’s opinion. Bring a friend or family member you trust along; they may notice something you didn’t. And if they love it too, you can rest easy knowing that you’re making the right decision.
11. Take the Time to Research The Market Before You Contact an Agent.
While many first-time buyers think poking around on Zillow for a few days gives them a solid understanding of the market, in reality, they’re barely scratching the surface. Even small, slow-moving markets can be far more nuanced and complex than they appear. While your agent has a fiduciary responsibility to represent your interests, they also have a financial incentive in closing you quickly. That means you need to educate yourself to know what you should be paying for your home. You need to know how much comparable homes are listed for and how much they’ve sold for in the past and what factors influence those prices.
12. Shop around for home insurance.
Don’t just use the company that has your auto insurance. Prices can vary dramatically between companies for the same coverage, so check with 3-5 different companies to get the best deal. This can make a big difference in your mortgage payment and closing costs since you set up an escrow account at closing.
13. Your first home likely won’t be your last home.
It’s hard to predict where our families, jobs, or lives will take us 10 years down the road. I try and impress upon my first-time homebuyers to look for a house that suits what they need now and for the next few years. When buyers accept this advice, they end up finding a home that works for them now, with the ability to buy up as their needs progress.
14. Keep an open mind while searching for homes.
It’s important to have an open mind when you’re looking for your new home, especially for many first-time buyers who are on a budget. Be careful not to soak in too much HGTV and make sure you’re realistic about what is available in the area you want to live in while also staying within your budget. Remember that many cosmetic items in a home can be replaced pretty easily without spending too much. And it can be fun to have a few small projects to make your first home your own!
15. Make sure you know the process.
Review the home-buying process, the timing of a purchase, funds that will be needed, and the current market circumstances (i.e., is it a seller’s market or a buyer’s market? Are short sales or foreclosures available, etc.). By knowing the process before looking at homes, the buyer will be prepared to make a quick decision, which is especially important today, as inventory is limited.
16. Know Your Budget and Factor in All Housing Expenses.
In this market, you have to be ready to move decisively to secure a home. If you view homes within a certain price range (based on a pre-approval, for example), there are still differentials that may make the mortgage payments different. You have to calculate payments, including property taxes, mortgage insurance, and other expenses like water, electricity, etc. Get a number that you will be comfortable with, so when the time comes to placing an offer, you are ready to go.
17. Narrow down, narrow down, narrow down.
The right real estate agent will help you greatly through this process, which is crucial to make sure the first-time home buying experience is smooth, fun, and to find you the perfect first home. For example, many first-time homebuyers come to us with a list of 50 properties they like, yet those properties have many differences and nuances. It’s already exhausting enough as a first-time homebuyer to understand the process and prepare yourselves financially for potentially the largest investment of your life. Thinking through what you want as specific as possible will help with time, efficiency, and making it enjoyable. Nobody, I don’t care how excited you are, wants to look at 50 homes – it’s exhausting and draining, especially if we are on a short time-table! You probably won’t get everything on your wish list for your first home – but picking your top 3 must-haves and top 3 dealbreakers is a great place to start!
18. Buy the home you think you will need 3 to 5 years from now.
Say a single young adult wants to buy a home and finds a nice one-bedroom; that’s great and enough space. However, chances are the buyer will find someone, fall in love, even welcome a child; then the young home buyer will need to go through the sale of the current home and find another home. It is wise to buy a home you’ll need soon; don’t worry, it will get filled (stuff, pets, hobbies, love).
19. Choose an agent that you connect with on a personal level.
The most important thing that you are going to need in a real estate agent is trust, communication, and responsiveness. Ask for referrals and recommendations from close friends, then start meeting with agents. All real estate agents have access to the same homes on the MLS. It is paramount that you find an agent you feel comfortable confiding in and trusting with the most expensive purchase of your life this far. If you don’t connect personally, you won’t connect professionally, and that leads to miscommunication and disappointment.
20. Don’t Skip the Home Inspection.
The home inspection is an opportunity for you to learn about your home. It is not a chance to renegotiate the contract or walk away if the seller doesn’t fix every little thing. It educates you about your home so that you can prepare for more likely scenarios in years 1-5. If the home inspection does uncover significant, serious problems, of course, we will appraise the seller of the situation and determine the best path forward for the buyer.
21. Make a list.
This is doubly important if you are purchasing with a partner. Each of you needs to make a list of what is truly important in your new home. Now, when you get into a home, you’ll be able to step back from the emotions and remember your important features. Don’t let the perfect home getaway.
22. Be methodical as you rate your selections.
Bring your phone and take photos of the features and nuances of each home that you view. Begin each series of photos with a close-up of the house number to identify where each home photo group starts and ends. Pay attention to the home’s surroundings. What is nearby? Do you like the location? After leaving, immediately rate each home on a scale of 1 to 10, with 10 being the highest. View top choices a second time before you start bidding.
23. It’s ok to not know everything when you are buying your first home.
Many people want to do all the research and watch all the TV shows before taking the step into homeownership. But it’s perfectly ok to have the desire, and the finances to buy a home but not know anything else. Buyer’s agents exist for a reason! Hire a qualified real estate agent who can guide you through the process and answer the many questions that will come up. To find a great agent, start by asking your friends and family who have recently purchased a home about their real estate agent. Interview agents who have been referred to you by trusted people that you know. Look for agents who not only know the market well, but ones who understand your needs well, and you communicate well with.
24. Find a lender you can trust and who is responsive.
Supply as much information as you can and get prequalified so that when you find a house, you are ready to move on it. This market is not waiting for people who are not prepared. Determine if your mortgage lender would allow you to remove any contingencies when you place an offer. Chances are there will be multiple offers, and you will need to make your offer as strong as possible.
25. Know Your Credit Score.
A first time home buyer needs to know their credit score before doing anything. You can get a free copy of your credit report and credit scores from Credit Karma or Credit Sesame sites. The scores you see online are consumer scores, not FICO scores, which lenders use. You will still have a good idea of where your score is. Borrowers don’t need a 640 FICO score to qualify for a home loan anymore. FHA loans allow borrowers to have a 580 credit score to qualify with 3.5 percent of the purchase price as a down payment. However, lenders set their own credit score requirements and may require a minimum score higher than 580.