Nov. 19, 2020
Buying a home as a first-time homebuyer is a big deal. There is so much you need to know as a first-time homebuyer to have a successful home purchase.
Like anything in life, the more you put into buying your first home the more you will get out of it.
Today we will discuss some first-time home buying tips and advice that will set you on the path to successfully buy your first home.
The first-time home buying tips will be broken down into:
- Preparing to Buy
- Viewing Homes
- Making an Offer
- Closing on a Home
Tips to Prepare To Buy
A have been a buyers agent helping first-time homebuyers in Massachusetts for almost 20 years. Often I will see buyers struggling on their own in frustration because they have not taken the time to understand the various aspects of buying a home.
#1 Deciding That Buying Your First Home Is Right For You
The decision to buy your first home should not be taken lightly. Buying your first home just because all of your friends are, doesn't mean you should.
Double-check your motivations. Are you ready to plant roots in a community? Are your job and income stable? Can you comfortably afford to buy a home? Is owning a home a lifestyle you want to live right now?
Don't get saddled with a home you don't want. you could create a bad financial situation or just be unhappy.
#2 Start Preparing To Buy Your First Home Early
For most buyers, the thought of buying a home is in their head months or even a year or more before they jump into buying a home. Start preparing early to get a handle on the home buying process, the market, your finances and to set realistic expectations.
There are many things you can get in place prior to ever looking at homes that you can do at a leisurely pace rather than having to do it at the last minute in a panicked frenzied.
You can get a handle on the market by watching homes online, you can organize your finances, work on improving your credit and take the time to find the right professionals to help along the way.
#3 Get Your Hands On Your Credit Report
Get your hands on your credit report right away. It is not unusual for there to be mistakes that are dragging your credit down. You can get a free annual credit report on your own or by getting approved early by a mortgage officer.
Don't let last-minute problems with your credit hold you up. If you are in the fray of buying you aren't going to have time to correct some issues and you may end up with a less than desirable mortgage program.
#4 Know There Will Be Things You Don't Know And Your Need Help
Real Estate Agents and Mortgage Professionals are immersed in their professions daily. One big mistake is first-time homebuyers don't know what they don't know!!
But these real estate professionals do. Find the right professionals to help you along your journey they can make all the difference in the world for you. Line up the right agent and mortgage officer before looking at homes.
Start assembling your home buying team now! Talk to real estate agents and mortgage brokers.
#4 Take the Time To Understand Agency
In Massachusetts and many other states, an agent can work with you in many different capacities. It can actually be darn right confusing. The only real estate agent that works on your behalf is a buyer's agent.
A buyer's agent has a fiduciary responsibility to work in a manner that promotes your best interest.
For example, a listing agent, who is the agent with the sign in the ground has a fiduciary responsibility to the seller and not the buyer. A listing agent can help you buy their seller's home, but at every twist and turn, they have a legal obligation to benefit their seller and not you!!
When push comes to shove, you will be thrown under the bus. Take the time to understand real estate agency and what capacity different agents have in their dealings with you.
#5 Understand The Type of Real Estate Market You Will Be In
Often a first-time buyer will enter the real estate market with certain perceptions from friends and family buying in the past. But real estate markets can change on a dime. You need to understand how the real estate market is performing right now, not two years ago when your sister bought a house.
The type of real estate market you are in will play a heavy role in how you look for homes and how you structure and negotiate and offer. In a seller's market, which we are in right now in November 2020, inventory is low and buyers are competing for good homes. Versus, November 2010 where it was a buyer's market and sellers were competing for buyers attention!
#6 No Question Is Stupid
Once you start working with a buyer's agent and mortgage professional, don't be afraid to ask questions. There are no stupid questions. If it is on your mind ask.
You aren't buying a $200 TV here, you are spending $100's of thousands of dollars.
Often a buyer will say this may be a stupid question.... but when they ask it is a very valid question. A real estate transaction has many facets some with legal and financial ramifications. It's your life, ask the questions no matter how silly you think it is.
Financial Tips When Buying Your First Home
The financial aspect of buying and owning a home is one of the more complicated pieces of the buying process. Get a handle on the financial aspect early so you are making good decisions, have a full understanding of the costs and aren't running around like a mad man at the last minute.
Your mortgage pre-approval is critical. Get pre-approved before looking at houses. First, no seller will take you seriously without a good pre-approval and an understanding of your financial ability to buy a home.
Secondly, without a good pre-approval, you can't have a full understanding of your finances. If a mortgage professional takes the time to properly pre-approve you, it is only then you can have a full understanding of what your mortgage will cost you and what the closing costs are associated with buying a home.
Waiting to talk to a mortgage officer when you are trying to get a home under contract is a mistake. You are in a hurry and you often end up in a less than desirable mortgage program.
