As you scroll through your Facebook timeline, buying your first place can seem like the “I am a grown up” status symbol. Relax…everyone buys real estate at different points in their life, some of you may be renting or living at home because it is more advantageous for you at the moment and that is perfectly fine.
I am not a realtor, so my good friend Nick Bush helped me with this post. Nick is a local realtor in the D.C. Metro area. He also has an awesome podcast I subscribe to, where he shares practical tips on real estate that will help you land your first place and get educated on real estate.
This post would be a great resource to use as a checklist when buying a home.
5 Questions to Ask:
1.How much can I afford?
The largest expense to consider is your monthly mortgage payment, should you choose to take out a mortgage. In your monthly budget, figure out how much money you can spend each month toward a mortgage without going “house poor”. Here is an easy calculator to figure out a mortgage payment estimate.
It’s also important to mention that if you are buying a condo, or even a home, there may be an HOA (Home Owners Association) fee ON TOP of the mortgage, be sure to factor that in to your monthly payment.
The next piece to consider is a down payment. I recommend at least 20% down, because if you put down less you have to pay PMI (Private Mortgage Insurance), which is an insurance on your payments. If you are looking at places that are $300,000, and want to put down 20%, you would need $60k as a down payment.
***You do not have to put down 20%, and PMI is not necessarily a bad thing. Always be sure to figure out your total monthly payment and make sure it works in your budget!
Related post: 4 Tips To Save For A Down Payment While Renting
The last expense to consider is furnishing and fixes you want to do or need to do on the place immediately.
2.What is pre-qualification, pre-approval, and why is important?
Nick says, “Pre-qualification is when a buyer completes a pre-approval application to get pre-approved to buy a property. This is a hard credit check and you will need to fill out an application containing personal information such as income and assets. This pre-approval is important because it lets the buyer, buyer’s agent, and eventually the seller know that the Buyer has been approved for a home loan at the amount of pre-qualification.”
Getting pre-qualified shows the realtor that you mean business and you have access to the amount of money needed to buy real estate.
***Sometimes you may be pre-approved for a lot more than you expected, but keep in mind question one and how much you originally felt you could pay before you start to up your price range. ***
3.What other expenses do I need to plan for?
One expense that you may have to pay in addition to the down payment are closing costs. Closing costs are typically 3% of the sale price, and they can be negotiated either way to be paid by the buyer or seller.
Another additional expense is a home inspection. This is good to have completed before buying real estate because trained professionals walk through the property and inspect it to make sure there won’t be any significant issues when you buy your home.
The inspector helps you know what you may want to keep an eye on and fix (caulking in bathroom, tile cracks, appliance troubles etc.).
Some of the more serious issues (HVAC concerns/age of unit, leaking valves etc.) are good to know about because you can go back to the seller and request that some of these things be fixed.
Your realtor will help you decide what is reasonable to ask and sometimes the seller will go through with fixing it and others they may say no, which will leave you with decisions to make.
4.How does the real estate market work? (Price Changes)
Nick explains, “Generally, as a rule of thumb, the colder months are the slower months in real estate. There is less inventory on the market and that gives buyers the opportunity to find “deals” and negotiate some aspects of the contract because there is a lower chance of being in a multiple offer situation. The market will begin to pick up again in April, where you’ll see more inventory and potentially run into a multiple offer situation.”
“April-September is usually the sellers’ market where multiple offer situations can drive up the overall sales price.”
Basically, when its cold outside you can find a good deal on a place. However, I bought my condo in mid-July, so there are always deals out there and negotiations to be made.
5.How does negotiating work in Real Estate?
“Negotiating happens before the offer is submitted. The buyer's Realtor will call the listing agent (sellers agent) and discuss the potential offer, gather information on what the seller is looking to accomplish. They will ask if they have or are expecting any offers and see if there is any wiggle room in the price or with contingencies. This conversation allows the buyer and the buyer’s agent to put together a strong offer that will be accepted right away.”
This is what I did when I bought my place!
Nick’s general advice for a first time home buyer
“PLAN. Buyers should always plan out their purchase at least 6 months prior to when they want to be closed on a property. This means having an initial conversation with a lender, potentially completing a pre-approval application and figuring what their actual budget will be, what loan type they will qualify for, how much money they need saved for down payment and potential closing costs.”
Got a question for Nick? Be sure to follow him on Facebook.
I planned out my purchase 2 years in advance and started saving up. 6 months before I bought my place I started looking at homes in my price range. I made 3 offers before I got my place for the right price.