How To Buy Your First Home

In my younger days due to various employment situations, I ended up moving about once every five years. Fortunately, ever since I went to college I’ve pretty much put a stop to that by living in the same town for twelve years. As mentioned previously, my wife & I have bought our first house and have since moved in. While doing the actual move didn’t frighten me in the least, the buying part of this was a new and rather terrifying exhilarating emotionally draining experience. And as I hate to be flying blind in any situation, I did what I could to prepare myself. Mostly, this consisted of hitting up the public library for every book written in the last 5-7 years talking about home buying, mortgages, house inspections and anything else I could think of to look at. Those books included: The Virgin Homeowner: The Essential Guide to Owning, Maintaining, and Surviving Your HomeMortgages For Dummies, 2nd Edition, Kiplinger’s Homeology: How to Be Sure the House You Buy Is the Home You Really Want, and House Inspection: A Homebuyer’s Homeowner’s Guide: With a Special Section on Older or Historic Homes.

I’ll talk more about those books later, but I’d like to distill the knowledge I got from reading them into a few handy bullet points for future first time buyers to think about:

  • Start planing and SAVING as soon as possible! Personally, I’d recommend start planning out your purchase 5 – 10 years before you ever look at a house. Every “expert” in home buying recommends having a minimum down payment of 20% of the purchase price of the house you want to buy. Having that much saved up gives you several advantages:
    • Banks/Lenders will be more likely to take you more seriously when you can demonstrate both financial stability and prudence.
    • They will also be more likely to offer you a better loan when you have that much money up front.
    • The downside to having the 20% is it could disqualify you from some of the first-time buyer programs out there. Then again while I am a first time buyer and I do qualify for some of those programs; it made more sense for me to NOT use them1.
  • If your credit history is either short or bad, work to improve it. This means borrowing money for things like a car or using credit cards and being extremely careful to pay back what you owe in a timely manner (e.g. no late payments). The better your credit history, the more likely a bank/lender will want to work with you and possibly offer you a better interest rate.
  • If you are young and undecided on what you want to do for a living/career; consider real estate sales and/or being a lawyer specializing in real estate/property law. When you start going to the banks and realtors, they are going to dump tons of paperwork loaded with legalize on you. If you have the skills to understand what they are talking about; you’ll stand a much better chance of getting the house you want at a price (and a mortgage payment) you can live with.
  • Figure out exactly why you’re buying a house:
    • Are you simply sick of renting?
    • Do you want to have the additionally privacy of not directly sharing a wall with your neighbor(s)?
    • Are you looking for a long term, non-liquid investment?
  • Figure out how long you want to stay in the house:
    • 5 years?
    • 10?
    • 20?
    • More?
  • Figure out what kind of house you want:
    • A 3 story brick mansion with a dozen acres of manicured gardens?
    • A 2 bedroom, 1 bath condo?
    • A turn of the century bungalow built and decorated in the Arts & Crafts style.2
    • A 1950’s ranch in need of major renovation?
    • An environment friendly underground bomb shelter?
  • Figure out how much you can afford to spend:
    • Based on your savings, credit history and monthly income determine how much money you can afford to spend on a house. Note that the amount a bank will preapprove a mortgage for you is the maximum amount they feel comfortable lending to you and is not, I repeat NOT a figure you want to be paying off for the next 30 years.
    • When trying to determine this amount, you should be thinking about more than just the mortgage. You should also include your utility bills (e..g electric, natural gas, water, etc..) and insurance costs.
  • Start looking around the area you’d like to buy a house in, keep an eye on any “For Sale” signs and watch for open houses. You want to get an idea of how much the houses in the neighborhood are going for, so you can have some idea of what you might have to spend.
  • Likewise attend any open houses in the right area and get a good look at the houses.

Once you find a house that you are interested in, take another walk through it (either at an open house or arrange a time with the realtor. When you go through the house, you should poke in every closet. Also you should try every door, toilet, faucet, lightswitch and any appliances that are included with the house. Look for anything that doesn’t work or that perhaps works but not easily. These are things you can either ask the homeowner to fix in your bid on the house. Or you can ask them to knock some money off the price of the house so you can fix it yourself.

There’s undoubtably tons more advice I could put into this post, but it’s been sitting in my publishing queue for far too long already. If any of my readers have additional questions, then can either post them here and I’ll try answering them. Or then can read one of the books I linked to above.

1 Due to the interest rates being offered by the banks being better than that offered by the program.
2 Yes, yes, yes, yes please! 🙂

2 Comments

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Many people can’t even afford to buy a house. They are better off with a trailer home. The prices are more affordable, but with the housing boom, trailer parks were being pushed out to make for expensive new housing developments. Now that the housing bubble is over, hopefully prices for all types of housing should come down.

All houses, need maintenance and this always ends up making home ownership more expensive. Having your own home though is about choice and unlike the rental, you can choose what you want to repair or change. My best advice is to buy a new furnace and air conditioner unless the units are less than seven or six years old. A good furnace may last twenty years, but a new unit can give you peace of mind and lower energy bills right away.

For new home owners, it is a good idea to start going to Sears (or Kmart, since Kmart now owns Sears), Lowes, and HomeDepot and start looking at tools. If you are going to do any type of home repair, having the right tools matters, and it is best to buy them on sale before you need them. Everyone needs a good socket set, screwdrivers, pliers, and of course the reliable monkey wrench. It is amazing how you always need a monkey wrench around the house, even though you never think of it until afterwards.

When moving into a new neighborhood, make sure you find out who your neighbors think are reliable plumbers, electricians, furnace repair people. You never want to call a service without getting a recommendation. It is best to ask neighbors or coworkers in your area who they trust. This will save you sometimes from getting ripped off.

Lastly, when you buy a house, the first people to show up on your doorstep are salespeople. You will get harassed for everything, from window salesmen, to over the phone telemarketers who have great offers for new home buyers. Remember that most of these deals are not really deals for home buyers, they are just marketing. Most businesses want to make you think that they have a special deal just for home buyers, but in reality these deals are their regular sales pitch. Just say no.

I’m not convinced that a trailer home makes a good investment. Sure, it’s less expensive than a regular house but that also means you won’t get as much for it when you eventually resell it.

As for tools, fortunately enough I inherited a large collection of them from my folks. And although I don’t have a classic monkey wrench, I do have a good adjustable wrench. Next to a good pair of screwdrivers (one flat, one phillips) it probably is the most useful tool in my box. The next tool on my list to get is a good drill, preferably cordless and preferably 14.4 volts or stronger. I like the DeWalt DC728KA Heavy-Duty 14.4-Volt Ni-Cad 1/2-Inch Cordless Drill but it’s kind of expensive.

Good tip on checking with the neighbors. The area I moved into has something of a community organization/email list/cocktail party circuit. We actually met a lot of our neighbors while just looking at the house and everybody’s been really friendly around the neighborhood. I’ve also already tapped the email list for a recommendation on a plumber; next I’m going to ask for a good chimney sweep.

Salespeople? We’ve not had any come to our door yet. A few extra flyers in the mailbox and some phone calls from a local satellite dish dealer, but that’s it. We just hang up on the satellite people, added our new ph# to the DoNotCall list and recycled the flyers.

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