Do This Now! First-Time Home Buyer Do’s and Don’ts
Becoming a First-time home buyer is a huge milestone that many people strive for. It was for me too! I purchased my first home in 2014; however, I made a TON of mistakes! I am now on my 5th property and continue to learn important lessons with each purchase. So here is a basic guide to help you AVOID these mistakes!
First-Time Home Buyer, Do THIS FIRST!
First thing’s first, where do you stand in your finances? What is your credit score? One of the first things when purchasing a home (via mortgage), that the Loan Officer (LO) will look at is your credit score. They will pull a credit report and look at your history; therefore, you want to start working on fixing any discrepancies. One thing many people aren’t aware of is that you can have a LO do a pre-audit on what they look for, and answer questions before you actually apply. I had a great LO walk me through the steps and gave me advice on how to improve. Some of the main documents the LO will look at are:
- 2 Years of Tax Returns
- 60 days of Bank Statements
- Credit Report
- Paycheck Stubs
All these are used to verify your income and to calculate your debt-to-income ratio. This will determine if and how much money they are willing to lend you. So my first suggestion is to give your own finances a look!
What can you afford?
After understanding where you are financially, you want to figure out how much you can afford. There are several costs that come with owning a home that are not thought about. These include:
- Mortgage Payment
- Property Taxes
- Home/Flood/Fire Insurance
- Maintenance/Repair Costs
- Upgrade/Decorating Costs
All these costs add up quickly! So you should NOT want to purchase a home that is at the top of your budget! This means that you may not be able to go after your DREAM home right away. That is okay! You do not want to be “house poor,” in which you are at the top of your budget and can’t afford to maintain the upkeep of your home.
Shop Around To Find The Right One!
Another thing I learned to do, was to shop around for a Real Estate Agent and loan interest rates. These two are important in cutting down costs. There are several types of Real Estate Agents that specialize in different areas like investments, land purchases, and general home buying. Make sure you hire the correct one for the type of property you are buying.
Also, be sure to interview them! I picked a random one for my second purchase and it was a poor choice. The Real Estate Agent was nice and attentive, but he was not very knowledgeable; therefore, I paid top dollar for a home that SHOULD have been negotiated down due to the inspection report. The hot booming real estate market of 2021-2022 has also created an influx of newbies that may not have your best interest in mind.
Similarly, shopping around for a loan can prevent headaches and save you money. Don’t worry, the credit inquiries, within a small time frame, count as one and have a small impact on your credit score. I, for the most part, stay away from banks. However, if you have a great relationship/history with them, they may get you a great mortgage loan. Otherwise, looking elsewhere may get you better terms and the lowest interest rate.
Get to know your Loan Officer-They can provide great knowledge on the loan process. I had one find a deduction in my taxes that I wasn’t claiming! The LO didn’t need nor require that information, but educated me in de-appreciation of homes.
Do Not Skip the Inspection!
Whatever you do, DO NOT skip the home inspection! With the housing market skyrocketing the past years, many have opted out of home inspection to be competitive. However, even if you want to buy it “as is,” you should still order a home inspection.
A home inspection will give you a good idea on the condition of the home. It lists possible issues and repairs you will likely have to do after purchase. Some things listed are:
- Condition/Age of Water heaters/HVAC
- Condition of the Roof
Although, the inspector can only give you a snapshot of the condition of the home at time of inspection, the report can prevent major surprise repairs. Make sure to read the inspection in its entirety and ASK questions. Now that the market is becoming more stable, the price of the home can be negotiated or the seller may fix or fund the repairs.
I learned this the hard way in my second home. I should have negotiated the price of the home, as it had plumbing issues. My RE agent didn’t advocate for me as well. Now I know better! I negotiate every property after inspection.
Almost There! Closing
Okay, so you have passed the inspection, appraisal, and negotiations! Now, it is time to close on your first home! Do Not get any new lines of credit or new loans! Many people make this mistake. This can prolong, or worse, stop closing on the home. Wait until the ink is dry on the paperwork and you have keys in hand.
Finally, before closing, you and your real estate agent will make a final walkthrough of the home. This is to ensure the terms of the contract are met. For example, appliances/furniture that were included. If all is good to go, then both buyer and seller will sign the contract at closing.
Home buying can be overwhelming, but with the proper steps taken, you can reduce the headaches and surprises. After purchasing several homes, the main thing that led me to success, were the tips listed. So, how are you preparing to start the home buying process?