#8 Have An Understanding Of The Costs Associated With Being a First-time Homebuyer
Of course, you know you need a downpayment. But don't forget about the closing costs which can run another 2-4% of the purchase price of a home.
But beyond closing on the home, there are other costs to homeownership you should be aware of. There are taxes, insurance and home maintenance, utility bills that may include water and sewer. Talk to family and friends as well as your @realtor to get a full understanding of what costs are associated with buying and owning a home.
Don't put yourself in a position where every cent you make goes towards owning a house. You want to live a life after closing on a home.
#9 Work On Improving Your Credit
In the previous section of first-time homebuyer tips on preparing early, we suggested pulling your credit. But while you are in the pre-buying stage and looking at homes there often may be improvements to your credit that can make a difference.
First dispute any mistakes. Work with your mortgage officer. He may make some suggestions that could raise your credit score. Approximately, every 20 points in credit score can impact your interest rate and mortgage programs available to you. A difference between a 673 credit score and a 680 credit score could be significant for you as a homebuyer.
Often a buyer can improve their credit by a few to 20 points in a short period of time. I have also had a buyer increase their credit score by 112 points in less than 45 days!!
#10 Shopping For Your First Mortgage
Many consumers are under the impression that shopping for a mortgage means trying to get the best interest rate. But there is more to it than that. Of course, you want the best interest rate possible.
But for many first-time homebuyers, they are putting down a minimal downpayment. It is also important to discuss mortgage programs and the advantages for you.
The subtleties in mortgage programs can mean the difference between qualifying for a mortgage or not. Or, if put in the wrong program, it can costs you hundreds of dollars in your mortgage payment a month.
#11 A Word On Interest Rates
As I mentioned getting pre-approved early is important. Often I run into home buyers that have been out in the market place making assumptions based on advertised interest rates. They have avoided talking to a mortgage professional and are basing their budgets on the teaser rates often advertised by banks.
Read the fine print!!
The teaser rates are just that... they are based on putting down 20-40%, having a credit score of 720 or more and buying a single-family home. Often the criteria for the teaser rate is unattainable for many home buyers.
Tips On Looking At Homes
Once you have taken the steps to prepare yourself to buy and have taken to understand the financial commitment, it is time to seriously look at homes. Here are some first-time home buying tips for when you actually shopping for homes.
#12 Look Towards The Long Term
When buying a new home, think 5-7 years out. If you aren't planning on owning a home for 5-7 years maybe you shouldn't buy.
There is a substantial cost of selling your home. Real estate markets usually rise but in the short term markets have their highs and lows. 5-7 years will usually allow you to weather those ebbs and flows in the real estate market.
Don't just think of your needs now. Make sure your home will suit you and your family for its future housing needs.
#13 Don't Get Caught Into the Glitz and Glam Of A Home
Everyone loves shiny and new. But shiny and new is only good when the underlying quality of the home is good and the workmanship is of professional quality.
You can live with an outdated kitchen and bath, but issues like a leaking roof, insect damage, a failing heating system or electrical system can't be ignored. Plus they are all costly repairs sometimes running into tens of thousands of dollars.
Pay attention to the basics first to make sure you are buying a solid home. Don't get stuck buying a pig with lipstick!!
#14 Cheap Is Not Always Good
Like most things in life, you get what you pay for. This includes real estate. Houses are priced a certain way for a reason.
If you are buying a home that needs work, make sure you can financially handle the work as well as being capable of completing the work. Sometimes it is prudent to spend more money on your upfront purchase on a house that is updated and in good shape than it is to buy a fixer-upper that will cost more in the end to own.
#15 Pay Attention To More Than Just The House
When you are buying your first home you are also buying into a neighborhood and community. Pay attention to the neighborhood as you approach a home for your showing. Is this an area you can see yourself living in? Is it quiet, does it have nearby amenities?
Do a little research and make sure the community itself offers you what you need. Good school systems often top the list of what home buyers want out of a community.
For example, you may have a 2-year old that isn't in school now but in several years the school system may be important to you. This also ties in with buying for the long term. Your community needs to serve you for the future as well as now.
#16 View The Houses In Person
There is only so much an online listing can tell you. But to truly get a sense of a home you need to visit it in person. Whether your agent schedules a personal showing, go to an open house or even do a quick driveby, it is important to get your feet on the ground.
If you have any interest in a home at all don't discount it because of what you do or do not see online. Check it out. Especially if inventory is tight and you are struggling to find a home.
#17 Be Realistic
Every homebuyer starts out with certain wants and needs. But wanting or needing something does no mean you are going to find it. Your wants and needs may exceed your budget. Hopefully, you have spent some time looking at houses in your price range and have a realistic idea of what is available in your budget.
