First time buying a house? A simple guide on what to expect

Stay ahead of the curve with these 10 tips

By Michelle Ganley - Graham Media Group
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If you’ve never bought a house before, the whole system can be daunting, to say the least.

There's a lot to learn. If you can attend one of those first-time homebuyers classes at the local credit union, you should do it.

But we wanted to save you some of the legwork. After chatting with a real estate agent, Donnie Pauck of Red Door Realty, we present the following 10 tips to first-time homebuyers:

1.) Take a good hard look at your finances, and determine what can you really afford.

Sit down and examine your current monthly budget. If you don’t have a budget, then you need to make one. Decide, with your partner if you have one, on a monthly payment you’d be comfortable making, while still living within your means. Unless of course, a lifestyle change is in the cards. Don’t get in over your head financially, or assume you’re getting that raise before it arrives.

2.) Prioritize your needs and your wants.

There are going to be specific things that you absolutely “need” in a home; take note of those. There also will be aspects and elements that you want -- and those are items you may need to sacrifice, in some instances. That isn’t to say you can’t find a house that fits all your needs and wants, but the home also needs to be in your price range, most importantly. Just keep in mind that you might have to give up some “wants” in order to fulfill all your needs.

3.) Know the location.

Do some homework on the areas where you are searching for a home. A real estate agent can help you with any questions, especially if you’re not familiar with the area. Ask yourself: are you interested in a home near a downtown? Do you want to have a larger lot, or be on the outskirts of the city? Look into the things that are important to you, such as schools, churches or the neighborhood.

Go for a walk in the neighborhood. If it’s a nice day and you see people outside, make small talk, if that’s your style. Get a sense of your neighbors, the block and the atmosphere.

4.) Consider using a trusted real estate agent.

All the advice in the world cannot prepare you for everything you are about to encounter, Pauck said, so the best advice is to pick a local professional to be on your side. A Realtor’s sole purpose is to find you the best house, for the best price, that checks off the majority or all of the items on your checklist. A great Realtor is not only someone that knows the market, but someone with outstanding integrity and a network of other professionals to help get the job done, such as a lender, inspector or a contractor.

5.) Get pre-approved.

Many first-time buyers will skip this step and assume they’ll find their house first and then figure out the pre-approval. Pauck said to get the pre-approval first; it’s what is necessary to submit an offer anyway, and in this current market, time is of the essence.

Trust me -- when you find the perfect house, you don’t want to wait for anything. You’ll want that offer IN and you won’t think about anything else until it’s accepted. Just get pre-approved.

6.) Understand the offer process.

Once you’ve found the house that you’d like to submit an offer on, what’s next? Well, a lot.

There are several things to take into account when it comes to the offer, such as, how long has the house been on the market, asking if is the listing price is relatable to the comparable homes in the area, and deciding, is this a three- to five-year home where resale value is worth looking into, or is this a forever home? 

Once an offer is decided on, the next step generally is the negotiation. If the offer is accepted by both buyers and sellers, it moves on to inspection, appraisal and finally closing.

At inspection, you’ll make sure you understand your home and everything that comes along with it. If there are any deal breakers on your end, you can typically back out, or negotiate what it would take to keep the deal alive. Your appraisal is about your lender determining how much your house is worth, and you can’t get financed for any more than the amount listed on your appraisal -- unless you want to pay for the overage out of pocket.

The other thing to keep in mind is, appraisals and inspections can be pricey. Between one inspection and two appraisals, you might spend $1,200, for example, which, without a doubt, is worth it in the long run. But while you’re in the process, it’s easy to feel like, “Between saving for a down payment and preparing for a mortgage, now I have to pay for all this?”

7.) Understand what you’re signing, because you’ll be signing a lot.

And you thought buying a car felt like a big commitment.

You’re buying a home now, so there are a lot of signatures needed. Don’t just start “signing away,” ask questions -- whether it’s regarding the purchase agreement, a seller’s disclosure, or the other handful of forms, ask your real estate agent and (s)he will fill you in on exactly what each form is for and what it means. Hey, that’s why we recommended an agent, right? Use this person to your advantage.

8.) Familiarize yourself with contingencies.

These are exactly what we were discussing in tip No. 6, regarding the many elements involved in the offer process. There are many contingencies in a typical real estate transaction, and among the most important are the inspection and appraisal. Pauck said the inspection is a must-have, as it’s there to protect your investment. The inspection is where a professional goes through and gives you a full report on the physical integrity of the home. The appraisal is where the bank does a market evaluation to determine the value.

9.) Be aware that you’ll need to put down an Earnest Money Deposit.

I know what you’re thinking, another expense, right? An EMD is typically due upon writing the offer, or on the seller’s acceptance of your offer.  This is a deposit it to prove to the seller that you are a serious buyer. Your Realtor often holds this deposit while the contract is being executed, Pauck said. Once all the contingencies are met and the all-clear to close is given, these funds are applied to the closing costs. If the deal does happen to fall through due to one of the contingencies in the agreement, you will receive your full EMD amount back. 

10.) And don’t forget about the down payment and closing costs.

Many first-time buyers are surprised by the closing costs, Pauck said. Sure, the down payment is on everyone’s minds, but a large part of the total out-of-pocket costs to buy a home are the closing costs or settlement charges. These range in what makes them up, but typically, you are paying property taxes, insurance, title fees and lender fees. This is where working with a quality Realtor and lender make all the difference, as they’ll prepare you for what’s ahead.

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A final personal pieces of advice would be, although this isn’t so much a formal tip, know when to walk away. There was a house we struggled to pull the trigger on when it came to making an offer, and as it turned out, it was for good reason. We found the perfect home a week or so later, and I learned that when it’s the right fit, you probably won’t want to hesitate at all. And then even when the perfect house panned out for us a short time later and we had some appraisal issues, there was a day when we walked. Guess who came right back to us 24 hours later, showing their cards, offering us a new asking price -- which was well below what we first offered?

When it’s meant to be, it all works out. But you can’t be scared that you’ll never find another house you love ever again. It's just business.

Someone also told me to find the “right things wrong.” Most houses, if not every house, will have little problems, quirks, or things about it that aren’t perfect. Ask yourself what you can fix and what you can live with. If the house has a roof that will need to be repaired in the next few years -- or, let’s just say sooner rather than later -- well, that’s a bummer. But if that’s the worst thing about the house, that’s not terrible. Maybe the house also comes with a fantastic neighborhood or a perfect layout. Sure, the roof is the “something wrong,” but it’s also the right kind of thing to be wrong.

Happy house-hunting!

 

Graham Media Group 2017