Buying your first home can be both exciting and frightening in equal measure. You’re making one of the biggest decisions in your life, both in terms of finance and lifestyle. But many first-time homebuyers have successfully and happily purchased their first home — and it gets easier the more prepared you are. As long as you do your research first, don’t jump in blindly, and work with an accomplished professional, you should be able to find your dream home.
That being said, there will be both opportunities and potential pitfalls on the way. Here are the most important Do’s and Don’t’s during the homebuying process.
- 1 Do: Make a List of Your Needs vs. Wants
- 2 Don’t: Get Too Attached to a Single Home
- 3 Do: Get Your Financing Sorted Out Early
- 4 Don’t: Be Unrealistic About Your Financial Goals
- 5 Do: Negotiate Wisely (and Frequently)
- 6 Don’t: Make Too Many Concessions During Negotiation
- 7 Do: Think About Your Future
- 8 Don’t: Try To Do It All on Your Own
- 9 Your Next Steps
Do: Make a List of Your Needs vs. Wants
Take out a sheet of paper. Make a list of what you “need” in a home and what you “want.” This is going to be very valuable moving forward. It’s easy to get caught up in looking for a home — starting to “need” a pool even though you really “need” an extra bedroom. Making a list of your needs and wants early in the process will stop you from drifting toward things that you don’t need, even if it might be nice.
Your list of “needs” and “wants” also gives your real estate agent something to work with. They’ll be able to narrow down homes to just the ones that suit you. It may take some time to get through the process, but it’s important; spending an extra few months finding a home that you’ll spend a few decades in is worth it. Of course, you shouldn’t forget that there may be “needs” and “wants” that you can get even if it isn’t already in the home — you can always put in a pool, but it’ll be harder to put in an additional bedroom.
Don’t: Get Too Attached to a Single Home
It’s very common for a first-time homebuyer to get caught up in a particular house. You might find the “perfect one” just a week into looking and not be willing to let it go. But that’s a problem.
There are plenty of fish in the sea and plenty of houses in the market. But if you get attached to a single home, you can get caught up in bidding far too much for that home. You may start to visualize yourself and your family inside of the house and that could lead you to getting attached. The more attached you are to a house, the more likely it is that you’re going to make poor financial decisions.
It is possible that you could find a rare home that is perfect for you. In that case, you do need to make critical decisions about how worthwhile it is to you. But it’s more likely that a home will seem “perfect” until you see the next property. The only way to defend against this is to see as many properties as you can with the help of your real estate agent. You won’t know whether a home is truly perfect without being able to see the full inventory of what’s available to you.
If you’re looking for a home with a partner, you should also get on the same page with them — and have a deal to pull each other back if you start getting too involved.
Do: Get Your Financing Sorted Out Early
You should have a pre-approval or a pre-qualification in hand before you even start looking at homes.
First, you need to know how much you can realistically spend. You don’t want to look at houses outside of your price range if you can help it; that’ll just waste your time. You also don’t want to feel more restricted than you really are. You might be pleasantly surprised regarding how much house you can afford.
Second, the home buying process can actually move quite quickly. You may need to submit an offer fairly quickly when you find the right home, and that might not leave you a lot of time to get approved or qualified. You do need approval or qualification to make most offers.
Third, you want to know about any issues that could be inhibiting you from getting a house. Early on, you might find that there are issues with your income or your credit. You want to be able to address those before you start looking.
By getting your financing sorted out early, you can also close faster later on. You want to close fast if you’re in a hot market.
Don’t: Be Unrealistic About Your Financial Goals
Your bank may say that you can purchase a $500,000 home. But can you really afford that without being uncomfortable?
If you buy the most expensive house that you can, you will often end up house poor. Though you have a home, you may not be able to afford much else. And you might not be able to afford updates or renovations on the property.
On the other hand, if you already live quite frugally, you might be fine purchasing a house with the biggest mortgage you can get — and in some markets, it’s the smartest thing to do, because the property values are going up so substantially.
Ultimately, this has to do with your personal financial goals and financial situation. Some people want to spend more money on their homes and some people are more comfortable spending less. But you absolutely need to explore your financial goals first so you don’t end up in a bad situation. And don’t rely upon future finances to purchase your home — many people acquire adjustable-rate mortgages for that reason and end up in trouble later on.
