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! 🙂