Are you considering buying your first house but feeling a little lost or stressed out? Check out these 5 things to consider when buying your first home.
Buying your first home can be a time of both excitement and fear. The thought of having a place to truly call your own is the dream of many.
Not to mention that buying a home usually shows you have reached financial independence and stability and are looking to invest in your future.
But, thoughts of "Can I really afford this?" or "Will I find the perfect home?" along with many others pass through your mind.
However, as we research buying our first home, we've learned that while buying a home is stressful no matter what, you can take steps to make the process a bit less worrisome.
Table of Contents
Know How Much You Can Comfortably Afford
If you're considering buying a house, you've hopefully already got somewhat of a budget setup, have been working on your credit score and any debts, and have figured out the type of loan or financing you want to use when you buy.
This will help you determine how much you can afford to comfortably pay monthly without being house rich but everything else poor.
Keep in mind you’ll also be responsible for things like property taxes, home insurance, utilities you may have had covered by rent in the past.
Depending on location, things like flood insurance or HOA fees may be needed.
If you lose your job do you have savings or another source of income to stay on top of your mortgage and other costs?
For example, when I got sick a few years ago, we used up most of our savings. When our landlord wanted to sell the house we were renting, it was tempting to see if we could buy a house instead of finding somewhere else to rent.
We knew that things were just too tight to take on home ownership at the time though, so we decided to rent at least a couple more years to get things built back up.
As a renter, it can be tough to take into consideration all the extra costs that come with owning a home. Yes, there are tax deductions, but those take a year to roll around and may not be as much as you hoped.
Also keep in mind that just because you were approved for a certain loan amount, it doesn’t mean you need to buy a house quite that expensive, especially depending on your other expenses.
Typical Expenses For Home Owners
- Legal fees and closing costs that come with purchasing a home
- Mortgage with interest
- Maintenance - landscaping, unexpected home and appliance replacement and repairs, etc.
- Home Owners Association Fees
- Utilities you may be used to rent covering; utilities could also be higher if the home isn't properly insulated or is larger than what you've been renting
- Already needed repairs or renovations
- Changing locks
If you don't have money set aside for these things, it can be quite the sticker shock once a bill arrives.
Insurance generally costs hundreds of dollars and property taxes can be thousands of dollars a year.
It's also important to realize that you'll still be paying property taxes after you pay off the home.
Some locations have taxes that are a lot higher than others and is something to take into long term consideration as it may feel like you’re still paying a mortgage even after it’s paid off.
If you have a decent down payment set aside, you may want to look at saving some of that money for home emergencies that aren't currently visible and maybe invest in mortgage insurance.
Mortgage insurance basically means you can purchase a home with less than the traditional 20% down payment as it provides financial protection to lenders and investors if a home buyer ends up defaulting on their loan. It can often lead to faster closings.
Plus, once you've built up 20% equity in your home with a good payment record, you can generally cancel the insurance.
Make A List of Must-Haves and Would Be Nice
Take the time to really think about what you absolutely need in a home versus things that would be nice to have but can be compromised.
For example, since I work from home and cook for work, I need both a decent office and kitchen while others may mostly eat out and use a laptop on the couch when needed.
How many bedrooms do you need? Are you okay with sharing bathrooms if needed?
Do you have a larger dog that really needs a fenced in yard to be able to run around in?
Do you have a classic car or wood working hobby that you need garage space for?
Are you willing to sacrifice space and pay more to be closer to the heart of the city?
Is the lot big enough for that garden you always wanted?
Are you willing to invest time and money into a house that needs fixing up?
How long are you planning on living in this house - will it retain or increase in value by the time you look to sell?
Honestly, it’s rare to find a house that will meet all your needs and wants while being in budget.
Setting your expectations before you start house hunting will help both you and your realtor figure out what priorities matter most.
Be Aware of HOA Rules and Local Laws
More and more communities are starting homeowners associations which can contain a number of rules homes in the community must abide by, in addition to extra cost.
You may have to keep your home landscaped a specific way. You may not be allowed to have certain breeds of pets.
Your trash cans can only be visible at certain times. There may be regular inspections of the exterior of the home.
Many cities and counties also have specific laws about the number of pets and specific breeds, extra taxes, quiet hours, and other specific ordinances that you want to be sure aren't deal breakers before purchasing the home.
Don’t Forget About Location
You have found the perfect home and are eager to make an offer, until you hear the jet fly above you so loud it shakes the entire house.
You can't wait for your children to enroll in the fabulous school just across the street until you realize how clogged the roads are and that you really can get tired of hearing the marching band.
You always wanted a home out in the country until you realize the odors that can come from farms, utilities aren’t always stable, and how long it takes to get to stores.
Being close to a hospital is reassuring until you're constantly woken up by sirens.
Do trains even run anymore? Your open windows at 3 AM confirm that yes, yes they do.
The neighboring open fields may look lovely until you find out a strip of townhomes is being built there.
Also keep in mind your commute work, how long it takes to get to stores and offices you frequent.
If you have children, will they have to change school districts or still be close to childcare and activities?
If you have pets how far away is the closest emergency veterinarian or dog park if you have a dog?
Don’t Skip A Thorough Home Inspection
These days houses can move so fast it might be tempting to make an offer that doesn’t include an inspection.
While you may be able to get a better deal on buying things "as-is" I am always wary of doing so, especially with something as expensive and long-term as a home.
Unless you’re comfortable paying the offer you make for the home plus have plenty of cash stashed for any potential damage or improvements you don’t see at first, don’t skip the inspection.
You never know if there may be foundation issues, hazardous electrical issues, or other issues so I think it's always a good idea to get a thorough home inspection before closing.
This will help you make sure of any potential deal breakers you may not be able to afford or the seller may not cover.
Be careful of accepting an inspection provided by the seller or even your real estate agent as they may be friends with the inspector who may thus gloss over some issues to make their friends more money.
It’s also not a bad idea to be present for the inspection so you can ask questions and make sure none of your concerns are missed.
While some sellers may not be willing to do so, it may be a good idea to see if the seller is willing to give you information on past improvements.
What materials were used when the bathroom was renovated, when was the roof last replaced, etc.
While things can break down or need repair at any time, this will help you get a feel for when you may need to invest in further improvements or replacements based on average lifespans of things like appliances, roofs, or HVAC systems.
Don’t Get Emotionally Invested
You may want to roll your eyes at this last home buying tip but when you find a house that feels like it’s perfect, it’s hard to not get emotionally invested.
Once you start picturing happily living your life in said house it’s going to be hard to walk away.
You never know what may be brought to the table or deal breakers that may surface.
The seller may not accept your offer, or another gets accepted before you decide.
The seller may not be willing to cover repairs that are needed, or you later find out something before closing that you're not sure you can compromise on or afford to repair, like a $20,000 roof.
There are simple things you should be able to compromise on, such as a fresh coat of paint for new wall colors or different flooring.
However, try to not get so emotionally invested that you feel like you can't walk away even when you know it's something you really can't afford or want to deal with.
On the flip side, if you get turned down, you don't want to be so heartbroken that you end your search.
Just like fish in the sea, there are plenty of other homes out there.
Buying your first home is a huge decision and achievement but it doesn’t have to be totally overwhelming by using tips like these and getting advice from professionals and those with experience buying their first home.
If you’ve bought your first home and have some advice to share, please leave a comment below!