Do: Negotiate Wisely (and Frequently)
Homebuying is all about negotiations. Now, you don’t need to do this directly. Your real estate agent will handle most of it for you. But you do need to be willing to play some hardball, such as only making an offer based on contingencies.
Most people would flinch spending $5,000 but will not hesitate to spend $5,000 more on their property than they feel is fair. It generally does not hurt to ask for a cheaper price, to ask for updates, or otherwise ask for concessions of the seller. If you’re in a hot market, this is less likely to work. But if you’ve got a good offer for the seller, it may make sense for them to accept it.
Negotiations only work if you’re prepared to walk away. If there’s a home you absolutely want, then you might not want to play hardball so readily. But your real estate agent should be able to give you an idea of whether negotiations are likely to work in your situation. There may be a property that’s been on the market for a long time — or the sellers are just very eager to sell.
Don’t: Make Too Many Concessions During Negotiation
On the other hand, negotiations can go the other way. A seller might want you to spend more money, especially if others are bidding on the property. Getting locked into a bidding war is the worst thing that can happen.
Before you even start negotiating with a seller, have a set price point in mind. Don’t go beyond this. This is the rational amount that you would pay for the home. It’s very easy to get emotional about a property, especially if you feel that someone else is “taking” that property away from you.
Consider any other concessions strongly. A seller might want to sell a property but only with attached land. You might need to pay more for that land — but is that something that’s going to be useful to you in the future? Or is it going to be something that’s a pain to maintain?
Again, your real estate agent will also be able to tell you what’s normal for your area. In hotter markets, it may be normal to go $20,000 or $30,000 over the asking price. In slower markets, it may be far more likely that the seller should be jumping over themselves to offer concessions to you. There’s no universal “normal” because everything is so regional.
Do: Think About Your Future
You don’t want to purchase a home only to have to sell it next year.
When selecting a home, think about your immediate future. Usually, you don’t want to sell your home within three to five years of purchasing it. That’s because of the costs of the transaction itself; it doesn’t make sense to sell a home very quickly because you’ll lose money on the costs of selling it.
Further, you need to think about what you’re going to need in the future. If you’re going to start a family in two years, you may need extra bedrooms. If you’re going to start a new job, you should consider what would happen if you had to transfer.
Most people aren’t purchasing their “forever home” with their first home. They’re looking for a starter home. But even a starter home needs to work well for you now. If you’re going to be renting it out once you do purchase your forever home, is it going to be a good rental? Making a complete strategy for the property is important. It is a major financial decision, and it is going to be something that you’re going to need to deal with in your future.
Don’t: Try To Do It All on Your Own
It’s very tempting for first-time buyers to do a lot on their own.
It’s easy to look up real estate listings, for instance, completely online. It’s easy to even schedule a showing. When that happens, you usually end up working with the seller’s agent. And while a seller’s agent can represent you, the buyer, as well, that’s normally not ideal. For one, the seller’s agent isn’t going to be interested in representing you; they’re going to be interested in representing the seller to the best of their ability.
When you try to do it all on your own, you may not be aware of the intricacies of the market. And because of that, you may fall into offering too much for a property. You could also accidentally put a bid in for an unsuitable property.
There are also a lot of issues that can arise, such as purchasing that’s less than ideal — such as rent-to-own deals that may not be entirely on the up-and-up. These are issues that a real estate professional will point out, but that you may not be able to realize until much later. As a buyer, you don’t pay for the real estate agent; the seller does. So, there’s really no reason for you to work without an agent.
Your Next Steps
You may not be able to go out and buy your new home tomorrow. But you’re now prepared to start. Buying a home is an incredible opportunity. You’ll likely know your dream home when you find it. Everything else is all in the details.
When purchasing your new home, you need to be critical. It’s an emotional time, which is what complicates it. You’re not just choosing a financial investment; you’re choosing a place to grow, build a family, entertain friends, and more. Understandably, the decision isn’t going to be purely logical.
But by separating your logical thoughts from your emotional ones (and, of course, still taking care of your emotional needs), you’ll be able to get a home that both suits what you want and meets your financial goals.