Melissa Kaspern's Blog
Are you in the market for your first home purchase? If so, congratulations! This is an amazingly exciting stage of life, and we know you must be excited.
Many first-time buyers run into issues that can turn their new home into a source of stress. Here are three common pitfalls you should watch out for as you purchase your first home.
Biting Off More Than You Can Chew
Far and away the most common pitfall that first-time home buyers run into is with setting realistic expectations. It’s a tough market for first-time buyers, and many are tempted to jump in deeper than they can manage. Just because you can get a mortgage without a full down payment doesn’t necessarily mean that you should, for example.
Your mortgage payment is going to be a reasonable percentage of your take-home pay, but don’t let it get too high. Many experts recommend 25 to 30%. And consider what your financial situation will look like if in a few years you add a child or two to the mix.
Everyone’s situation is different, but none of us have infinite money. Take the time to calculate what you can truly afford, and then stick to those figures. You may well tour your dream home as you look at available properties, but living there won’t be dreamy at all if it puts you in financial distress.
Not Considering Non-Mortgage Costs
If you’ve been renting all of your adult life, you need to be prepared for some non-mortgage costs that you probably haven’t had to pay yet.
First, understand that all repairs to your new home and property are your responsibility. If you have a $2,000 sewer repair crop up in the first 2 months of living there, do you have a way to pay for it? When you’re budgeting for your home purchase, make sure there’s enough left over to cover unexpected issues like these.
Second, if you’re bringing a full down payment to the table, there’s one more non-mortgage cost that could catch you by surprise: property tax. Make sure you know before you buy what property taxes are like on similar homes, and save 1/12th of that amount each month.
Making a Purchase Decision Too Quickly
A third pitfall for first-time homebuyers is rushing the purchase decision. Don’t get us wrong, we want you to buy a house! But your house is a long-lasting investment. Get to know various parts of your city, and take your time surveying what properties are available in your price tier.
Most first-time homebuyers won’t be in a position to sell and move up in house for at least five years. So don’t rush the purchase decision. Be sure before you commit.
Although you might have entered the housing market with a strategy to help you streamline your search for your dream home, it is important to remember that even the best-laid plan may need to be changed. And if you fail to discover your ideal residence after a comprehensive search, now may be a great time to revise your homebuying strategy.
Let's take a look at three tips to help you revamp your homebuying plan.
1. Consider Your Home Must-Haves and Wants
Creating a list of home must-haves and wants may be done at the start of a house search. Over time, however, this list may evolve. And if you update your list, you may be better equipped than ever before to reenter the real estate market with a fresh perspective.
Think about where you want to live in the foreseeable future too. Then, you can narrow your home search to specific cities and towns and accelerate the homebuying journey.
2. Review Your Budget
If you recently paid off your student loans or eliminated your credit cards, you may want to reassess your homebuying budget. That way, you can hone your house search and explore residences that fall within your up-to-date price range.
Of course, if you have yet to get pre-approved for a mortgage, you can still do so. Meet with banks and credit unions to learn about all of the mortgage options that are available. This will enable you to gain the insights you need to select a mortgage that matches your finances.
3. Learn About the Housing Market
The housing market may favor buyers or sellers. And if you have been searching for your dream home for several weeks or months, the market may have changed.
It does not take long for a buyer's market to become a seller's market, or vice-versa. As you consider your homebuying options, you should study the local real estate sector closely to determine whether the current housing market favors buyers or sellers.
Evaluating the prices of recently sold houses in a particular city or town usually is a good idea. This housing market data will enable you to find out whether sellers are receiving offers at or near their initial home asking prices.
You also should find out how long current residences in a particular city or town have been listed. If houses linger on the real estate market for an extended period of time, you may be operating in a market that favors buyers. Or, if homes are selling quickly, you may be operating in a seller's market.
Lastly, hiring a real estate agent often is helpful, particularly for homebuyers who are struggling to identify the perfect residence. A real estate agent can offer lots of tips as you conduct your search for your dream residence. Plus, if you need to revamp your homebuying strategy, a real estate agent will make it easy for you to do just that.
If you're a first-time homebuyer and you've already started exploring available properties, you might think to yourself, "Why do I even need a buyer agent?" After all, you've been looking at homes for sale and the realtors who showed you the properties were very nice and helpful. But here's the deal: Those realtors are seller agents. They represent the home seller. They are legally, morally and ethically bound to get the best possible deal for the seller -- not for you as the buyer! This is just one of the reasons why first-time homebuyers can really benefit from working with a buyer's agent. Here are some more advantages.
Buyer Agents Work for You -- The Buyer
Once you're prequalified and your buyer agent understands the features you want in your first home, the agent will locate for-sale properties that fit your criteria. Not only that, but the buyer agent will coordinate and schedule showings of those properties for you. You don't have to do all of the legwork. And remember: As your representative, the buyer agent is out to find the best possible deal on a first-time home purchase for you.
