Smart Moves To Take Before Buying Your First House

Buying a house is one of the most expensive purchases you will ever make and there are some things you can do before buying a house that can save you money, time, and relieve much of the stress.

1. Crunch the numbers to make sure buying makes sense

Many millennials are fine with being lifelong renters if it makes financial sense. But does it? In order to find out, I suggest that you plug all your relevant numbers into a Rent vs. Buy calculator (easily found online). The results should be very helpful in making your decision. If the decision is to buy, then the next steps are in order.

2. Hire a buyer's agent

A buyer's agent is a realtor who acts on behalf of the person buying a home. Your agent will help you find your home, negotiate with the seller, choose from a list of trusted inspectors, guide you through all the paper work and advocate on your behalf.

There are many issues that surface during the buying process and there is nobody better to have on your team than an expert – especially on the first go-around. So, hire a buyer's agent. By the way, in most cases, the seller pays your agent.

3. Get pre-approved (not pre-qualified) for your Mortgage

There are many lending options in the market place today and good real estate agents have good referrals if you don’t have a favorite.

Getting pre-approved is critical and most sellers will not accept or consider an offer without a pre-approval letter included with your offer.

Pre-approval requires going through the mortgage application process and getting approved for a loan amount. Pre-qualification is more of a rough estimate on how much loan you could be approved for based on financial information you volunteer. Guess which is stronger in the eyes of the seller and their agent?

Having your pre-approval in place demonstrates to the seller that you're serious and able to make the mortgage commitment. I also recommend cross-qualifying with a second lender, giving you added assurance of success.

4. Calculate exactly how much you want to spend — and stick to it

The pre-approval process will help in determining your maximum budget by determining the maximum loan amount you qualify for. However, it is critical that you and your partner determine and agree how much you can comfortably spend each month for your mortgage, homeowner’s insurance, taxes, and utilities payments for your new home.

5. Have a frank discussion about your desired lifestyle

Discuss location, proximity to restaurants and transportation, and where you see yourself in 10 years.

Your first house is not likely to be your last house, but people are staying in their homes longer — a median of ten years, up from the median of six in 1985, according to a 2017 survey from the National Association of Realtors.

That means having open discussions with your partner (or reflecting on your own) about how you like to live today and how you want to live in the future.

For instance, say you had always rented two-bedroom apartments and thought that you would do the same for your new house, but soon realized you wanted a third bedroom for the future. And while you liked your proximity to restaurants and bars as renters, often you ended up driving or taking transit to meet friends across town.

Things you once thought were important aren’t as important as you once thought and realizing that helps you focus on home features most important to you.

6. Research target areas aggressively

"Location, location, location" goes the old truism, and it still holds up. Beyond your personal preferences, you still must consider what direction housing prices were trending historically and what the comparable sales were for the houses of similar square footage, age, and features like what you are wanting to buy.

7. Consider multiple inspections

Inspections are an important step in the purchase process. Buying your first house is likely to be the biggest purchase you've ever made, and likely the most debt you've ever incurred at one time. That can make you feel green in the gills as the additional expenses add up, including the cost of inspections of a house you might decide to walk away from.

But to not get all the inspections you might need is a penny-wise and pound-foolish proposition.

In addition to your standard home inspection and what that inspection reveals, it may be wise to also consider: a video pipe inspection, roof inspection, foundation and termite inspections.

These inspections might hurt the wallet upfront but knowing the condition of the home you are considering is critical. Should you discover major issues you can negotiate for repairs and/or credits while you are in escrow. After escrow closes and you move in, you deal with the surprises on your own.

Should you have questions, I am happy to help and may be reached at 626.524.4158