I was you once. I had no idea how any of this works. All I knew was that I was ready to buy a house and I had to borrow money to do it.
I had been saving a little. I was self employed running my lawn care business. I had a busy spring and had fallen behind on billing. I totaled up the invoices I had just sent out and to my surprise, I had suddenly had a 5% down payment for a very modest home.
I started working with the only realtor I knew at that time. I got preapproved with the bank that I had my checking account with. After seeing a lot of houses, we decided on one and bought it. There is of course more to that story, but this is really about what I learned as a first time buyer and now many years later a realtor that might help you.
I always think the first step is to find a realtor. A realtor can explain the whole process and prevent a lot of mistakes. When picking a realtor, you want somebody that sells enough houses in your price range to be able to tell you if a certain house is a good one to buy or not. Keep in mind that while it is great to love the house you buy, odds are you won’t be there forever. It is the first step on a path to getting in the house you ultimately want, can’t afford now and that you will be in long term. You want a house that will be easy to sell in any market. Always keep in mind that one day you will sell it because your needs have changed. You will love the next house that suits your needs better and this one can help you get it or ruin your chances. This means don’t use your neighbor’s babysitter who just quit her job at Subway and got her license. Don’t use your best friend who just got their license. Having some experience will benefit you more than you will ever understand. A lot of first time buyers assume they have to pay for their realtor and will try to go at it alone. The commission your realtor gets is offered from the Listing Realtor. The Listing Realtor has an agreement for the Seller to pay them a commission to sell their house. That Listing Agent has offered to split it with your realtor. That means having your own realtor is totally free to you. (Caveat-some realtors do charge what is called an ABC fee of $175-250. I do not do that since I think it is stupid and just a way of getting a little more money.)
The next step I would take if I were you is to find a good lender. A good lender is not necessarily the one with the rock bottom interest rate and closing cost. The best lender is one with a competitive rate that can smoothly and efficiently get you to the closing table with the least drama or delay. Pro Tip here…….this lender is typically NOT the bank with your car loan or your checking account. Your realtor probably knows a couple of good lenders.
Then I would start looking at houses. I’d look at a bunch of stuff in your price range all over town. This is a process. I can tell you that few buyers I have worked with ended up with exactly what they told me they wanted. I’ll have people say they want a specific neighborhood and fall in love with a house outside that neighborhood. I’ve had people tell me they wanted an old house end up buying a much newer one. They often apologize to me for the change of plans. I always tell them it is a process to get the right house. Changing plans just means you are more clearly discovering what you really want. The more houses you see, the more you know what you want. The worst thing about the crazy hot market of the last few years is that no buyer in any price range has had a chance to look at more than a handful of houses.
How do you know when you’ve found the right one? Most people leave a house they don’t like pretty fast…..NEXT! People that like a house stay at the house for a long time and keep walking around. Sometimes buyers stay for a while because they love certain features and not others. If you find yourself saying “If only this were different, it would be perfect,” then it probably isn’t the one. If you begin arranging your furniture in the house and are worried about losing the house as you leave it, then it is probably the one. When I say worry about losing it, I mean losing the house. The past few years the market has moved so fast that people have started worrying about losing the opportunity to make an offer. That is a fear of missing out. That has nothing to do with the house. That just means you like it enough to be anxious about losing it while you decide if you want it. If you are worried about losing the house and not just the opportunity, then you know. Also, you’ve been so focused on finding the right place that odds are you are sort of caught off guard when you do find the house. Don’t worry about that. It is common. Often a first time buyer needs to wrap their head around the fact that they are about to take the giant step they have been working towards. I try to give my first time buyers a little space. You need to get past the shock and be ready to sign the offer.
When you are ready to make an offer, please rely on your realtor for advice. I have seen so many buyers just tell their realtor what to put in the terms of the offer and then not get the house should there be multiple offers. In multiple offers, you really only get one change to win the house. Ask your realtor what they think you should do. If you can handle their advice, just do it. Your realtor has done this multiple times in the past month and this is your first time. It is their time to take care of you.
You’re feeling all good now. You’ve found the house. A contract has been signed. Your lender is asking you for a lot of documents. The next step is the home inspection. Not having been though a home inspection, you assume since the house looks good that it is good. As the home inspector you chose starts going over the inspection report, you begin to wonder if you have made the wrong choice. Most home inspection reports I have seen have 20-50 items that the inspector found. Most of these items will be things that are deferred maintenance or things that were not done in the textbook perfect way. This is where a realtor you trust can help you sort through what items are most likely going to be on any home inspection report and which items are specific to this house. I try to break down the items that are most immediate and those that will be the most expensive. Sometimes the house has one or more major items that are deal breakers. Sometimes the sum of all the immediate needs is too much. Most of the time though, 80% of whatever your inspector found at your house will be on the next home inspection report should you walk away from this house and buy another. Why? Because there is no perfect house.
Now we are getting close to the closing. Your realtor tells you that you have to do a “Final Walk Through” of the house right before the closing. All this means is you need to see the house prior to you owning it to make sure any home inspection repairs were done and that the house is in equal or better condition than it was the day you bought it. It can be a fun time too just to get inside the house.
The final step is the closing. Sometimes buyers get anxious about this. They just don’t know what to expect. A closing in my state usually takes about 30-45 minutes. Everybody sits at a table and signs a bunch of documents. You’ll have the most to sign since you’re getting a mortgage. It’s a fairly casual deal. Dress however you want since all anybody cares about is that you brought your Driver’s License and are able to sign your name. You are the star that day. Everybody at the table is there because YOU decided to buy a house.
Now the place is yours. Move in and enjoy building equity!