Oh, hi! It’s been a while (as in more than a year) since I’ve last posted here. Funny thing is that I have 10 blog drafts waiting for me to hit the “Publish” button. But, I was waiting for something big. And this, y’all, this is BIG! I’ve finally found THE ONE. No, it wasn’t on an online dating site (but close!). I recently made things super official and became a FIRST TIME HOMEOWNER! Going about something so big definitely proved to be challenging, especially when you do it all by yourself. Most people wait until they’re married to buy a house, and I’m sure having an extra person to share some of the responsibilities would be helpful. But, there’s something incredibly rewarding about doing this all on my own (well, financially, at least). I feel fortunate to be able to take on this new journey, but it hasn’t come without a few (hundred) questions. Is this the right home for me? How much should I offer? What’s involved in closing? How much is this really going to cost me? Is this normal? Can they do that?! Thanks to the calming efforts and question-answering skills of both my amazing parents and a fabulous realtor, I was able to make it to signing day and that gratifying moment when the keys were finally placed in my hand.
As much as I wanted to believe that buying a home would be super easy, the struggle is real. So, if you’re looking to buy or are currently in the process of buying your very first home, here are a few tips I’ve learned along the way that I hope will help you in your own home-buying adventure.
Find a realtor you like/love and trust
I was on the hunt for buying a home for a few years. Believe it or not, finding a realtor was the hardest part about getting started. As a young and single female, I felt like many didn’t take me seriously or pushed me aside as a nonimportant client. (Not cool, btw.) I found my current real estate agent through Zillow.com. She was quick to reply to my inquiry about a home, and she was always available to show me homes and answer questions. And trust me, I asked a lot of questions. She never made me feel like I was asking too much or feel guilty for wanting to see a home a second (or third) time. She walked me through this whole process step by step and helped me get a great deal on a home I love. Best of all, the seller pays for her to do all of this. Meaning I paid zippo for her efforts.
Don’t be afraid to look around — the right home is out there
I looked at 20+ homes before deciding on the one that was right for me. Even then, I looked at that home twice before even realistically considering putting in an offer. I was afraid of wasting my realtor’s time, but she assured me that’s what she was there for (again, I can’t stress that first tip enough). A few suggestions she also gave me:
- If you don’t like the area, don’t even bother looking at the house.
- Don’t be afraid to keep looking.
- Do ask to see properties you like more than once.
- Drive around the neighborhood before scheduling a showing. Sometimes, getting a feel for the area is enough to say “no” to a particular property.
Know how much you can afford
There are some pretty decent home affordability calculators out there, but they can’t tell you everything. Do your research on other costs, such as property taxes, home insurance, yard work, utilities, alarm systems, HOA fees, and any other additional expenses you may need to take on as a homeowner.
Also, be sure to factor in your down payment. If you plan on putting down less than the recommended 20 percent, you’ll need to pay something called Private Mortgage Insurance (PMI). This can increase your monthly mortgage payment for an upwards of 10 years, but it could also mean having more money in your pocket upfront. Compare all your options to see what works best for your budget.
Figure out your savings
I knew I’d have to put a down payment on a house, but I didn’t exactly realize there’d be SO MANY other fees, too, like lender closing costs, a year’s worth of home insurance, property taxes, interest on the loan after closing, four months upfront PMI …
Typical closing costs can run on average anywhere from two to five percent of your total loan. So, on a $200,000 loan, you can expect to pay upwards of $10,000 in closing costs. And, that’s in addition to your down payment (most lenders require at least 3.5% down). Be sure you’ve saved enough to be able to pay with cash in hand when it comes time to close, and factor this into the amount of home you can afford. You may find that you will need to readjust your numbers or wait until you’ve saved more money.
Know your credit score
You’ve seen the cheesy commercials. There are several free credit score checkers out there. Use one. Know it. If it’s good, great! If not, look for ways to build your credit. It will help you get a better mortgage rate and make the process of applying for a loan so much easier. You don’t want to find your dream home, at your dream price, only to find that no one will approve you. That would be like pouring a bowl of Reese’s Puffs cereal only to discover you’re out of milk.
