Many people have a dream of owning their own home at some point in life, for both financial and personal reasons. However, the process can seem overwhelming and complicated… especially if you’ve never gone through it before. If you’re looking to buy sometime in the future, I hope you gain confidence and knowledge from the following tips for first-time home buyers.
Save/set aside $ for down payment, closing costs, etc.
This one’s obvious but I had to include it because it’s a pretty big deal. When purchasing a home, you’ll need cash for your down payment (typically 5-20% of the purchase price), various closing costs (2-5% of purchase price), and any moving expenses. The rest of the purchase price amount will be paid to the seller by your mortgage lender, and then you will pay the lender back through monthly payments.
Check (and strengthen) your credit
Your credit score will help determine if you can qualify for a home loan. You can get a free credit report from the three main credit bureaus – Experian, Equifax, and TransUnion – and dispute any errors you see that you don’t recognize and/or that might impact your score. Be sure to pay all of your bills on time and keep your credit card balances as low as possible! Lenders want to see consistent behavior patterns so they know you can be relied upon for future payments.
Work with a trusted real estate agent (sooner rather than later!)
This is truly a CRUCIAL step in setting yourself up for success! A great agent will help answer all of your questions. They’ll educate you on the buying process, current market conditions, and legal forms; connect you to reliable contacts such as lenders and home inspectors; and act as a project manager/advisor during your home search and closing process. Above all you should select someone that you connect well with and that will put your needs first.
Note: As a buyer, you typically don’t have to pay your agent – their commission is paid by the sellers. Also, if you need an agent somewhere other than Seattle, I can still help you!
Connect with a mortgage lender & get pre-approved
Before you seriously look at homes, chat with a lender to see what your options are (conventional mortgage, FHA, VA, etc. – they will explain the difference) if you won’t be paying the full amount in cash. Many people like to compare quotes from a few different lenders. You will go through an application process with them and get “pre-approved” for a loan. It’s pretty much non-negotiable these days to include a pre-approval letter with any offer you make, which is why you’ll want to tackle this step ahead of time. The letter is like evidence for the seller and their agent, as it’s a pretty good guarantee that you are qualified to make the purchase.
Your real estate agent should be able to recommend their favorite lenders to you. Local lenders are often preferred over larger institutions like Wells Fargo, Rocket Mortgage, etc. They are MUCH more responsive and have a better reputation with listing agents (crucial if you want to win in a competitive market like we’re in now). Some local lenders will even call the listing agent on your behalf just to vouch for you… there’s no way Rocket Mortgage is doing that!
Note: Certain lenders offer first-time home buyer discounts, so be sure to ask! Often times they are also willing to match the rates of other lenders in order to be competitive.
Figure out how much you can afford
In order to get the most accurate idea of what you can comfortably afford, you’ll want to have that lender conversation. They’ll be able to look at your monthly income vs. debts, any assets you have, credit score, employment history, etc. and help you figure out what makes the most sense for you. That said, there are many financial calculators out there (like this one on my website) that can help give you a rough estimate of what your monthly cost might be. Take these with a grain of salt!!! They are never totally accurate.
Get clear on your priorities (must-haves vs. nice-to-haves)
There are endless different amenities and features that a home can offer. Spend some time brainstorming what’s most important to you so that you’re clear on it when the time comes. Decide what your “must-haves” are – the elements you can’t live without. Maybe it’s a garage, a large yard for your dogs, at least two bathrooms… you name it. Then decide what your “nice-to-haves” are – ex: a view, open floor plan, hardwood floors, etc. Keep in mind which things can be removed/added/changed and which can’t (your agent should be able to help with this), and realize that it’s a game of compromise. No home has it all!
Choose a type of house + neighborhood that match your lifestyle
Think about your preferences and the way you live and how that might impact your decision. If you’re someone who hates yard work and doesn’t want to pay a landscaper, maybe think about buying a townhouse or a home with a small yard. If you’re someone who values being able to walk to and from dinner, be sure to check out what restaurants and shops are nearby. Planning on having kids at some point? You might want to research the quality and reputation of the school district. Take these types of things into consideration so you don’t end up making a choice you regret.
Pay for a home inspection
I cannot stress this one enough! No matter what, you should absolutely hire a home inspector to look at the property before you buy it. Your home may be your biggest financial investment / asset ever, so it is 100% worth it to know what you’re getting yourself into. Even if a home looks lovely and recently remodeled, you never know what’s going on beneath the surface unless you get an expert to look at it. This book is super helpful if you want to learn more about how to look at homes through an inspector’s eyes. It by no means replaces a professional inspection, but it will educate you on what to look out for. Your agent should be able to recommend trusted home inspectors in your area.
Save copies of all paperwork
When you go through the buying process, you’ll end up with a lot of important documents – purchase contract, mortgage statements, deed, etc. Yes you’ll want to save them online in the cloud somewhere, but it’s also smart to print physical copies and store them in a locked, fireproof file cabinet if possible.
I hope you found these tips for first-time home buyers helpful! As always, please reach out if you have any questions on this post or anything else real estate related. I’d love to be a helpful resource – even if you don’t live in Washington!