10 Things First-Time-Home-Buyers Should Know!
1. Having a Buyer's Agent is FREE!
Commission to the Buyer's Agent is typically paid by the Seller. Which means that it is Free to the Buyer! So there's no reason not to have someone working on your behalf. Without a contractual agreement between an Agent and a Buyer (called Buyer's Agency), the agent is by default legally working in the best interest of the Seller. Eek! And this goes for new home building too. The Builder IS the Seller. Have someone working on your side through the whole process.
2. Things can get Competitive
Depending on the time of year, your location, and your price point, things can get pretty competitive out there. It's currently a seller's market which means there is a shortage of listings and a plethora of buyers. You will likely be up against other offers and you might even miss out on a couple houses before you get the winning bid! Houses are moving quickly, sometimes within days or hours from being listed, so when you find the perfect house, you need to be ready to pounce on it! It's important to mentally prepare for this and realize that it's a journey. This is also why it is especially important for you to have a Buyer's Agent on your side to help guide you through the process and negotiate on your behalf.
3. It takes a while (except when it doesn't)
The timing can really vary so much. I've had buyers that take 1 day to find the perfect home and others that take 1 year. But for most cases, it takes a few months from start to finish until you are in your new home. It's important to see a variety of houses and neighborhoods when you're searching for the right home so that you can gain a frame of reference. But remember, certain times of year, thing can get very competitive and houses sell quickly. So if you find the perfect home and are ready to take the leap, things will likely move very quickly from there. Also keep in mind that, depending on what part of the month you close in, you'll have 1-2 months after closing before your first mortgage payment is due which is important to note so you can avoid having any overlapping payments between rent and mortgage.
4.Get pre-approved BEFORE you start to look
There are so many mortgage options out there, especially for first-time home buyers. And you need to know what you are looking for! If you start looking at your dream houses and then find out your budget is really $10,000 less than that, you are going to be disappointed. It can sometimes take a little while for your lender to go through the pre-approval process so getting it done ahead of time is important since you will need a pre-approval letter to submit with your offer. And like I said before, things can move pretty quickly, so when you find the perfect house you need to be ready to snatch it up quickly. Having all your ducks in a row ahead of time will be helpful.
5. A Good Mortgage Lender is key
I can't stress enough how important it is to work with a lender that is responsive, easy to work with, and fast. Trust me, you do not want to find out a week before closing that your lender dropped the ball and you can't buy your house! Also, most buyers don't realize that the lender you go with can make or break your offer. Realtors work with a lot of lenders and know the "good" lenders from the "bad" ones and if you are working with a bank or lender that is known for being difficult to work with or for taking too long for financing, they will be less likely to accept your offer. It can be tempting to just use the bank you already use for your checking and savings accounts but I would highly recommend taking the time to shop around a bit. Just be careful not to space it out too much since each lender will likely check your credit. No more than 3 lenders within 2 weeks will generally only count as one “hit” (inquiry) on your credit score. Also, as a good rule of thumb, find a lender that is local and reputable (Please No Rocket Mortgages!!) A good lender goes a long way in making this journey smooth and easy so ask your Realtor (me!) for some suggestions on good lenders in the area.
6. You don't necessarily need a 20% down payment
It's been drilled into our heads (probably from our parents) that you need 20% down to buy a house. But it's just not true and it's not realistic for many buyers. Some First-Time Home Buyer loan programs offer as little as 3% down and some with $0 down! Some banks require PMI (private mortgage insurance) and some don't. So make sure to ask questions and shop around!
7. Consider your Future Plans
How long do you plan to stay in this house? Is this your forever home or your starter home? If you plan to move in 3-5 years, consider re-sale value. If you plan to have kids soon, consider schools (also keep in mind though that you'll have at least 5 years before your new baby grows into a school age child). If you plan to do a lot of traveling, maybe consider a condo instead.
8. Be Willing to Compromise
Whether you are buying a house with a significant other or one your own, compromises are inevitable. I have never met a couple that agrees on every aspect of the house they are looking for. And even without having to agree with another person, you might need to compromise on your own expectations. Are you willing to live a little further out of town? Sometimes an extra 15 minute drive can get you more options and more bang for your buck. Are you willing to do some updates yourself? Think about the things that matter most to you and your deal-breakers, and then think about what you can be flexible on.
9. You might not want to buy the home "together"
Whether or not you have a ring on your finger doesn't affect your ability to buy a home, but your spouse’s credit score will. A lender typically takes both credit scores into consideration when determining the loan value and interest rate, so it’s important to understand your partner’s financial situation when deciding whether to purchase a home together. One of the things in your credit score is debt. If your spouse has a lot of student loan debt, it could affect their credit score, which could affect your interest rate and how much you can ultimately borrow. Some couples, married or not, decide to put the mortgage in only one name instead of both. This can get rather complicated so it's best to have this conversation with your lender and/or lawyer to find the best option for you.
10. ENJOY the Journey!
With all of the joys in life comes a little chaos too and it's important to embrace it and enjoy the ride. Whether you are planning a wedding, getting a new puppy, having a baby, or traveling the world, all of these joys come with a little bit of stress. Finding your new home is no different. For most cases, the journey takes a few months from start to finish until you are in your new home. The process can be stressful at times especially when there is competition involved. Knowing what to expect and having a good attitude going in to the process can make a huge difference. Fulfilling your dream and finding your home is worth every second. So enjoy the journey, no matter how crazy it gets, and enjoy your new home.