Buying your first home is definitely a roller coaster ride! Since my husband Dan and I recently just went through this process ourselves, I thought it would be beneficial to create a list of the tips and tricks we learned to help make home buying as stress-free and exciting as possible! Happy house hunting! 🙂
Attend a First Time Home Buying Seminar
Many banks, credit unions, and businesses offer free Home Buying Seminars. These are the perfect opportunity to learn about the process, understand the difference between loan options, learn about your state’s taxes and closing fees, and ask questions. Attending one can help outline all the costs involved, and determine if you’re ready for the next steps.
The first question any realtor or home owner will ask you when you call, is if you are pre-approved for a loan. A pre-approval letter states the amount a lender thinks you’ll be able to borrow based on your income and credit score in actual documentation. Work with your chosen mortgage lender to submit the necessary paperwork; most realtors will not show you a home until you have acquired this document. A word of caution: be weary of borrowing the max amount. You want to make sure the monthly payments and taxes will fit comfortably within your budget.
Spend Time Finding the Best Mortgage, not Just the Best House
It wasn’t until we attended a Home Buying Seminar that I really understood how much mortgage rates and PMI can affect your payments. Mortgage rates will differ based on the loan terms you choose, the mortgage lender, and your down payment and credit score. A lower rate can make the difference of tens of thousands of dollars over the life of the loan, so it’s really important to shop around with multiple lenders to determine what is the best fit for you.
PMI can also dramatically affect your payments. If your down payment on a home is less than 20 percent of the appraised value or sale price, your lender will require you to obtain private mortgage insurance. PMI is an additional amount usually between 0.3% 1.15% of the original loan amount that you will need to pay each year.
Hire a Realtor
A good realtor can make the biggest difference in your home-buying experience! As a buyer it costs you nothing to hire one. The commission is paid out of the sale, so it’s almost silly not to consider it. A realtor will help ensure that your budget is met, recommend locations and neighborhoods that meet your needs, be your voice in the negotiation process, help spot any red flags in the home before you put an offer down, and can usually recommend names and companies when it comes to choosing home inspectors or home repair services. Our realtor was fantastic, and really made all the difference in how we approached the process! I highly recommend talking to friends and family to find a good realtor in your area.
Create A Realistic List of “Must Haves” and Shop within Your Budget
Take the time to sit down and create your list of ‘must haves’ and ‘wish list’ items before you start shopping for your new home. Be realistic about your budget and do some searching to find out what homes in your area recently sold for, and what they included. For us, it was really important that we found a home that was close to work, in a good school district, had lower property taxes, and included at least three bedrooms and two full bathrooms. Share the list with your realtor, so you don’t waste time looking at properties that won’t meet your needs.
Don’t Always Rely on the Popular Real-estate Websites
Websites like Zillow or Truila are great for determining average home values and taxes in your area; however, they are not always accurate or kept up-to-date when trying to find available homes for sale. I can’t tell you how many homes we inquired about that already had accepted offers on them! Find out what MLS (Multiple Listing Service) is used by realtors in your area before going onto the national listing sites.
Negotiate, Negotiate, Negotiate
Negotiating extends past just the sale price of the home. If you live in an area with high property taxes or closing costs, try to negotiate a closing credit to help cover some of those fees. If your home inspection comes back with a crack in the chimney, make sure to negotiate getting it fixed prior to moving in. This is most likely one of the largest purchases you’ll ever make; you want to feel confident in your investment.
Budget for Closing Costs
Closing costs and property taxes differ by state and county. Most states also require a certain percentage of property taxes to be paid at closing as well. If you live in a state with high property taxes like Wisconsin, that can be thousands of dollars that you need to come up with on top of your down payment. Work with your mortgage lender and review your Truth in Lending Agreement (disclosure of terms and costs associated with the loan) thoroughly, so you know exactly what is required of you.
Get a Home Inspection
This one goes without saying, but I was surprised to learn that some people opt-out of getting one! A home inspection not only provides an ‘out’ from the offer if anything is found critically wrong, but can act as a bargaining chip for further negotiations, detect safety issues or illegal installation, and will teach you how your home runs! Make sure you are present during the full inspection, ask questions, and bring a camera and notepad to document how certain systems work and where they are located. Our home inspection detected severe levels of radon in our basement, and we were able to negotiate a radon mitigation system into the contract as a result.
Shop Around for the Best Home Insurance
If you are like us, we knew nothing about how to shop for home insurance or what we should or shouldn’t look for in a policy. Don’t just sign up with a national carrier because you like their ad; take the time to get quotes from multiple agencies and discuss what may be important to include in your policy based on your location. This is also a perfect time to consider combining your home and auto into one policy. You can usually save a significant amount of money by bundling.
Good luck and have fun! 🙂 It’s all worth it in the end!