If you’re buying a home for the first time, the whole process can seem complicated and intimidating. However, it doesn’t have to be if you’re prepared. So whether you’re buying a home in Las Vegas, NV, or buying a home in San Antonio, TX, here are 11 things you’ll want to know before buying a house to make the process as smooth and straightforward as possible.
1. Gather necessary documents ahead of time
Gather all documents in advance. It can help speed up the homebuying process and will also demonstrate responsibility to both the lender and the seller. Plus, you will need them to see how much house you can afford and then seek pre-approval for a mortgage. Here’s a list of documents you will need:
- Bank statements: To secure a mortgage, your lender will want a snapshot of all funds coming and going from your bank account for the past 30-60 days. You may also be asked to provide statements for any retirement, stock, and bond accounts to show other sources of income and your employment earnings.
- Proof of funds (POF): A POF is a lender-issued document showing how much money a person has to cover the purchase costs. When purchasing a home, you may need a POF to show the seller that you can cover the closing costs, purchase price, and down payment.
- Pre-approval: A mortgage pre-approval letter from your lender shows sellers that you can qualify for a loan according to a cursory examination of your income and debt.
2. A great relationship with your agent can make your experience easier and more successful
As a first-time homebuyer, you’ll be ahead of the game when hiring a reliable and trustworthy real estate agent.
When looking for a real estate agent that suits your needs start by asking friends and family for referrals who have bought or sold houses recently. They would be happy to share if they had a great experience and even happier to warn you away from an agent if they did not. Then, interview a few agents to see if you get along with them – and ask about their local knowledge, how long they have been working with homebuyers, and their take on local market conditions.
Be available and communicate what you want
Often, houses show up on the market that could be a great fit for your criteria, and you may need to drop everything for a showing. Real estate agents do their best to bring you properties, and you can do your best to be available when they find a good one. Be straightforward with your budget and the features you want in your home to help them understand the type of home you’re looking for, and they will let you know if that is realistic for your area.
Additionally, when you look at houses, give your agent honest feedback about what you like and dislike. Be honest and grateful that they are taking the time to show you the house, even if it’s not a good fit.
3. You may qualify for first-time homebuyer programs
Many lenders and federal or local housing agencies offer programs to first-time homebuyers to help with a down payment and closing costs.
A first-time homebuyer is anyone purchasing a home for the first time or someone who has not owned a home in the last three years. Federal, state, or local assistance programs typically involve income limits.
Grants or forgivable loans may be available to low – and moderate-income buyers; these typically don’t require repayment. Program availability varies by location and involves verifying household income and purchase price limits. Some assistance programs or grants require applicants to complete a first-time homebuyers class designed to help you navigate the homebuying process.
4. Determining your needs vs. want is essential
Before you start your house search, think about what features are essential and which you can do without, or add on later.With this information, you can weed out the homes that don’t meet your criteria while simplifying and speeding up the search process. Some things to consider:
- Style and size: Do you prefer a single-level ranch over a split-level home? Understanding what you’re looking for in terms of style and size can help you move towards buying the house when you see it.
- Property size: Do you need a yard for pets or children to enjoy? Do you want a forest in your backyard? Do you need extra space to add on an ADU in the future?
- Amenities: You may have your heart set on a particular brand of kitchen appliances, type of flooring, or backyard features. While these are great to have if they are already there, don’t let an amenity disqualify a great house. You can change or replace these features over time, so don’t let them be the focus of your purchase.
Additionally, think about a wish list of features you can live without today but would like to incorporate into your home in the future. This could include a hot tub, pool, office, a detached garage, a separate dining room, or a remodeled kitchen.
5. Hidden homebuying costs can add up
Beyond the purchase price, down payment, and monthly mortgage payment – there are other, often unexpected, costs you’ll need to factor into your budget when buying a new home. Here are some of the most significant additional costs you should be aware of.
- Closing costs: Typically, closing costs range between 2-5% of the loan amount and are expected to be paid on closing day. These fees are used to pay the various parties involved in transferring ownership of the house from the previous owner to you.
- Property taxes: When you close on the home, you will be charged a prorated amount of the home’s annual property tax for the remaining period of the tax year. You can estimate your tax expenses by looking at the last year’s taxes on the county website.
- Homeowners insurance: Before your lender will let you take out your mortgage, you’ll need to provide proof of homeowners insurance, which covers you and your lender in case of damage or complete loss of the house. You can pay homeowners insurance annually or monthly, but you’ll need a paid policy in place before closing.
- Moving costs: Hiring a moving company can cost between $80 and $350 per hour. Your cost will vary by how much you need to move, how far you are moving, and if you need to move items that need special care, such as a piano. If you plan on a DIY move, be sure to factor in costs for a moving truck, packing supplies, boxes, etc.
6. Know whether you are in a buyer’s or seller’s market
A buyer’s market occurs when there are more houses for sale than buyers looking to buy. This happens when demand is low. If you’re looking to buy a home, a buyer’s market is a good time to do it. This is because you might be able to find a great home for a lower price than you would in a seller’s market. In a seller’s market, housing inventory is sparse, home prices are higher than before, and more buyers compete for the same house – which drives house prices up further. This type of market favors the seller, who can often ask for more than they would typically get in a balanced market.
Be sure to talk with your real estate agent about the current market conditions for a better understanding of what to expect
7. Small changes can make a big impact
Depending on your budget, you may not be able to afford an updated home with significant recent improvements. It might make sense to find a home that needs some minor work, buy it for less, and invest in improvements incrementally, as you can afford them. If you find a home that meets your requirements but has stained wood cabinets instead of white, don’t overlook the potential if it’s at the right price. You can tear down wallpaper, repaint, or install new carpeting on your schedule.
8. Larger home improvements can be expensive
If you plan to purchase a fixer-upper, get a realistic assessment from a home inspector or contractor of your likely home improvement costs. Ripping out walls, electrical rewiring, and plumbing can be expensive. You may get lucky and only need to spend $10,000 for paint and carpeting. Or you may have to invest in critical repairs that could cost you much more before the house is safe and functional. Once you have a better idea of how much the home improvements will cost, you can then determine if buying a fixer-upper or a move-in-ready home is best for you.
9. Remember to budget for home maintenance costs
As a homeowner, you’ll need to invest in regular home maintenance for the property to retain or grow in value. Homes require regular maintenance, and homeowners should budget for this expense.
Proper external maintenance includes regularly mowing the lawn, cleaning the gutters, trimming trees, and shoveling snow. If you hire out this type of work, it can cost $100-$200 a month.
Regular internal home maintenance includes basic cleaning and upkeep and planning for larger projects as needed, like new flooring, cabinets, plumbing, lighting fixtures, HVAC, appliances, and more. A good rule of thumb is to budget 1% of the home value per year for home improvement and maintenance costs. If the house costs $250,000, that means setting aside at least $2,500 a year for these expenses.
10. Homeownership is a commitment
Buying a house makes good financial sense if you plan to live in the area for at least five years. You will be investing in your future by building equity and becoming part of a neighborhood and community. But consider your future plans and financial situation. If your future plans are fluid or your job is uncertain, you may want to defer buying a house. By waiting, you save money, preserve your flexibility to move anywhere, and minimize responsibility until you are ready.
11. Lastly, give yourself time to buy a house
Although you may start your home search in May with the intention of being in your new home by September, this is often not the case. Once your offer is accepted, the closing process can take between 30 – 60 days. All in all, you should give yourself at least six months to buy a house, but connect with a local real estate agent for a more accurate timeline based on your local market conditions. If you’re currently renting, try to go month-to-month on your lease if possible.