Becoming a homeowner is definitely all it’s cracked up to be with many pluses like building equity in your own home rather than building someone else’s. Not having to move every time the lease is up by having a central location for you and your family. Being a homeowner also carries a certain amount of pride in addition to being able to make the space exactly how you want it to be. Many people argue for renting where you live and buying to rent out, but I totally disagree because not only will you build wealth, have privacy but you’ll also be able to use the equity later on to start your real estate investment portfolio.
Of course, home ownership comes with lots of responsibilities and it’s not as easy to up and leave your home as it is with a lease, but the pros outweigh the cons. Now that I did some convincing on encouraging you to take the step into being a homeowner, it is important to note that you’ll need to be well informed and meticulous as a first-time home buyer. From picking the location, to choosing the right property, negotiating, getting approved for a loan and dealing with all the legal stuff, you want to be well prepared.
Not to worry, as a veteran real estate agent and entrepreneur, I’ll share all the top industry secrets to make sure you have not only a successful but also a smooth first-time home buying experience.
Pre-Purchase Preparation
Buying a home is an extremely exciting and very emotional decision, but you don’t want to get hasty. Many individuals rush and jump into home buying at the speed of light without ensuring they get a good financial deal from a lender, reviewing how the home meets their and family’s needs, evaluating the location and making sure they can afford it.
Budget and Financing
The first step you want to take before even thinking about what kind of home you would like is to review your budget and secure financing. Make sure to use online calculators to see how much you can afford to pay every month for your mortgage, management costs, taxes and of course have some money set aside for unexpected repairs and renovations. If you’re one of the few lucky ones who are paying cash, then you simply need to budget for everything except for the mortgage payment.
If you’re going to be financing, make sure to secure a solid loan with a reputable lender. Your lender will ask for proof of income, pull a credit report and verify your down payment. If all looks good, you’ll be pre-qualified for a loan and receive a letter which you’ll need to provide to potential sellers once you find a home.
When looking for a lender, pick a company or a broker who can provide you with competitive rates and high-quality service. Paying 1% or 2% more on your mortgage can result in quite a large sum over the years, so shop around. You’ll also want to work with a lender who is on top of your deal because so many deals fall apart not due to lack of qualification on the lendee’s part, but simply because the lender drops the ball during the loan approval period. Also, don’t forget that you can buy down the rate upfront with your lender, which can result in huge savings over time. So be creative and exhaust all savings possibilities before getting into a loan.
There are also many types of mortgage loans and terms available like FHA, Conventional, ARM and VA loans. Most often, we see people with conventional or FHA mortgage loans, which are ideal, especially if you can afford to secure them for 15 years. This will not only allow you to pay off the home faster but will result in hundreds of thousands in savings on interest.
Be sure to do additional research for your loan and review your budget. You can also find a highly qualified mortgage broker who can help you out with this process.
Needs vs. Wants
We all have our dream homes in mind when shopping for a property, but it is vital to take the emotions to a minimal and focus on the most important things we need. Yes, it’s ideal to have marble floors, granite countertops, and fully renovated modern kitchens and bathrooms with custom closet space designs. But it is more important to have a home with open spaces, a larger lot with plenty of front and backyard space, and maybe a newer roof and impact windows. When looking for a home, focus more on the fundamentals and not the cosmetics. You’ll also want to make sure the layout is ideal for your family’s living and has a nice flow to it. I once showed a small home that was completely decked out with features and renovations, which made my buyer fall in love. But after I carefully pointed out the short ceiling height, poorly designed layout, and old age of the home, she quickly reconsidered. Instead, we went with a bigger home in which renovations were also done, but not as much, with a two-car garage and backyard space, which was much more ideal for her family.
Location
Like the saying goes, real estate is all about location, location, and location. When you decide to buy your first home or 30th home, picking the right location is one of the most vital steps. Not only will it ensure you get the best place to live, but it also ensures that you’ll get a big return on your investment in the coming years. Homes in great and desirable neighborhoods to live have much higher demand and price appreciation over the years.