Buyer Agents Are Great Negotiators
Every home sale and purchase is bound to hit a snag or two along the way. It's a lengthy process to buy or sell a home, and it's also a highly emotional transaction for buyers and sellers. It is, after all, the largest emotional and financial transaction that most people will make in their lifetime. Therefore, the negotiating skills of a buyer agent will be of great benefit to you as a homebuyer. If something starts to go wrong, they know how to negotiate a fix and they know professionals within their network who can help iron out problems -- from titling companies to real estate attorneys and even contractors to fix unexpected problems with the property.
Buyer Agents Are Property Experts
If you look at a home, do you know all the potential problem spots to examine to ensure that it won't have hidden costs? For example, can you tell if the plumbing is too old and will need major repairs within five years? Can you assess the age and functionality of the furnace, hot water heater and other features? Probably not -- but the buyer agent can because he or she has that experience.
Best of all, buyer agents don't charge any upfront or ongoing fees for their services. They split the commission with the seller agent who works for the home seller. For all these reasons and more, it makes great sense to put the expertise of a buyer agent to work for you!
A home showing represents a valuable opportunity for a property buyer. However, there may be instances in which a buyer is unsure about whether to attend a house showing. Lucky for you, we're here to help you weigh the pros and cons of scheduling a home showing.
Now, let's take a look at three questions to consider before you attend a house showing.
1. Is a home the right size for me?
Take a look at a home listing and find out the square footage and number of rooms in a house. That way, you'll be able to determine whether a house is the right size for you without setting foot inside the residence itself.
Of course, you should consider your immediate and long-term plans as you evaluate a home's size. If you plan to start a family soon, for example, you may want to search for a home that offers sufficient space for you, your spouse and your children. Or, if you intend to retire in the foreseeable future, you may want to pursue a small home that requires minimal maintenance.
2. Is a home located in one of my preferred cities and towns?
Think about where you want to reside. Oftentimes, it helps to make a list of preferred cities and towns and narrow your home search to these areas. And if you find a home you want to check out in one of these cities or towns, you then can schedule a property showing.
In addition, it is important to remember that a big city home may prove to be more expensive than a comparable residence in a small town. If you decide to pursue a house in a big city, you may face increased competition for city homes in comparison to small town residences too.
3. Could a home be my dream residence?
Ultimately, if there is even a small chance that a home could be your dream residence, it may be beneficial to set up a showing. If you attend a showing and find a residence is your ideal house, you can submit an offer to purchase this home. On the other hand, if you attend a showing and find a residence falls short of your expectations, you can simply continue your pursuit of your dream house.
As you conduct your search for your ideal residence, it generally is a good idea to hire a real estate agent. This housing market professional will set up home showings, keep you informed about new residences that become available in your preferred cities and towns and much more. Plus, if you ever have concerns or questions during the homebuying journey, a real estate agent is ready to respond to them.
Consider the aforementioned questions before you schedule a home showing – you will be glad you did. And if you decide to attend a house showing, you will be better equipped than ever before to determine whether a particular home is right for you.
The definition of a "dream house" varies from homebuyer to homebuyer. Fortunately, there are many things you can do to determine if a residence is right for you.
Now, let's take a look at three tips to help you evaluate a home so you can decide whether to proceed with an offer to purchase.
1. Review a Home's Features
Think about why you are searching for a home and what you want to find in a house. For example, if you require a home that features a deluxe kitchen, you can narrow your house search accordingly. On the other hand, if you want a home that boasts an above-ground swimming pool, you can focus on houses that offer this amenity.
Consider where you want to reside too. That way, you can hone your home search to a select group of cities and towns and find a residence that is located in one of your preferred locations.
2. Examine a Home's Price
The cost of a home depends on a number of factors, including the residence's age and condition. Of course, the housing market itself plays an important role in a house's cost as well, so you'll want to examine the real estate sector closely. By doing so, you can differentiate a buyer's market from a seller's market – or vice-versa – and determine if a home's price falls within your budget.
In a buyer's market, there may be an abundance of quality houses available at budget-friendly prices. If you shop for a home in a buyer's market, you may be able to purchase a house at or below a seller's initial asking price.
Comparatively, in a seller's market, there is a shortage of premium houses, and top-notch homes that become available may be in high demand. In a seller's market, you may need to act fast to acquire your dream home. Plus, you may need to submit an offer to purchase that exceeds a seller's initial asking price so you can purchase your ideal residence without delay.
3. Consult with a Real Estate Agent
A real estate agent is a home selling expert, and he or she is happy to help you weigh the pros and cons of buying a house. In fact, a real estate agent will go the extra mile to ensure you can make the best-possible decisions throughout the property buying journey.
With a real estate agent at your side, you can receive lots of support so you can enjoy a seamless homebuying experience. A real estate agent first will learn about you and your homebuying goals and help you search for a residence that matches your expectations. Next, a real estate agent will help you craft a competitive offer to purchase your dream home. And if your homebuying proposal is approved, a real estate agent will help you finalize your house purchase.
Use the aforementioned tips, and you should have no trouble deciding if a house is right for you.