7 crucial tips for first-time buyers
If record-low mortgage rates and plummeting housing values have you primed to get into the market, don't get antsy — get educated. Here are some essential steps to take when buying your first home.
With the nationwide median home price at a five-year low and mortgage rates near record lows, too, you might be tempted to buy a home now before the housing market rebounds. But this is one decision you don't want to rush into.
That's especially true if you're relocating, like my husband and I did in July 2003. We were living in a one-bedroom apartment in Washington, D.C., before buying our first house in Bowling Green, Ky., where my husband accepted a teaching job. And even though I was intimately acquainted with the process, we still ran into plenty of snags and surprises.
When buying a home ...
1. Lay the groundwork. Our first step was figuring out how much house we could afford and how much we could borrow. If you're moving to a new community, be sure to find out what home prices are there. Housing prices can change dramatically from state to state and even city to city. You might also want to talk to friends or colleagues in the area about neighborhoods and other considerations only a local might know.
2. Take your time. We thought we were ahead of the game by looking on the Web for homes. But every house we found online that we really liked was snatched up before we had a chance to go to Kentucky to check them out. I started to worry that if we didn't move fast enough, all the "good" houses would be gone.
By the time we actually went to Kentucky to look at homes, we had only two months before my husband had to start his new job. I was determined to find something — anything. My husband, the levelheaded one, urged me not to rush. Did I listen? No. As a result we settled for a house that had only a few of the things I wanted and many of the things I didn't want.
In retrospect, I realize homes constantly come on (and off) the market. You might not find your dream home, but you don't have to settle for any old house just because you feel under the gun to buy something. Consider renting to give yourself time to find the right home.
3. Realize you won't find the perfect home. Forget the idea of finding your dream home. It doesn't exist. You will not find a house that has everything you want, and none of the things you don't. Real-estate agents tell you to make a list of what's important to you — size, condition, location, style and price. That way you can zero in on a home that comes closest to suiting your wants and needs.
We wanted an old home with hardwood floors, a small yard, a garage that didn't face the street and a basement. We got a newer home with wall-to-wall carpeting, a big yard, a garage in the front of the house and a crawl space. That's because we had to give up some things to get others — like a big kitchen and plenty of bedrooms.
4. Accompany the inspector. Most stories on homebuying advise you to have a home-inspection clause in your contract, giving you the right to have the property inspected and to withdraw your offer if the inspection report isn't satisfactory to you for any reason. What these stories often neglect to mention is that you should be present during the inspection. We weren't because we didn't want to spend the money on a flight to Kentucky. Now we know it would have been money well spent.
Sure, you'll get an inspection report. But it can be difficult making heads or tails of it. If you're present during an inspection, you can see problems with your own eyes, get an idea of how serious they are and ask the inspector how much he might think it will cost to repair them.
5. Pay attention to the little things. Because I thought I needed to rush to buy a home, I wasn't as objective during our home search as I should have been. When we finally walked into a house that met many of our requirements, we turned a blind eye to some things we should have paid closer attention to. And because the inspection didn't turn up any major problems, we decided to look past the minor ones. Well, it's the little things that can become big headaches once you move into a home.
- Pay attention to how a home smells. A strong odor — especially a musty one — can be an indication of a bigger problem such as mold.
- Look at small details, not just the big picture. If there are cobwebs in the corners, dirty windows, weeds in the lawn and leaves in the gutters, the sellers obviously didn't do a good job of keeping the property clean. If they haven't taken the time and money to maintain the little things, there's a chance they've let big things, such as plumbing or the heating and cooling system, fall into disrepair.
- Don't think just because the house needs a few minor repairs or new paint on the walls, it will be cheap, quick and easy to tackle. Before you know it, the costs add up, it's taken a lot more time than expected and you've had to call in the experts to finish the jobs you couldn't handle on your own.
6. Be ready to negotiate. We got the sellers to lower their price by $7,000 and throw in a one-year home warranty, which will cover the cost of repairing or replacing the home's mechanical systems and major appliances. And we got a good deal on our homeowners insurance, with guaranteed replacement coverage at no extra cost.
7. Don't spend all your money on the down payment. If you're moving into your first home, you'll have to buy things you never needed before, such as lawn mowers, yard tools and major appliances. You'll need cash for these purchases unless you're planning to mire yourself in credit card debt.
When you're ready to move ...
Check out the movers or moving truck. If you're entrusting all your worldly belongings to movers, make sure you check out the company first. We opted to take the cheaper route by renting a truck and making the move ourselves.
If you go this route, protect yourself by asking to see the truck's maintenance records. Also check the fluids and the lights before leaving the lot. Finally, be sure to take a good test drive before loading the truck.
We went through three trucks before we found one that we thought would make the trip. The first truck had a steering problem — the wheel jerked back and forth once the vehicle exceeded 40 mph. The second one made a loud squealing noise when we accelerated. The third was missing a taillight. All three had more than 100,000 miles on them. The fourth, we discovered 400 miles down the road, had a bad tire.
