8 Tips for First Time Homebuyers

Thinking of buying your first home? It can be overwhelming if you don't know where to begin. Let us help you along the way with this simple checklist:

1. Start saving early.

While you don't need 20% down to buy a home, you do need some kind of down payment (usually a 3% or 5% minimum) and closing costs. Saving just a small portion of your regular paycheck can add up quickly, as long as you do it consistently. It might be a good idea to evaluate your regular spending as well. Small things like buying daily coffee, or going out for lunch at work every day, can really add up. Check your bank and credit card statements to find recurring charges that could be cut (like that gym membership you might not have used in months). Cutting these expenses really add up over time and can make a big impact on your savings. 

2. Decide how much you can afford.

Most buyers think of affordability only in terms of the principal and interest, but forget that you also need to account for homeowner's insurance and real estate taxes. You may also need to pay for private mortgage insurance (PMI) and if the property is in a homeowner's or condominium association, you'll also need to account for that monthly payment. It can all be very confusing, but start with an affordability calculator, like we have in our Homesnap app. Check out the Affordability menu in the Utilities section.

3. Check and strengthen your credit.

There are various credit scoring models out there, and they each yield different scores. Both Equifax and TransUnion offer the ability to get a free credit report on a regular basis. Your bank or credit card company may also offer free credit score reporting. Check these on a regular basis and work on tightening up the loose ends to help improve your score. It takes time to impact your score, so starting early gives you time to make changes and address any old items or inaccuracies. Do this now and regularly so you don’t get surprised or delayed once you find the perfect house.

4. Explore mortgage options, rates and fees.

Like anything else, there are many types of loan programs out there: Conventional fixed or adjustable rate (ARMs), FHA, VA, construction loans, and the list goes on and on. Each program has different qualifications and requirements…and rates and fees. It can feel downright confusing, but you won’t have to go it alone when you have the right team in your corner, which brings us to the next item on our list….

5. Get pre-approved.

Getting pre-approved early is an essential step in the process, and needs to be done BEFORE you ever step foot in a house. Sometimes the process can be as simple as filling out an application and providing recent income statements. If you own a business, it’s a little more complex because the lender will want to see 2 years of both personal and business tax returns. Getting through this process now ensures that we aren’t fumbling around at the last minute and potentially losing out on “the one” because we weren’t prepared. While we’re at it, a quick word on lenders. We always advise using a local mortgage lender or loan broker, instead of the “big banks” or an online approval. The loan process is complicated and things often come up at the last minute in a transaction. If/when that happens, you'll want the confidence of knowing you have a local presence who’s available off hours and weekends. With most of the big banks, you’re dealing with loan officers who work bankers hours. In our experience, working with someone local usually yields a smoother process for you (and the seller, too) which serves to strengthen our offer, especially if we are competing against other buyers.

6. Share your wants and needs with a qualified REALTOR (like us)!

You’ll want to work hand in hand with a local REALTOR, and spend time up front to conduct a buyer consultation. This is where we talk to you about what you’re looking for. What is the minimum number of bedrooms you need? How many bathrooms? Do you need a garage? Do you need to live within a certain radius of your job, or are you targeting a specific school district? All of these are important and help us set up a targeted search for you directly in our multiple listing service (MLS). That’s the fancy name for a database where agents from all over the area share their listings. Incidentally, the MLS will be the truest source of data for listings, and we have access to much more information than you’ll find on the public websites. One final point here…we’ll ask you to think about the distinction between WANTS and NEEDS. For example, you may want central air, but if we find a house that's perfect for you in every other way, you may be able to add central air after you purchase it. Making these kinds of distinctions now will make for a more targeted search and a better experience for you, our client.

7. Stick to your budget.

That pre-approval we talked about matters. Once we know what you can afford, and we’ve determined your list of needs (must have’s) then we will set up a search using that criteria and your budget. For example, if you are pre-approved for $500,000, we may set up a search for properties with all of your must have’s ranging from $400,000 to $500,000. You might stumble across a property that you love, but it’s listed at $650,000. While it might be tempting to just go see it, we would be doing you a disservice by tempting you with something you can’t afford to buy. Not to mention the fact that as REALTORs, it is our responsibility to only tour properties with clients who are qualified to purchase those properties. It’s part of our code of conduct, and it’s also respectful to the seller, and to other buyers who are qualified by not taking up a showing slot just for fun.

8. Pay for a home inspection.

Some agents may tell you you need to waive a home inspection in order to compete. We've never been proponents of that approach, unless you're buying new construction. For most people, a home purchase is the biggest investment of their lives. Why would you buy something so expensive without making sure it's not falling apart? Also, as your agents, a big part of our jobs is to protect your interests. What kind of agents would we be if we weren't looking out for you? Once we find the right house, we'll discuss all of the different types of inspections you can get, and together, we'll come up with the right approach that's comfortable for you, and that represents a good blend between protecting your interests and being competitive.

We are here to help guide you along the way. We also firmly believe that creating raving fans is the best way to grow our business. Don't take our word for it, though. Check out what others have said about working with us here. Whether you need to be in your new home in 4 weeks, 4 years, or you don't have a specific timeline, we are happy to start the journey with you. Get in touch with us and let's chat.