Our Tips for Buying Your First Home

Buying a house for the first time is an exciting, but definitely not a simple, process! My husband and I just recently went through the entire home buying process, and I thought it was the perfect time to give you some tips we learned along the way.

Honestly, before you do absolutely anything at all, go to open houses – even if you’re not ready to buy. This will allow you to explore different neighborhoods, types of houses, what you can expect to be in your budget, and get a feel for the process in general. This was an important step we took, and we are happy we did, because it made us more prepared when we were ready to start the process.

So, here are some steps for buying your first house:

1. How Much House Can I Afford?

This is a big one! Buying a home is not an inexpensive process. In fact, it if more expensive than just the ticket price for the house, which a lot of people don’t anticipate. We found that it was important to ear mark extra money for certain expenses we had to incur during the inspection and closing process, as well as for after the closing!

Set a Budget

This is probably the most important part of starting the home buying process. Set your budget and try to stick to it. We decided to figure out what OUR absolute maximum budget, based on what we were most comfortable paying monthly, and look at houses only under that budget. The last thing you want to do is to be “house poor.” In other words, putting all of your monthly income into your house payment. We all need a vacation every once and a while! So, figure out what monthly mortgage payment you’re comfortable with, and only look at houses within that budget. After we figured out our max budget, we were able to continue on with our home buying process.

There are some mortage budget calculators out there that might be able to give you an idea of what you can afford!

Down Payment

Now that you’ve have set a max budget, you’ll need to make sure you have enough money for a down payment. This is the scary part for most first time home buyers! We learned that if you put a 10-15% down payment (not the full 20% or more), most lenders will charge what is called PMI (Private Mortgage Insurance). This is an insurance you pay monthly (lumped into your mortgage payment) until you reach the 20% down payment on the house. We actually found out that you can pay a 1x flat fee to eliminate PMI, which can often be cheaper than paying the PMI monthly, or making the fully 20% down payment. If you have some extra cash, you may want to consider this. You can also wrap the flat fee into your total mortgage loan if your lender gives that as an option. Our mortgage broker was able to present us with all of the options when it came to this so we could make an informed decision. Be sure to talk to them about all of your options!

Find a Mortgage Lender

You can start the process of finding a mortgage lender now or after you start looking at houses. It’s really up to you! We decided to start researching a few different banks and mortgage brokers we could use right in the beginning of our search, so we would be ready with a mortgage pre-approval letter when we did want to put an offer on a house. The last thing you want to do is rush this process! My husband and I used Cross Country Mortgage and they were great!

Figure Out What your Needs are

This is important. You have to go into buying a home with at least a short list of necessities you want your new home to have. For Example, we wanted to have 3 bedrooms and 2 bathrooms, minimum, and we absolutely wanted to live in a good neighborhood and not on a busy street. As a first time home buyer, your needs-list may be much shorter than if this is your second or third home purchase. So make sure you have an idea of what you need and an idea of what you want, before getting into the process.

As you start looking, your needs and wants may change a bit based on what you find in your price-range and what neighborhoods you wind up liking, and that’s okay! Just remember to keep an open mind and be flexible if you can.

2. Finding a Realtor

Next up is finding a realtor! Some of you may have a family friend who is a realtor, who you trust and want to use! If that’s the case you’re lucky! We did not have anyone in mind, and needed to start from square one.

Our idea was to go to open houses and meet realtors there that were showing the homes. It just happen to work out for us that we met our awesome realtor at an open house! I believe you can also contact any real estate agency and ask to work with one of their realtors, who can bring you to see houses. Asking friends, family, your attorney, or your mortgage broker for a referral is usually a good way to get connected with someone that others have had a good experience with. Remember, the ball is in your court when it comes to finding a realtor that you like and trust. Interview your prospective realtor to see if they’re a good fit for you and your family. You want someone that has your best interests in mind and will be able to work around your schedule to view homes as well. If you don’t like someone you don’t have to use them!

Some people will even just call the person selling a house they like and ask them to show them the house. Sometimes this isn’t the best option because they might not have your best interest in mind. Whereas your own realtor is on your side 100%. This is definitely more advantageous because if your realtor represents the sellers, they may be trying to get the seller the best price, not focus on certain inspection negotiations or credits that might be better for you than the seller, etc. It’s always better to have your own realtor in your corner.

3. Research Homes

I think there is a misconception sometimes that the realtor is supposed to do ALL the work for you when you’re searching for a home. Although our realtor did send us links to home options all the time, we also did research ourselves and sent homes options to her, that we were interested in seeing. This was a great way to show her what we liked and get her input on houses that we saw online. We use Zillow.com and Realtor.com to search for homes we wanted to see.

