First time home buyers are more knowledgeable today with the Internet providing unlimited information. They want to learn more to make sure they're making the right decisions too, given the housing bubble they witnessed.
Home buyers have more hurdles to overcome when buying a house, as more safeguards have been put in place to prevent problems with home financing. The home buying process can be very intimidating for the first time home buyer, who will benefit from working with an experienced realtor, someone who can guide them through the complex process.
These tips come from my experience as a homeowner, buying and selling homes across the US (New York, Connecticut, California, Massachusetts and Florida) and advice from realtors Mickie Kucinkas, Keller Williams in Portland, ME and Kathleen Morrow, Ebby Halliday Realtors in Rockwall, TX.
First Time Home Buyer Tip #1 – Family and Friends Can Help
While friends and family know you better, they're not experienced realtors. Their stories from buying and selling homes over the years will give a first time home buyer a framework for understanding what's ahead but remember that today's real estate market is vastly different and the rules keep evolving.
Many real estate practices are also local (city, county or state) so getting advice from your family on the east coast won't help much in California. You want a realtor with in-depth knowledge and experience in the area where you're buying – market values, schools, appraisals, seller concessions and more.
First Time Home Buyer Tip #2 – Pick Your Realtor Carefully
Buying a home takes time, so start by finding a realtor you enjoy working with, someone you can trust. We bought our first home in California, where I think it's much easier to learn about real estate. As a first time home buyer, we learned by talking to lots of agents at open houses and picking our realtor. They didn't know they were being interviewed but talking to several realtors lets you learn what's important to you.
Most homeowners don't realize the listing and selling agents work for the seller who's paying the commission, unless you work with a “buyer's agent” who works exclusively for you. All realtors should explain this and don't be surprised when you're asked to sign a buyer representation agreement which documents who represents you as the buyer. There are many different agreements throughout the US but the important thing is you want to know exactly how you will be represented.
First Time Home Buyer Tip #3 – Prioritize Your Requirements
A first time home buyer knows what their parent's home is like but this likely wasn't their first home. The shows on HGTV aren't terribly realistic where everyone gets granite counter tops, so a little homework is appropriate. There are 2 lists a first time home buyer should create, to help them articulate their requirements for their realtor.
- Start by listing what you want in your dream home. This will help you get clear about what's most important to you and your significant other.
- Now make a list of the things you can't live without, i.e. these are your requirements for your first home.
First Time Home Buyer Tip #4 – Develop Your Housing Budget
Before looking at homes, a first time home buyer should talk to a local, trusted lender to learn what financing they will qualify for. This will take into account your credit, funds available for a down payment and other financing requirements, and don't take any actions to alter your credit without speaking to your lender first.
Most lenders now want a 20% down payment (the norm when I bought my first home) so if you're getting any of this money as a gift, you'll need a gift letter and have to wait 60 to 90 days before you start looking at homes. This will insure that when you find a house, you're ready to make an offer.
First Time Home Buyer Tip #5 – Be Flexible and Realistic
You know your priorities but it's likely you'll still have to make some compromises. Rarely will you find a home that meets all your must have requirements in the ideal location, for the price you'd like to pay. A common problem for many first time home buyer is waiting for their ideal home, and realizing too late that they should have made an offer on an earlier home.
Flexibility is key so be prepared to make tradeoffs on location, along with the size and style of your first home. this might mean trading less space for a more desirable location or a condominium with more space and steps to a park with bike paths.
First Time Home Buyer Tip #6 – Inspections are Critical
A first time home buyer rarely understands how many things can and will go wrong in a house over time. A home inspection contingency gives the first time home buyer, an experienced set of eyes to check every home system to find potential problems up front.
Home inspections are like insurance, they protect you from things you don't have the experience to see. It's important to pick your home inspector carefully as not all states require licensing. Never cut corners or try to save a few hundred dollars, as you'll pay much more once you own your home.