9 Best Need To Know Tips For First-Time Homebuyers

WHAT'S IN THIS POST?

Our first home purchase

At the end of the Great Recession in the United States in 2010, the Hubs and I bought our first home at the young age of 22. Honestly, homeownership was not something we were mentally or even financially prepared for. We weren’t looking for homes on the market like most prepping home buyers do and we didn’t spend months or years saving on a down-payment. It just kind of happened after we spent some time searching for an apartment in a new city.

In the end, our decision to buy a home was because it was more affordable to own than it was to rent. We knew it was not our forever home, but one that would serve us for at least the five years we would be in grad school. In 2010, Homeownership for us meant it was an affordable shelter that would later serve as an investment property.

If you’re new here, read 10 Things You Must Do BEFORE Buying a Home where you’ll learn how to set a solid foundation for your new home purchase.

Since our humble beginnings, we’ve experienced the home buying process three times over a decade. I’ll share the best tips that will empower you with the preparation and knowledge to be a better homebuyer. Are you ready?

Disclosure: This post contains my own thoughts and opinions based on my personal experience as a 3x homebuyer and homeowner. I am not a finance, real estate, or legal professional. Please consult with your professional team for buying a home.

9 Best Tips for the First-Time Homebuyer

Tip 1: You can put less than 20-percent down payment

The benefit of having a down payment is its application to the purchase price of the home which will lower the loan amount; therefore, your monthly payment.

However, contrary to popular belief, you don’t need to have a 20% down payment to purchase a home. In fact, depending on the loan type, you can purchase a home with a zero percent down payment and as a first-time homebuyer you have even more resources! Your eligibility for a loan will be dependent on your debt-to-income ratio, down payment, and credit score.

If you purchase a home with less than a 20% down payment, you may have the additional monthly expense of a principal mortgage insurance (PMI). The PMI is a monthly expense for the homeowner that protects the lender in the event of default on the loan. The loan type may influence if the PMI is removed when it is at an 80% loan-to-value. The addition of PMI may vary depending on the mortgage servicer. Check with your lender regarding PMI.

Here are the types of mortgage loan options and programs that could be available to you:

Conventional Loans
FHA Loans
USDA Loans
VA Loans

Loan requirements may be different today so it is important to understand the loan type, loan term, and interest rate associated with your loan options.

As you can see there are many financial resources to fund your home purchase. Research your loan type options to figure out which loan will meet your needs.

Tip 2: Use a Mortgage Broker

If you don’t have the time or patience to fill out multiple lender applications, then a Mortgage Broker is an alternative to shopping around for the best rates. For a small fee either paid by you or by your chosen lender, they will compare rates and give you the best deals.

We used a Mortgage Broker in our third home purchase. Having a broker saved us a lot of time in the application process and it was easier to have a single point of contact. When we chose a lender, our broker helped us collect our documents and kept us organized.

If you decide to go with a broker and have additional funds, I recommend paying for the fees up front instead of through the lender. A lender may charge a different rate than what the broker will charge and they build it into the loan which contributes to the interest over the life of a loan.

Check out the pros and cons of using a mortgage broker by U.S. News & World Report, if you want to know more details.

Pin Me for Later!

Tip 3: Don’t compromise on your must haves

No matter what, don’t compromise on your must haves. Your must-haves are there for a reason and without them you may end up making a home purchase you regret. You’re already spending a lot of money on a house so you deserve to get what you need.

Must-haves are the deal breakers for any home buyer and if you settle for something less, you may find yourself disappointed. If you need a 3-bedroom home for your family, you don’t want to settle for a 2-bedroom because your household members may get a little cramped and cranky. If you love to cook and really need that space for all your cool kitchen gadgets, don’t give up that dream.

There are plenty of homes out there, so have patience in the process. You’ll be thankful you did.

Tip 4: Use a real estate agent who meets your needs

Real estate means more than just residential housing. The experience and knowledge of your real estate agent is important to finding your home.

In our first home purchase, we went with the first real estate agent that we spoke to. We didn’t know what we were doing and felt obligated to stick with them. They weren’t horrible by any means but after two more home purchases we realized a drastic difference in the interactions with our agents. Our following agents made us feel comfortable to share our thoughts and they went above and beyond by providing us valuable information that we didn’t even know to ask for. We are questioners, so the more information for us, the better!

Buying a home is a big deal, so an agent needs to be there working for you and finding something that meets your needs. However, understand that it is a mutual relationship so please treat your agent with respect. You can think of them as your friend so don’t be afraid to ask them for their honest opinion on a home you may be interested in. Ultimately a home purchase is a homebuyers’ decision but a little inside knowledge of location, schools, shopping, etc from your agent can help finalize it.

Identify with an agent who understands what you are looking for as a homebuyer and knowledgeable about the neighborhoods you are interested in. If you have a budget of $450,000, you don’t want them to show you a home that is $475,000 even if it’s a neighborhood you like.

The form you have selected does not exist.

Tip 5: Be open to the potential a home has to offer

During your home search, be open to the potential a home has to offer. This will give you more options in the housing market and you may find a diamond in the rough for less than you would’ve originally spent. Homes that need minor repairs and refinishes such as a new paint or flooring is simple to do.

As a new homebuyer, I’m not suggesting a total room demolition by any means unless that is what you’re looking for, kudos to you! When you’re in a home, envision what your life will look like in the space. Speak out loud about what your vision is and what changes you can make to really make it yours.