Realtors do so much more than just search for homes for you. They coordinate showing the home to you with the seller’s realtor, they share their knowledge about neighborhoods, the fairness of the price, potential issues and things you may not consider or even notice! We would send our realtor a list of houses we were interested in seeing during the week, and she would set up all of the showings and plan coordinate a full day of it for us! If she felt like we should see one of the homes sooner, she would have us go that night or the next day so we didn’t miss out on an opportunity.

4. Mortgage Pre-Approval Process

Let’s say you found your dream home and you want to make an offer right then and there, but you never got a pre-approval letter. That could cause an issue if other buyers are vying for the same home and make an offer with a pre-approval letter before you can get one. A pre-approval letter from your mortgage lender shows the sellers that you are serious and have a company that is willing to lend you enough money to buy the house. Always have your mortgage broker on standby ready to provide you with this letter so you can quickly make an offer, if you need to!

5. Your House Offer Was Accepted!

YAY! You got through the negotiation process and put in an offer! Phew, that was scary… at least it was for us!

We had a number in mind that we wanted to pay for our house based on our budget, and we stuck to it! It was fair and reasonable offer and it was accepted by the seller! The best advice i can give is to have an idea of what your maximum offer would be for the house you chose, and stick to it! Sometimes you get excited about the house and just want to get your offer accepted. Using your head instead of your heart when it comes to making an offer an negotiating is so important. Be fair to yourself and don’t over pay just to get the house!

6. Time to Start Spending Money

Now comes the money-spending part. Before the closing occurs there are certain costs you have to consider, such as:

• Hiring a lawyer (licensed int he state you’re buying the home in) – lawyers are often paid at the closing as part of the closing costs.
• Pay for an inspector who will inspect the home – this is usually an out of pocket expense paid up front.
• Hand over a nice big deposit for the home – the deposit is held in escrow by your realtor or attorney until the closing occurs.
• Pay for a title search – this happens differently in every state, sometimes it is an out of pocket expense, other times your attorney orders the title search and the cost is wrapped into your closing costs at closing.
• Pay for a surveyor – again this is different in every state. Some states require a survey, others do not. This is usually an out of pocket cost paid to the surveyor before you buy the house.
• Pay for an appraisal – sometimes this is an out of pocket cost, other times it is wrapped into your other closing costs at closing.

These out of pocket costs can vary greatly depending on how your state does closings, but your realtor and lawyer will keep you informed of what is due when, and can estimate these costs for you. The inspector is definitely one of the more important aspects, because they find out if the house has any issues that need to be fixed before you buy it. Your realtor can likely refer you to an inspector they trust.

Finalize Your Mortgage

If you find the right mortgage lender or bank, this process will be time consuming, but fairly straight forward. One of my biggest tips is to try not to mess around with your credit score, make any big purchases, open new credit, or move money around before you are buying a house. Your mortgage lender will ask you to explain any large movements of money, which can make things more difficult!

If you have a good mortgage lender, they will keep track of everything for you and let you know when you have to sign papers, give them certain information and more. If you respond to their requests quickly, that will avoid delaying the closing process, and possibly making the seller frustrated if you can’t close on time because your mortgage approval is delayed. Your mortgage lender will be in contact with your realtor and lawyer giving them all of the information they need throughout the process. It is important to have a good team around you so everything goes smoothly.

Make sure your mortgage lender also gives you all the details regarding the different options for your mortgage. Some factors could be whether you choose a 15 year or 30 year mortgage term, whether you want to make monthly versus bi-weekly mortgage payments, what the interest rates currently are, what your options are with regard to PMI, how much your down payment should be, and more! All of this can make or break meeting your overall budget and goals for your mortgage payments.

Important things to Remember:

• Your lender pays your property taxes for you – your tax payment will be divided over your mortgage payments (usually monthly) and that money will be placed in an escrow account established by your lender. When your taxes are due, your lender will use the money in your escrow account to pay your taxes.
• You’ll need home owners insurance – you will need to pay for one year of home owner’s insurance up front at closing. Your lender will pay your insurance each year after that, from money in your escrow account, just like your taxes.
• Factor in utilities for the home – you can ask the seller what the usual utilities are, so you can be prepared for that expense each month.

I hope my tips helped ease your mind about buying your first home – or even with buying a home if it’s not your first time! We enjoyed the process because we picked a good team to work with. We kept our minds open with regard to the whole process, we stayed in our budget, and we’re so happy to have purchased our first home! Ask any question you might have in the comments below!

I can’t wait to share everything we’ll be doing in our new home with all of you!