You’ll want to make sure you’re picking a home in a very low-crime rate, safe neighborhood with excellent schools, great dining and entertainment options, and recreational activities like beaches and parks. It is much better to pick an older home in an affluent city than a brand new one in a city with bad schools and higher crime rates.
In some instances, you can also do some research about up-and-coming cities that are next in line for growth by checking with city planning and asking around to see what city everyone is moving to. For example, when housing became too expensive in the city of Boca Raton, many people started to move to Boynton Beach, which at the time was not a very desirable and popular city, but fast forward 5 years and it is now a great place to live.
The Homebuying Process
Previously, you figured out everything you need to do before actually starting the home buying process, and now you’re finally ready to get to the exciting part of finding your dream home. In this process, you’ll want to find the right real estate agent, look at a few homes, make great offers, satisfy lender requirements, and get the deal closed. So let’s start with all the steps so you can be on your way to getting a home.
Picking a Realtor
Picking a knowledgeable real estate agent is going to most likely make or break your home buying experience. So how do you know which agent to go with? Well, there are a few ways to check, and we will give you our insider tips. First and foremost, you want to make sure the realtor puts ethics and customer satisfaction first rather than being transaction-focused. There are many successful realtors with large teams, but they are very focused on getting the deal closed instead of making sure you got the best home. Look for realtors who have lots of positive, warm reviews and can provide you with a list of client referrals. You also want to ensure they have some form of certification for completing continuing education classes, which lets you know they are staying sharp in their field. The last thing you want is a realtor who is not educated and drafts a wrong contract or misses something important that can hurt you in the end.
The real estate agent you’re working with should also have very good knowledge of the local area along with up-and-coming cities, pre-construction communities, and overall neighborhood vibes. If you have a realtor that puts every property in a positive light without pointing out the negatives, you need to look for someone else. A realtor who is focused on their clients will make sure to look at each home as if they’re buying it for themselves, and that’s exactly what you want. So look for an honest, friendly, and experienced realtor with your best interest in mind. By doing so, you’ll be on your way to making sure you’ll get a great home with upside potential and a smooth closing process.
Looking at Potential Homes
Many first-time home buyers are easily impressed with cosmetic features and typically will go with the first few options they see. Because at the end of the day, we are all human beings, and buying a home is a very emotional and exciting step in our lives. But you need to think long-term and focus more on the structural condition of the home, the community itself, and seeing how your family would utilize the property. It is quite often you have a home with a new shiny kitchen, but the entire plumbing of the home might need to be replaced, costing a lot of money. It is much more important to have a more updated roof, AC, appliances, and high-quality windows than a marble floor in a nicely staged home. For sellers, cosmetics is where they focus since it helps sell a home, but for buyers, overall condition is more important, so keep this in mind.
When doing showings with your realtor, be sure to ask important questions about the condition of the home, reason for sale, neighborhood, HOA, and schooling. You’ll be surprised how much you’ll learn about the home by asking the right questions. During a showing, be sure to look at details like stains on the ceiling walls, gaps between the floor and baseboards, mold and mildew, along with any signs of bad plumbing. You also want to see the condition of the AC, water heater, and the shape of the appliances. Of course, all of this will be thoroughly checked at the time of inspection, but why go all the way there when you can detect issues early on.
Also, be sure to see how you and your family will be utilizing the space since you don’t have a chance to live in the property until you are the owner. Basically, the key when viewing homes is to be focused on details and to take the process seriously because it is quite easy to get distracted and fall in love with a home, just to later realize it is not the right home or it has a ton of issues that you are now stuck paying for.
Presenting an Offer
Once you’ve got your eye on the ideal property, it’s time to make an offer. In a normal market, this would simply require you to have your agent properly fill out a sales contract and send it along with a proof of funds letter to the sellers. You want to make sure your offer is priced correctly and not too low where the sellers might get offended. In order to do so, really have your agent do a cost analysis to see the true market value of your home.
