When we bought our first (and current) house, our whole process went by very quickly and smoothly. Our mortgage company and real estate agent both told us that our mortgage was the quickest process they've ever done. We got pre-approved and bought a house less than one month from start to finish.
It took around 2 weeks for us to find the perfect house, and we probably looked at over 20 houses in person. We also looked at hundreds online so the 20 that we looked at we thought were for sure buys. Our agent probably HATED us. Luckily she was a family friend so I hope she got over her hatred quickly 🙂
We are sort of in the home buying process again as you all know. We keep going back and forth with what type of house we want, where we want it located, and how much we want to spend.
Our current house is fine for now. There is definitely nothing wrong with it, I guess we just want something a little nicer that also has a little more room. So we could: a) stay in our current house and save a lot of money; or b) buy a house within the next year and finance the majority of it (probably with a 25% down payment).
If we did stay in our house for longer, we would spend some money on making it perfect. I definitely would want to change some things in our bathroom (such as adding a nice glass shower door), make our front and backyards perfect (possibly add a garden) and finish decorating everything to the way we want it. This is a whole ‘nother post in itself!
Anyways, when we bought our current house, we followed all of the steps below, except for the fact that we didn't realize that the total monthly cost would be that much higher than what the mortgage company quoted us. That is something that we were naive about. Learn from our mistake!
1. Get pre-approved for a mortgage!
This is definitely one of the first steps you should take. Looking at houses without getting pre-approved can be disastrous because you might just be wasting your time. You might not get approved, get approved for less than you think, etc.
Wouldn't it really stink if you spent a ton of time looking at houses that turned out to be way more than what you can be pre-approved for? That can be a major letdown.
2. Buy less than what you are approved for.
I think we were approved for around $200,000. We were 20 years old and this seemed like a ton since we made hardly any money then. We were shocked and we looked at one house that was around this price range, but then we realized that this was a bad idea as we wanted to be more comfortable with our bills.
Also, something that our real estate agent told us, is to not show the seller how much you are pre-approved for. We showed our real estate agent our real pre-approval amount of course, and our agent said that when this happens, it can not be good. She said that if some sellers can see what we can actually “afford,” that they know how flexible that you can be with your pricing and negotiating. You can get your mortgage lender to lower the amount on the piece of paper and this is what we did. We asked our lender to say that our pre-approved amount was $150,000 (everyone, please keep in mind that I live in the Midwest and housing is cheaper here).
3. Buy a house that's a good size for you.
Also think about the future you are planning when you think about the size of the house you might buy. Remember my post on how we Bought Too Much House? Keep that in mind! While before our house seemed way too big for us, we now want something bigger. Eventually of course we would want kids, but it's mainly that we want a bigger yard.
Do you plan on living in this house for awhile, or just a short amount of time such as 5 years? Do you want a house and neighborhood/city that is good for kids to grow up in? There are many questions to ask yourself.
4. Get a realtor!
This is something that I definitely recommend. Our realtor saved us a lot of money and was a great negotiator. We got the seller to pay all closing costs (which were around $5,000). And she also got them to fix a lot of little things around the house. Realtors do a lot of work and are skilled in buying/selling houses. They know where to begin, what to look for and have tons of tips.
5. Make sure you look around and don't settle.
The market is great right now for people who are looking. There are a lot of houses out there and most have a great price (all of course depending on your city! Some cities are in a housing bubble). You will be living in this house most likely for a long amount of time, so you don't want to regret your decision.
6. Hire an inspector.
This is something that is definitely needed as well. An inspector will be able to find things that might sway you from NOT buying the house. If you're buying a house, then you can most likely shell out another $300 for an inspection. It is a good investment.
7. Figure out the WHOLE cost.
Not just want the mortgage would be. Figure out if there will be any PMI, what the homeowners insurance will be, and property taxes. This all can add up quickly, and it added around $300 to our mortgage.
8. Save!
Now that you know you want a house, try and save as much as you can before you move into your new home. Your new costs will most likely be higher than what you think, and any extra savings will be extremely helpful.
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What tips do you have for a potential homebuyer?
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Great tips, Michelle! Hiring an inspector is big. Even with an inspector, things are going to be missed and overlooked (trust me, I found this out the hard way…), but if you don't get an inspection God knows what you are going to find out later on…I'd rather pay a few hundred bucks for a thorough inspection than to trust that there are no major issues.
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I agree! If we wouldn't have hired an inspector, then we would have never known that we had a radon problem in the basement. We then made the seller pay for the machine to eliminate and monitor the levels.
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I fell victim to buying a house too big for me. By that I mean too expensive. I let my realtor show me a house that was more expensive (and nicer) than the price range I was looking for. I fell for it and started looking at others. Luckily for me I had a roommate paying rent which allowed me to handle the increased purchase price. If I didn't though, I don't know how I would have survived. I still look back it though and think how much more I could have saved if I had just bought a less expensive house.
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I agree! Luckily my sister pays rent and that definitely helps out.
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All of your points are great. Especially number 7. If you put down a large down payment, you can forgo the PMI all together. It's worth it to check your principle throughout the life of the loan because when you have enough equity, you can request that the PMI be discontinued (but I am sure you know that).
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Thanks! And yes we really regret not putting down a large enough down payment on our current house.
