First Time Home Buyer Tips – 6 Do’s and Don’ts
First Time Home Buyer Tips
There are many things for a first time home buyer to consider when making a purchase. I’m going to break down the Do’s and Don’ts in 6 easy steps for you. Make sure you watch the entire video for some very important first time home buyer tips that will save you out of pocket cash and make the home buying process a bit easier if this is your first purchase.
Tip #1
The first don’t and mistake 1st time buyers often make is going out to see property before they are qualified for a mortgage. This is a common mistake and the wrong way to start your home buyer journey. You need to know that you are financially qualified to buy a house. I can’t tell you how many calls I get from first time home buyers asking to see property who have never spoke to a lender. (does this sound familiar?)
Knowing where you stand financially is very important. So, do speak to a lender first, have them go over your credit, look at your income and cash availability before you start seeing home. There are many mortgage calculators found on the internet, but they are often inaccurate, and they can’t evaluate your credit effectively. So, speaking to a lender first is very important before you start looking at homes. I know home buyers are excited to start looking at houses, but people are often shocked to find out they can’t afford what they thought they could afford. Talking to a lender will put you in a position of control and knowing what you are capable of purchasing will reduce stress in the buying process.
Tips #2
OK the second don’t . Don’t expect that the house you buy to be exactly what you want. Your first home, often, is a starter home. I know everyone wants granite countertops and crown moldings, but your first-time home buyer budget is going to have a great deal to do with what you can afford. You can expect that you will need to make some compromise along the way. I know you have a check list of the things you want; however, you need to realize even the most seasoned home buyers don’t get 100% of what they want 100% of the time. Buyers often need to make improvements to the house after they purchase which gives them the opportunity to make the house their own. You can always paint, add that granite and crown molding later. The house is an investment and you will in your lifetime buy other homes as you gain real estate equity.
So, do expect you make some compromises along the way as its part of the home buying process.
Tip #3
Ok the third mistake or DON’T for first-time home buyers is using the listing agent to represent you in the purchase. And if this is you, stop, don’t do it. Yes, I know you’re thinking the listing agent knows the property and he or she will probably get you in to see it fast. But just stop right there. The listing agent represents the seller. It can be a conflict of interest to have the same person negotiate both sides of the sale. I see first time home buyers making this mistake often at open house situations. They pop in and start chatting with the list agent who of course wants to make a commission on both sides. This is going to be one of the biggest financial decision you make, so let’s not do ourselves a disservice by paying more than we should.
So, do find yourself a buyer’s agent to represent you. Research on line or ask someone you know to make a recommendation on a good agent with experience. Experience is key. If you’re in my area I fit the description of a great buyer’s agent. Just saying. You need a real estate champion on your side, so get one.
Tip #4
And the 4th don’t is using on line estimates as a ruler for an offer. There are many 3rd party search portals like Zillow and I cringe every time I hear the word zestimate. That’s a fake word that Zillow came up with. There’s not a real estate appraiser in the world who uses the Zillow zestimate. You need you real estate agent to provide you with real comparable sale. (that means sold houses, recent sale that show you what the market is doing and what the home will appraise for). You need to make a fair offer based upon real data, not some tricky Zillow marketing tool. So, do have your buyer’s agent provide you with recent sales for you to review before you make the offer. Knowledge is power people.
Tip #5
Ok the 5th don’t and first-time home buyer mistake is not budgeting money for house maintenance. First time home buyers often under estimate home maintenance expenses. The rule of thumb is to budget 1% of the purchase price for maintenance and repairs. There are lot of hidden cost when you purchase a home, you have lawn maintenance, regular service of your HVAC unit of course, but things break too, and you will need to make sure you make the repairs as quickly as possible. As a homeowner, you’ll be responsible for additional monthly costs that may have been covered by your landlord in the past. So, DO put money aside for maintenance and unexpected repairs.
Tip #6
Ok the 6th mistake (or don’t) is not researching. Not researching down payment assistance programs. Saving for a down payment is often cited as the biggest hurdle for first-time buyers. But did you know there are thousands of down payment assistance programs in the U.S.?
Now, these programs typically offer “soft” second mortgage or grants which allow for a low or even a zero percent interest rates and those payments are usually deferred. But I will mention that many of these programs do have specific guidelines, like a maximum income limits. So, if you’re hitting it out of the ballpark and making a 6-figure income this is not a program you will probably qualify for. Down payment assistance programs are designed for lower income buyers and many are tied to geographical areas of your state. I’ll also mention that some of these programs will often run out of funds mid-year, so making application early is key. I’m going to be frank, these types of programs require work on your part as a buyer and you must qualify for a mortgage, most programs require you to provide a loan approval upfront with your application. And you do have to pay back the funds in most cases and that happens when you sell. If you would like to find out more about available down payment assistance programs you can visit: https://www.hud.gov/states/florida/homeownership/buyingprgms to see a full list of buyer assistance programs available in the us.
First time home buyer often have problems coming up with cash. There are other ways for you to get help with money needed to make a home purchase. In most cases you’re going to need between 7 to 8% in cash to get into that home. Your down payment will be roughly a minimum 3.5% and your closing cost will be about 4%. The first thing to consider if you’re are short on cash would be to get a gift. Banks do allow gift funds from family members. If you have a good relationship with your family and they are willing to provide assistance you can ask for a gift. There are no limits on gift funds , but seller concessions are limited to 3% in most cases on conventional loans. Now, FHA products allow up to 6% in assistance from a seller, but you are still required to put up the minimum 3.5% down payment, so often the 6% will be rolled back to cover just your closing cost and pre-paid items. And maybe you’re thinking there’s no way my family going to give me the money or I can’t ask them to do that. I completely understand. If you have a good realtor who is skilled at negotiations, you can often work the assistance into the deal by making a good offer to the seller. If you would like more information on how to buy a home contact me directly. I am always happy to help you.
