Buying Your First Home
Buying your first home can seem daunting and expensive, but it does not have to be either of those things. Having the right people in your corner can make all the difference in getting you from point A to point B, as seamlessly as possible.
To start off, I’d like to cover some common myths when it comes to purchasing your first home:
Myth #1: You need 20% down to purchase a home. - This is not true. Your down payment is a result of the loan you choose. Minimum down payments range from 0% to 3.5%.
Myth #2: You cannot buy a home with student loans. - While your student loans can impact your debt to income ratio, this is still not true. Lenders look at your income compared to your expenses when preapproving you for a loan. Student loans may raise your debt to income ratio but that does not mean you won’t be approved, it just may be for a lesser amount.
Myth #3: You need a substantial amount of money to cover closing costs. - There are plenty of ways to lower your closing costs, I’ve had client’s close on their first home with less than $3000.00 out of pocket. Ask your lender about first time home buyer programs (some give you up to 10% of the homes value towards your closing costs!) Your agent can also negotiate these fees into the sales contract.
Now, let’s get into the actual process. Buying a home involves a lot of steps. First and foremost, I tell all my clients to ask themselves the following questions:
Why do I want to purchase a home?
There are a lot of great reasons to buy a home. Purchasing a home gives you the pride of ownership, freedom to do what you’d like and is an appreciating asset that you can use to invest in your future. This being said, it is not the right choice for everyone so it is important that you understand why you want to buy.
Are my expectations realistic?
A lot of first time home buyers expect to find everything they want and need in one home and, in most cases, this can be unrealistic. When purchasing a home you should expect compromises, whether its your first home or your sixth. Even those that build their own homes will typically make trade-offs and change things down the road.
What is my timeline?
When would you like to move? If you are renting it is important to discuss your plans with your landlord. If you are changing jobs, it is important to discuss your situation with a loan officer beforehand. Consider the time of year and if you are okay with moving if the weather conditions are less than ideal. The market also changes throughout the year, it’s a good idea to discuss this with your realtor so you know what to expect.
What is my budget?
A lot of people feel like buying a home is out of their reach when this is not the case. You do not always need a significant amount of money to purchase a home and discussing your situation with a great loan officer can put you at ease. PA also has a lot of great programs to help first time buyers make their dreams come true.
Next, I instruct my clients to make a list of their wants and needs. Although these things can seem very similar, they can be anything but that. Your needs are your non-negotiables; things that you cannot change (without a significant amount of time/money). Your wants are things that you would appreciate having but aren’t total deal-breakers and may require some flexibility.
Making a checklist of these items can keep you from buying a home that isn’t a good fit, avoid looking at homes that don’t work for you, prevent emotional buying and make appropriate compromises.
As an example, your needs could look like the following:
Location to employment, schools, shopping, medical centers etc..
Space for your current (and potentially growing) family
Affordability of the home and the area
Safety of the area
Service Providers
Your wants could be things like:
Amenities like pools, hot tubs, fireplace etc.
Aesthetics like paint color, floor furnishings, floorplan and light fixtures
Equipment like the type of appliances, central air, auto garage doors etc.
A lot of first time home buyers make the mistake of looking for their “forever home” when on average, most Americans stay in their first home for less than 8 years. It’s a good idea to think of your first home as the investment towards your future. The time you spend in your first home, updating and maintaining it, will encourage your equity growth. You can use the equity you gain in your first home to purchase your next home or upgrade your current one.
The first step in the home buying process is to contact a Realtor. In the meantime, I encourage you to take a look at my Home Buyer Guide.
Inside the guide, you will find the step by step process, costs and tips to help you move forward..
If you’re feeling ready or you’re interested in learning more, Contact Me to schedule a free buyer consultation. Together, we’ll go over your goals and the steps we’ll take to make them a reality!