23 Things Every First-Time Homebuyer Should Know
Seven first-time homebuyers admit their biggest rookie blunders and reveal recession-proof lessons to guarantee home buying success.
Lesson #12: Examine both financial and personal costs of buying
Buying a home can require you to make tough personal sacrifices. After adding up the cost of their mortgage payment, HOA fees and other monthly expenses, Becky realized she would need to quit school and get a job so she and Adam could afford their house. While Becky is happy with her decision, if they had saved more money she would have been able to stay in school. Before buying a home, think about what kind of personal and financial sacrifices you’ll have to make. If affording a home is a stretch right now, it might be better to wait awhile and save up more money.
Lesson #13: Read HOA documents before closing
Reading a big stack of papers may seem like a huge hassle, but carefully reviewing your HOA documents is important if you want to avoid unpleasant surprises down the road. Eight months after they moved into their home, Adam and Becky learned that their HOA dues were increasing by 5 percent. If they had read their HOA documents, they would have known sooner and been able to prepare. Before buying a home in a community with an HOA, read through the covenants, conditions and restrictions (CC&Rs), bylaws and budget and look for anything that could affect you in the future. Also, talk to residents in the neighborhood and get opinions on how well the HOA does its job.
Lesson #14: Secure financing before falling in love with a house
Lesson #15: Don’t spend every dollar you qualify for
Clarence and Angie were willing to come down in their price range, and as a result were able to open up their options to a larger chunk of the market. With financing already secured, they found another great house with ease and were able to spend more on decorating and upgrades. Coming down in price also allowed Clarence and Angie to save more each month and lock in a better interest rate. By not spending every bit you qualify for, you can open yourself up to more options and better possibilities.
Lesson #16: Find smart money
Clarence and Angie found their “smart money” by getting a loan through a non-profit organization that had agreements with several lenders to give first-time homebuyers affordable loans. These kinds of opportunities are out there; you just have to look for them. Remember, you still have to be underwritten by the lenders, so be prepared to show your credit history and attend classes and workshops the non-profit group organizes.
Paying close attention to the aesthetic details of a home is just as important as the structural details when going through an inspection. Oftentimes, do-it-yourself remodelers looking for a quick fix use low-quality materials that turn into a problem for future homeowners. They key is to make sure any renovations were done by a professional contractor using quality materials that are meant to last. Inspecting details up front is very important so you don’t find yourself shelling out even more cash later on.
Lesson #18: A creative bid strategy helps ensure a good deal
Scot and Leeah used a unique approach to get a great deal on their Denver, Colo., home. By first making an offer of $300,000 on the home, then adding a contingency that they would pay $1,000 over any other competing offers up to a maximum price point of $329,000, the couple could guarantee they got the house with minimal dollars spent over the highest competing offer. Although unconventional, a creative strategy like this can be very effective in today’s market, especially when there are competing bids for the property.
Lesson #19: Don’t overlook the landscaping
Updates to the exterior of a home can add up just as quickly as the interior. If you aren’t looking to spend much more on the details once you have found a home, look for a property that already has the amenities and the landscaping that you desire.
Lesson #20: A higher price point might save money over time
After making interior and exterior renovations, many homeowners find that their budget has been stretched way beyond what they initially wanted to pay for a home. For this reason, it can be smart to adjust your price point a little to help you save money over time. By paying a little more upfront for a home that has all of the upgrades and extras you want, you won’t have to worry about paying for them down the road.
Justin and Sarah bought their first place in Scottsdale, Ariz., but before they finally closed the deal, they had to endure the discouraging feeling of being outbid or rejected multiple times. From the beginning, Justin and Sarah were adamant about not spending more than $240,000. Unfortunately, by looking for homes at the top of their price range but making lowball offers -- plus asking sellers to contribute to their down payment and closing costs -- their offers looked weak and were rejected, outbid or ignored every time. If you find yourself incurring multiple losing bids, a change in strategy is in order. By giving a little bit, you can get a lot in return.
Lesson #22: Change a bid strategy that’s failing
Tweaking your bidding strategy can make the possibility of getting the house you want much more realistic. Justin and Sarah learned that you have to be smarter, faster and closer to the original asking price in order to put in a competitive bid. The offer should be strong enough to at least hit the seller’s base price. The key to remember is if you would like the sellers to do something for you, such as contributing to closing costs or the down payment, then you need to get as close to their asking price as possible.Lesson #23: Save money for a down payment
No matter what you might face when going through the process of buying your first home, one thing remains the same: Cash is always king. Saving money for a down payment is one of the most important things a buyer can do when looking to purchase a home. Having money set aside gives you more negotiating power and makes your offer look much stronger to the seller. Putting a reasonable percentage into the down payment also means you will have equity invested in the house from the get-go. Not only that, but having extra money set aside lets you make repairs and improvements once you’ve moved in.