If you are buying a home in a hot market, you are going to have to get a little more creative when drafting the contract. The reason being, there can be 8 offers on the table, some cash, some waiving inspection, and even paying above the asking price. To stand out in this type of situation, you want to make sure to make it to the open house with your agent and start a conversation with the sellers’ party to introduce yourself and get a slight edge when you send your offer. You also need to try to find out what kind of other offers are on the table so you can beat them out. Although you’ll never get a clear answer, asking questions will give you enough hints.
Now, just because you found a great house and can’t see living anywhere else doesn’t mean you should outbid everyone and be the fool who overpaid for a home. Stay within the market price of the home unless you know something that no one else does about the potential future of the property. To wrap this up, don’t forget to be very diligent about contract language and make sure both your realtor and attorney review it before you send it over.
Offer Accepted, Now What?
Hopefully, you had a good offer which is beneficial to both parties, and now you can move one step closer to becoming a homeowner. The next few steps are broken down here so you know exactly what to do:
Order Inspection
Speak to your realtor about some experienced inspectors he or she has, or do some searching to find one. You’ll want to make sure you have the house completely inspected to prevent unforeseen problems or damage done to the house. A good inspection will show you the condition of the roof, appliances, windows, AC, and water heater. You’ll also want to check for insects like termites or other bugs that can cause severe issues. To take it a step further, hire a professional to check the piping and do a structural inspection if the home is much older. Completing an inspection will not only give you peace of mind, but it can also allow you to negotiate a little more by asking the seller for a closing credit for some of the needed repairs.
Appraisal
If you’re financing a home, the lender will want you to get an appraisal done. This is where a professional will analyze past sales, the condition of the home, and any upgrades to see what the home is actually worth. If you’re paying cash, you can just have your realtor do a CMA (Comparative Market Analysis) instead, just for you, so you know you’re getting a good deal.
Getting Mortgage Approval
Although you may have gotten pre-approval for the loan, it doesn’t mean you have been cleared yet. So be sure to provide all the information and documentation needed so you can pass through the lender’s underwriting review and get the deal funded. Obviously, if you’re a cash buyer, this is not part of your step. I have personally seen buyers lose out on their home deposit simply because the lender didn’t close on time and didn’t get final approval. So make sure you turn everything in early and keep your eye on the process.
Review Documents and Close
Once your lender is good to go, you’ll need to make sure all the documents are in order so you can move forward with a clear closing. You’ll also want to make sure to do a final walk-through with your realtor at the property to make sure it is in good order and not flooded or destroyed. This is done on the day of closing.
If you’ve done all these steps, you have officially closed on your first home and are on your way to enjoying your new home.
Post Purchase Considerations
Now that you’ve closed on your home, it’s time to make sure you’ve got everything transferred and ready to live out your dream.
Change and Update Address
First and foremost, you should change your address with USPS so all your mail can be forwarded to your new address. You’ll also want to call all your lenders, providers, and legal entities to update your address with them as well. Don’t forget about your driver’s license, immigration office if necessary, and any other state document departments that need to be updated as well.
Switch Providers and Promotions
You’ll also want to call your electric company, cable provider, and other utility providers to have the service transferred or started at your new home. When doing this, be sure to ask for special promotions; there are always huge savings available.
Maintenance
Now that you’re a homeowner, you need to understand that all the responsibilities of keeping the home in good order and condition are on you. I usually recommend my clients get a service plan that covers all their appliances. You also want to have monthly or bi-monthly pest control as well to avoid any pest infestation. Make sure to also put some money away for future repairs like broken garage doors, a new roof, old windows, or any other renovations you may need.
Personalize Your Space
If the budget allows it, hire a professional interior designer to give you a consultation on how to set up your home with the right furniture and accessories. This will bring more style, utility, and coziness to your home.
Conclusion
To summarize, stepping into homeownership is exciting but also a quite serious and important step that should not be taken lightly. Make sure to review all your finances, know exactly what you need from the home, research the location, and pick the best realtor for the job. If you read this entire article, you are more than ready to find the perfect home and get the job done. If you are in search of a great realtor, we are more than happy to assist you in this life stage. Please write or call us so we can find that perfect home for you and your family.
