Buying your first home can feel like taking a big step into the great unknown of real estate. It’s true that real estate is a complex industry full of high-rollers and investment buyers, it’s also a first-timer’s market. More than a third of all homes sold each year are sold to first-time home buyers so while you may feel like you’re jumping into the deep end, you’re certainly not alone. You have the opportunity to benefit from the lessons learned by home buyers who have come before and the real estate agents who have helped dozens of first-timers make it through their first home purchase.
Of course, the real clues aren’t always found in your run-of-the-mill first time home buyer guides. Many are far too rosy for fear of scaring you away from your home buyer dream. But these leave out important clues about how to avoid mistakes others have made. Other articles focus only on the negative, hoping to draw in readers with the allure of bad news. Today, our real goal is to simply share the secrets of buying your first home that other sources are shy to tell. Our first secret is about the size of a home.
1) Size Isn’t Everything
When house hunting, many of us get into the mindset that ‘bigger is better’ and it’s easy to get caught up in comparing raw numbers. On paper, it does seem better to have three bedrooms rather than two for the same price. Or an extra half-bath, a bigger yard, or a few hundred more square feet listed in the floorplan. But before you weigh a home’s value on size alone, ask yourself: Is the bigger house really better? Does it get you one step closer to the dream home in your mind than the smaller one does?
Make sure you are evaluating each home you consider for its individual charm and qualities. If you genuinely like a smaller house better, reassure yourself that you’re not letting a better deal slip through your fingers by passing on a larger home. Pick the house that is right for you, not just the biggest one you can afford.
2) Don’t Worry About Market Timing
For people who ‘live’ in the real estate market, agents and investment buyers specifically, market timing matters a great deal. There are hot and cold property buying seasons, interest rates rise and fall, housing markets become flush or tight. And if you’re willing to wait a year or more to buy an opportune property, these factors are important.
However, as someone looking to buy their first and only home, market timing means very little. You are looking based on the right time to buy a home in your life. At the same time, the homes are usually only on the market for a few months or less before a buyer makes a move. Worrying about the market schedule can cause you to rush when you should wait or wait forever instead of claiming a great opportunity.
3) Bid What the House is Worth
There are so many tips out there about how to bid strategically on your first home. Some say bid low to drive the price down, some say bid a little high to influence the seller. While strategy is all well and good, usually your best bet is to base your bid on two absolute numbers: What you can afford and what the house is really worth.
Be realistic about which houses you can reasonably bid on or you will put yourself into an uncomfortable financial position. At the same time, you don’t want to insult the seller or make them fear for their margin. Be as honest as you can, after consulting with inspectors, and try to bid what you think a home is really worth, then negotiate earnestly.
4) Calculate All of Your Future Expenses
The one thing almost every first time home buyer overlooks is all the additional costs beyond the cost of the home and the monthly mortgage. There will also be property taxes, which vary by location and home size, home insurance, mortgage insurance, utilities, neighborhood fees. These can quickly stack up your monthly costs much higher than a mortgage calculator will reveal. Not to mention closing costs.
Make sure to find out what all the expenses of buying a particular home will be, from top to bottom, before committing to the purchase. In fact, you should go through the process with one house just for practice to give yourself a more realistic idea of how far your budget can really go.
Are you ready to take the next step in your homeownership goals? Click here to get started finding a local loan officer near you, or give us a call toll-free at 877-255-3554.