When buying your first home, it helps to have a plan. It’s important to plan to get pre-approved for a home loan before you start getting serious about buying. Here are some other steps you should take.
- Check your credit report and fix any mistakes. This can take a month or more to get resolved.
- Create a plan to improve your score. You get better rates the higher it is.
- Get pre-qualified to find out how much home you actually could afford.
- Go to open houses if you can but stay detatched. Your goal isn’t home shopping right now. It’s to meet real estate agents and to learn more about houses and neighborhoods.
- Create a list or spreadsheet of things you like (3 bedrooms 2 bath minimum) and things you don’t like (ovens open up into a doorway).
- Create a list of neighborhoods that you like. Then drive around at different hours on different days. Is it really busy on weekends or during commute hours? How close is it to shopping?
You want to go in with the best information possible. Don’t rush in and regret later.
Something else you should evaluate is how long do you want to live there, and how is your life going to change over those years? Some people are happy to buy a starter home of 1 bed and 1 bath. But how long would you be able to comfortably live there?
Also, would you want to sell that to buy another house or would you rent it out?
We’ll finish up with common mistakes first time buyers make:
Looking Without Knowing Your Price Range or Budget
You should know what you can comfortably afford today before you ask a real estate agent to pull listings. The best way to achieve this is by writing down your average expenses, looking for things you may want to give up for a little while, and getting pre-approved by a reputable mortgage loan officer.
When you do find some good houses, have your agent find out the average expenses for gas, electric, water, and garbage. You can also go online to estimate your property taxes. This gives you a better long term picture of how much the home will cost you.
Finally, contact your insurance agent for an estimate on homeowners insurance, and if you will need additional coverage for earthquakes or floods.
Not Considering Home Resale Value
A house is also an investment, and the only thing constant in life is change. If you don’t have kids, you may buy a fun house in a neighborhood that doesn’t have good schools. If you decide to have kids, you’ll need to either look into private schools, or selling that fun house and buying in a different neighborhood.
When you get older, you may not want a house with three flights of stairs, or four bedrooms and three baths.
A rule of thumb is you should live in a place for at least five years to make it worth the investment. You should also evaluate if you would have to do any major repairs or remodels and how long it would take to get back your money.
Not Getting Professional Advice
As a first time homebuyer, you lean towards trusting what your real estate agent advises because you assume they have your best interests at heart. Usually, yes, but remember that they may not fully understand your situation and make recommendations that aren’t. So trust advice but verify. Don’t be afraid to ask questions or see if there are any other options.
And finally, a verbal agreement isn’t worth the paper it’s printed on not to mention it’s non binding. Get every part of the offer in writing when the seller agrees to your bid. If it’s not under contract, then the seller is free to reject your bid and accept one that comes in afterwards.
Put together a team of professionals to work with you, and always think with your head. It’s easy to lose focus when you buy your first home.