Here’s a little secret. When you become a homeowner, you will quickly make a list of all the home improvements you want to make both big and small. You will also start to build your own tool collection and learn some new skills you never thought you would. If you’re not a do-it-yourself (DIY) kind of person, forewarned you will become one.

Take it from me, that DIY projects can be hard and sometimes try your patience. The magic comes in the end when you’re finished and get to reflect on all the hard work you’ve done with your own two hands. Paint does wonders and transform any space! Check out my 7 Secrets to Painting Cabinets Like a PRO!

Related Reading:

Tip 6: Make a backup offer on the house you love

Did you know that you can still make an offer on a house that is already under contract? This is not the ideal situation but if there is a home that you are absolutely in love with, you can make a backup offer.

We learned about backup offers when we were selling our second home, we had two backup offers waiting in case the one under contract fell through. As a homebuyer, it may seem impossible to get the house, but in reality you just can’t predict the future of the sale. If offer #1 falls through, then you are in the backup position to go under contract before the home goes back on the market. If you want the option to walk away from the backup offer, First Team Real Estate suggests to add a backup offer addendum and to consult with your real estate agent on the best contingencies to include in your backup offer.

In the meantime, you can continue searching for your home. You don’t have to wait until the first offer to go to closing or fall through before you search for your home. If you wait, you may potentially miss out on a home that may be better.

Check out First Team Real Estates article on 5 Facts Home Buyers Should Consider About Backup Offers.

Tip 7: Avoid making large purchases before closing

Now that you’re a homebuyer under contract! You’re getting excited about how you get to furnish your first home. You start researching interior design styles and your shopping wish list starts to grow. You’re probably thinking that it’s probably okay to purchase if you’re just two weeks from closing; it’s probably a done deal, right?

Sorry, I’m here to tell you that you’re so close to the finish line and you need to wait. It can be easy to get caught up in the rush and excitement of your first home purchase. As it gets closer to the closing date, your lender may do another pull on your credit to make sure that nothing has changed from the first pull.

They will check to make sure that the finances are stable and there are not any drastic changes. Large purchases after mortgage pre-approval and before closing may affect the processing of the loan and your lender may start to ask more questions and additional financial documentation.

Make a list of what you want to buy for your home, but hold off on making those large purchases. Build up your Pinterest board and after closing day you can start buying what you need for your home.

Tip 8: Read all active governing restrictions to the property

Many residential homes are established in a subdivision or community and may be regulated by Homeowners Association (HOA) bylaws and/or Covenants, Conditions, and Restrictions (CCRs). These are governing restrictions that can affect what you can and cannot do on your property, including any business you may conduct.

One of your responsibilities as a homebuyer under contract is to read the governing documents. Your lender, real estate agent, or title company may provide you the documents associated with the property. In addition to a property description and development plan, it may also include any governing restrictions and bylaws. You will have a certain timeframe to read through these documents and ask any questions on the regulations. This may also be the time to back out of an offer if there is a governing regulation that you are not willing to abide and live with.

If you did not receive these documents, ask your real estate agent for these documents. I learned a lot during my brief time in City Planning and about the resources that are available on a property. You can also check with the local building and planning departments; these are most often public records. Keep in mind that if a property is not managed by a subdivision, HOA bylaws, or CCRs, the property may still be subject to city codes.

Tip 9: Do a home inspection and a sewer scope

The International Association of Certified Home Inspectors (NACHI), defines a home inspection ias:

“A non-invasive, visual examination of accessible areas of a residential property performed for a fee. It is designed to identify defects within specific systems and components defined by the stands that are observed and material by the inspector.”

A home inspection is one of the most valuable investments a homebuyer can make during a home purchase. It offers you insight on the condition of your home and identifies areas that are and are not up to building code. At the end of a home inspection, the inspector will provide you with a detailed summary report of every inspected area of the home that was accessible. This report is useful in the negotiation process while you are under contract. This is a service and product that is only shared with the purchaser and should not be shared with any other parties without the purchasers consent.

The form you have selected does not exist.

Sewer Scope

A sewer scope is an informative add-on to a home inspection since it provides you with a visual of your sewer line that you would not have been able to inspect on your own. This is a great way to identify piping issues and blockages. For an additional fee, you may also request the inspector to perform this a la carte service among many others.

The American Society of Home Inspectors’ (ASHI) Homebuyers Guide explains that a sewer scope is a lateral (horizontal) sewer inspection done with a camera to identify if there are any concerns from the main lateral sewer line of a home. The main sewer line consists of the waste pipe that goes beyond the building and under or through the foundation or exterior wall to the sewer main.

Find a reputable home inspector who is either certified by NACHI or ASHI. Your home lender or real estate agent may have a couple of recommendations. I’m suggesting that you research your own home inspector that fits your budget and will provide you with a thorough report. Although certified home inspectors perform a standard general inspection, they all have a different way of presenting the information. You may prefer a report that includes many images and possibly video.

The Last Thing You Need to Know about Buying a Home

When you’re feeling overwhelmed by the daily home tours and nonstop lender emails, remember that you are buying a home that will provide you a space that is yours and is an investment that will build equity for your future. As a new homeowner you will experience the joy of creating a life that you choose and with the people you care about.

If you made it this far, you are more knowledgeable than most new homebuyers out there and you can feel more confident in your research. You will avoid the mistakes that new homebuyers make and are prepared to ask questions of your lender, real estate agent, and seller.

Wishing you a Little Peace of Happiness in your home search!