For example, many homebuyers in my market will want to purchase a single-family in the desirable town of North Andover. Say your budget is $350k. 6 houses sold under $350k in the past year. You may say, great! But when you are buying in the bottom 10% of a market you will find the home to be severely challenged by condition, layout, location or appeal. That translates to one new house coming on the market every two months.
Contrast that with a buyer that has a budget of $550k and 67 homes have sold in the same time period for about 6 new houses coming on the market a month. Or Haverhill having sold 138 homes under 350kin the same time period.
Make sure what you want actually exists or you will waste valuable time looking for that one unicorn. Remember in a seller's market house can rise at a rate of .5 t0 1% a month pricing you out of the market.
#18 Be Flexible And Adjust
Being successful in finding your new home requires you to be flexible and adjust. If you are not finding what you want in 12-15 homes it may be time to adjust your wants and needs. Look a little to the right and left of what you think you want. Following is an excerpt from something one of my first-time homebuyers wrote and it sums it up nicely.
"I remember day one going in with a list of our “must-haves” and our “deal breakers”. I could not tell you what was on those lists, because well, I made about 50 lists. Lists are helpful, to some extent. The lists do change, those must-haves become maybes, and those maybes become deal breakers. Keeping an open mind and looking at the bigger picture was important. I remember giving Kevin 5 towns we wanted to stay within. Funny, we are not in any of those towns"
I can tell you what my buyer client went through is pretty typical.
Tips For Writing an Offer and Closing On Your New Home
You have taken the time to prepare to buy your first home, you have spent months looking and you have put a house you are ready to negotiate and offer. Here is some advice for first-time homebuyers while they are in escrow.
#19 Know Your Numbers
Before putting in an offer know your mortgage numbers and be comfortable with it. Don't get caught with any financial surprises.
Also, know the market and what a house is worth. Have your agent run a CMA to give you a range of fair market value. Lowballing an offer usually leads to disappointment.
Talk about negotiating strategies that are effective for current market conditions with your agent. Negotiate to get the house you want and don't lose it over a few dollars.
#19 Keep Your Offer Clean
Avoid complicating offers with a ton of contingencies and requests. Focus on getting a fair price and go for it. Asking for furniture, lawn equipment or asking for contingencies outside the standard mortgage and inspection contingencies just muddle the negotiations.
#20 Take Your Home Inspection Seriously
Your home inspection is your last line of defense. In competitive markets, buyers may give up their rights to a home inspection but don't.
Make the most of your home inspection. Understand what it includes and doesn't include. Show up and ask and be prepared to ask questions.
Work with your buyer's agent and hire a great home inspection and review any issues with your agent. You should expect a home to be safe sound and all systems functioning unless otherwise specified.
Tips For Closing On Your New Home
A typical closing is between 30-60 days after submitting an offer. Here is some advice for first-time homebuyers that will make your time in escrow move smoothly.
#21 Time Moves Quick
Be prepared to act quickly. The bank will be requiring a lot of documents and want them quickly. It is a hurry up and wait game that can be frustrating.
Know what the bank is going to expect from you and be prepared to deliver in a timely manner. Don't you be the reason why your closing is delayed.
#22 Keep Your Credit Status Quo
While waiting to close on your home keep your credit profile exactly as is. Don't make any changes. Avoid changing jobs, don't buy a boat or a car, don't close credit cards and don't open new ones.
In your excitement to own a new home, you might be tempted to open up a Home Depot credit card or one at Jordan's furniture. This is actually a common home-buying mistake. But wait until after the closing before making changes to your credit. A new card could impact your ability to qualify for your mortgage.
And, as a last-minute tip banks will pull your credit and verify your job, once again just prior to closing.
#23 Don't Skip Your Final Walkthrough
Your final walk-through is one of the final steps of the home buying process. It is your final chance to make sure the home you are about to purchase is in the same condition as you viewed it, there is no new damage to the house and that all the systems are functioning properly.
Once you close on your home, you are agreeing you are buying the house as-is and will have very little recourse after you move in. Don't skip your final walkthrough and make sure you go through the home thoroughly
Final Advice For First-Time Homebuyers
There are so many other first-time home buyer tips I could pass along but I pulled out many of the more important pieces of buying your first home.
Get an advanced understanding of each step and rely on your professionals. A good mortgage professional, real estate agent and attorney are worth their weight in gold.
They know what you don't know and it is automatic to them. They are immersed in real estate every day.
Be prepared to buy your first home and enjoy this exciting time.
23 First-Time Home Buying Tips That Matter! was written by Kevin Vitali- Your Massachusetts REALTOR. If you are looking to buy a home, I would love to partner with you to help you make the most out of your first home purchase. Call me at 978-360-0422 let's chat!