For a free credit score and help with budgeting, I highly recommend Mint.com. It is a great online tool that syncs with your banking accounts, showing you exactly where your money is going (no surprise for me, it was mostly towards food). It helped me set up a monthly budget so I could track spending, and it showed where I could cut back in order to save more. It also has a feature to set a goal to track your saving progress. “Buy a House” Goal: Complete!
Get a preapproval letter
After figuring out how much you can comfortably afford, get preapproved for a loan. You don’t necessarily have to go through this particular lender once you find a home to purchase, but it definitely helps sellers see you as a serious buyer. I personally suggest getting preapproved through QuickenLoans because it is incredibly convenient to fill out a form online and get an instant reply from a friendly representative. The documents are also all kept online, so if you need to change your pre-approval letter amount (say, if you’re offering less for a home than what you’re pre-approval letter states), it’s a quick (as in three-seconds quick) fix. If you want a real person to talk to, they have that, too.
Know a fair asking price
Your realtor should be able to help with this by providing you with comparable homes in the area and suggesting a fair asking price. You know you have a good realtor when he/she says, “This is what I recommend putting in as an offer, but don’t put that in unless it’s something you’re completely comfortable with!” Yes, a realtor works off of commission, but you’re the one that’s going to be stuck paying the mortgage for 30 years. If the fair asking price is too high for your budget, you could have some room for negotiating. But, you may want to consider looking around more.
Yes, you can counter-counter offer
Each situation is different, but if you’ve made an offer on a home and the seller comes back with a counter offer, don’t think it has to stop there. If you are willing to compromise and meet in the middle, chances are that you might be able to continue negotiations. Again, your realtor will be able to tell you if this is recommended. In my case, it was and I did. And, I got the house for a price that I felt was not only fair but also a great deal.
Shop around for a mortgage
Just like you shopped around for the perfect home, be sure to compare your home loan options, too. Check to see if your current bank offers discounts to loyal members. Use online mortgage comparison tools for a quick way to narrow down lenders. Don’t forget to look at local credit unions, as they often have great rates and special deals. I was able to find a local credit union that not only had the lowest APR I could find, but it also waived closing costs. You could also obtain the help from mortgage brokers, as they can search different lenders for you, as well.
Home inspections ARE worth the money
I get it. Paying close to $500 upfront just to see if the home is even worth the purchase may seem expensive. However, a home inspection can help uncover other items you can negotiate in your overall costs. For me, we found that the electrical panel and roof both needed to be replaced. I was able to get repairs performed before closing and an additional concession for other renovations needed. Overall, my $500 inspection helped me get an additional $9,000 towards my new home! To me, that seems like a reasonable investment (that I wouldn’t mind duplicating in Vegas).
Don’t forget to get those free inspections, too! Many pest-control companies offer free inspections for yard pests and rodents in your home. Knowing if you have a family of mice in your attic is only appealing if you’re Cinderella. And, even then, it’s only cool if they can sew you a ballgown.
Get insurance quotes before submitting your request for repairs
This is actually something I didn’t do, but I wish I had. If you’re buying a home that may need repairs, this could prevent you from getting coverage with an insurance company. Even if you’re able to do the repairs once you own the home, lenders are sort of a stickler for closing with homeowners insurance. If your repairs stop you from qualifying with insurance companies, you can use this as a negotiating tool during the time for repairs and replacement request.
You have so much to do leading up to closing day. Don’t let anything fall behind because of something that was left on your plate. Call your lender, insurance agent, and realtor to ensure that nothing is needed on your end. The last thing you want to do is hold up your closing date.
My closing date has been delayed.
Twice Four times. Even if you do everything on your end with enough time to spare, you can’t guarantee that your seller is going to do the same. Obviously, you don’t want to sit around waiting, with delay after delay. Your realtor will be extremely useful here to keep the listing agent, title company, and lender all in check. He or she should be fighting to help you close on time. But, things happen. So, remember that patience is something you need in times like these.
You’ll still have more to do, even after signing on the dotted lines (all 500 of them). But amidst all the chaos and stress, don’t forget to be thankful that you are able to buy a home. Whether you’re buying a Beverly Hills mansion or a 250 square-foot studio, it’s a luxury not everyone is able to afford. You’ve made it this far, and that’s worthy of a celebration to me!