Get the sellers out before you move in. When we finally drove into our new home's driveway, we quickly discovered that the sellers had not packed a single box the day we arrived in Kentucky and were supposed to close on the house. An unsuspected lien on the house delayed our closing by a week. Because we didn't close and become the rightful owners of the house, we couldn't really tell them to hurry up and get out.
They were nice enough, though, to let us move our stuff into the garage while the closing fiasco was sorted out. It's pretty easy to guess what happened. While they were moving their stuff out, they mistakenly loaded some of our belongings onto their moving truck. We did get our things back (after I'd spent a night worrying they were lost forever).
Give yourself time to unpack. If you're relocating for a job, build in some time to clean your new home, unpack and get settled. As a result of the delay in our closing, we had a day to move in before my husband had to start his new job.
By Cameron Huddleston, Kiplinger.com
I do real estate selling in the Philippines but I enjoy reading and learn a lot from western articles on real estate, just like this one. Please take a look at my site.
Im buying my first house right now. The one piece of advice I can give is to find a realtor that you trust. Luckily my realtor is a good friend of mine so I can completely trust him. Buying a home is one of the biggest investments you can ever make. Why trust this purchase to someone who you're not sure has your best interest at heart.
There are also many first time home buyer assistance programs out there but vary from state to state. I have found $10k in down payment assistance from the federal government that doesn't have to be repaid. You must apply for this early in the calendar year because it's first-come-first-serve.
Happy House Hunting!
5) Investors are out there in droves with cash. Banks like cash. Banks will look at a cash offer that is perhaps lower than your offer. Let's say a bank-owned property is listed at $200K. Being the savy buyer who doesn't want to deal with an on-going bidding war, you offer $205. A cash buyer offers 199K. The bank will take the cash any day of the week.
6) Banks don't like to sell short. They would prefer to foreclose and then engage would-be buyers in bidding wars.
7) In some markets with high foreclosures, banks are holding properties off the market because there are just too many houses available. Don't be surprised if you purchase the only listed foreclosure on the block, move in, and then more foreclosures on your block suddently appear.
8) NEVER EVER buy into a new development that only has a few houses built, and has lots of open, unsold lots. That builder could go out of business the day you move in, and the empty lots could be vandalized for years to come.
9) So you have an HOA and think you have control over your neighbors and their loud partying, etc. Wrong. HOAs have no legal rights, when it gets right down to it.
10) If you're buying a house as an investment, don't buy. That lightning struck from 2001 - 2006. Lightning doesn't strike twice, folks.
11) The cost of furnishing a house is surprisingly stratospheric if you are a first time buyer. Go ahead, get quotes on window coverings during your initial shopping phase!
12) And just wait till that first set of utility bills hits the mailbox!
I know all of these things to be true. I could go on and on. And, friends, this is why I rent.
Good article but I'll add some personal points:
NEVER buy a home without an inspection. You should indeed be there but you can also request that the owner NOT be there during that inspection. The owner of a home we were having inspected spent that important time becoming the inspectors "best friend" and distracting him. It didn't work as our inspector was good but it was uncomfortable.
ALWAYS purchase a Home Warranty. Negotiate who pays for it. Ideally it is the seller.
NEVER move into a house before it closes. You can do it sometimes but nothing is guaranteed until the home is legally yours.
I would not worry one little bit over a home having cobwebs but I would be concerned over moldy odors.
Last, I think the writer would have been better off to move to the new city and rent for a short time and only make a purchase when they had a more intimate knowledge of their new community.
Hope that helps...
1) Bank-owned properties are encouraging bidding wars, so be very careful that you don't become emotionally involved in a bidding war and wind up paying way too much for a house.
2) Avoid anything that is being sold "as-is." There is a reason for this, and you don't want this house. (Unless you're going to tear it down and rebuild, but then again the property could be in a flood zone or worse.)
3) The existing neighbors are the alpha dogs. If you think you're going to move in, and then set an example for those messy neighbors who don't clean up their yards (who have cars parked on concrete blocks in their driveway for example) you're living in a dream world.
4) If the price is too good to be true, then it is. Move on.
Few things to keep in mind when getting a house/loan. (1) Get a good agent, still make sure you do your homework - don't rely on your agent 100% to find a home. Go through the web pages Trulia.com, realtor.com, homes.com (just some that we used), of other realty companies, news paper ads etc. (2) Get a lawyer, try not to use a lawyer that your agent or broker recommends. Ask around, interview lawyers. Make sure you agree to a flat rate lawyer charge. Some lawyers don't give you flat rate, don't use them. (3) Have your lawyer read the contract before you give the down payment - and you have to read it yourself. Make sure home inspection is build into the contract. Go back couple of times to make sure to check everything in the house. Drive around the neighborhood during both in days and nights (4) Don't rush, we saw at least 60 houses before we found ours. This probably is the biggest investment you make. Make sure to buy a house in a good school district, if you can afford. It is always easier to sell a house in a good school district. Good Luck!