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Good tips Michelle! Getting pre-approved is vital and it makes everyone know you're more serious that you're wanting to buy. I would add to be ready to spend once you move in. We had to buy things like new curtains/blinds and those were not cheap. I have heard that many can overlook things like that and they can be pretty pricey.
Thanks John! And yes I agree. So many people overlook curtains, a porch (such as for a new house), and so on. They all add up quickly.
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Don't forget you're buying a neighborhood, too. If you're getting serious about making an offer, introduce yourself to the neighbors. Get the lowdown on what it's like to live there from someone who's unbiased!
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I agree! Great tip.
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Great tips! I'm not in the market for a house yet, but in three to four years I'll probably be buying. The biggest issue I have when I look at houses (yes I do that even though I'm not in the market) is estimating the total carrying costs of the house, not just the mortgage payment.
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Haha I look at houses ALL THE TIME, so I know how you feel and what you mean.
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Don’t forget that in most instances, using a realtor is free for the buyer, as the commission is paid by the seller & split between the listing agent & buyers agent.
Also, drive by your potential home multiple times – day, evening, early morning… That alway you have a better chance of noticing any traffic problems or other issues.
Don’t be afraid to ask the seller for utility bills… Be sure to get all inspections you need… That could include not only a general home inspection, but also termite, septic , etc.
These are all great tips! Thanks Sam 🙂
One more thing! If you are buying a NEW home, from the ground up kind of home, be sure to save for taxes. The county, city, whatever entity that taxes, will tax the property on raw land for the FULL YEAR, even if a home was built on it. Then the following year, they will retro-activate the taxes on the home.
For example, I built a home and moved in during April in 2011. My county taxed me on raw land for all of 2011. Then I went to pay taxes for 2012, I was charged for all of 2012 for developed land w/ primary home PLUS the difference in taxes from raw land to developed land for 2011.
Some people lost their homes during this time because they just could not pay the taxes.
I will admit, it may not be so bad in low property tax states, but in Texas, there are HIGH property taxes and it can hurt.
Ugh that is something that people definitely need to keep in mind. Thanks Jennifer!
Great tips! I think you we're so smart in keeping your preapproved amount a secret from the sellers spot on.
We bought our house last year and it is a fun process, but totally scary too!
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Thanks!
I think these are all great tips…especially "don't settle." There are usually new houses coming on the market all the time if you don't find something you like at first.
I agree! We definitely don't want to settle the next time around.
I think looking at the whole cost is very important, but often gets overlooked. If you can afford the mortgage, many people think that's all there is too it. Coming from an apartment or a situation with roomates, the utility bills will be higher, and you have all the repairs and yard work to think about as well. Too bad there isn't an item on the closing costs that could estimate this!
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Yes I agree! Many people do not realize this.
I'm not looking to buy a house right now, but I've been looking to see the inventory and prices just for fun. You number 2 about lowering your pre-approved amount is something I never knew you could do. I'm going to keep all these tips in mind~ Thank you.
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Yup it's a great tip that my realtor told me about, and it worked!
This is a very good article. I have bought three houses in my life and never once got pre-approved. I knew there would be a chance that we would get approved for less, but did not think too much about it. I think the reason for this is that if I knew I could get pre-approved for $400k, then I would want to spend $400k or start looking at houses closer to that range. Since the last time I have purchased I think I have become a little more disciplined not to do that now. One thing I would add for consideration is whether there is an HOA. It may also add more costs that you were not expecting. I would highly suggest that you find a place that has an HOA if you are close to others. I am in a situation where I wished I took my parents advice about avoiding an HOA. We have a neighbor who rents his house out to people that do not take care of anything and he appears to not care either. Just a mess I wish we did not have to deal with.
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Thanks Alan! We don't have an HOA now, but thankfully our neighbors are all awesome.
I think it's really important to take your time and make sure you're making the right decision with something like this.
A couple friends just decided to look at buying a place then decided to put in an offer the next day on the first place they saw without even using a Realtor. I really wanted to say "are you crazy?" but I'm not sure it was my place…
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Yes I agree Dave. No need to rush it. And ugh that is crazy about your friends!
Great tips! I couldn't agree more about getting a realtor – they help out a ton with all the whole process, including dealing with the stacks of paperwork at the end. Also, definitely figure out whether or not you want to pay a HOA. There are pros and cons to it but it's good to calculate into your monthly costs going into the home buying process.
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Yes realtors are VERY helpful.
These are great tips Michelle! I would add try to find a situation where the seller is extremely motivated to sell (like maybe a pending foreclosure, divorce situation, or an estate that is trying to close). Some of these are more challenging to find than others but we bought our current house for 20k less than it was originally listed because the seller deeply discounted the asking price after months on the market because she had to get out to settle her divorce. We've also purchased two of our rental properties that were about to be or already in foreclosure.
P.S. I also want a lake house!
Thanks! We bought our house from someone who was getting an divorce and she was DESPERATE to sell. She had already found a new husband and wanted to sell quickly. It was nice and we were able to add in over $10,000 worth of stuff for free.
For us it would be a problem to sell right now because we are so upside down in our mortgage. So we will stay put for a while (and that's why we are always working on some projects here – to make this place suitable for our needs 🙂 But I think, the house market really depends on where you live. For example, in our state the inventory is pretty low at the moment because everyone is upside down like us, and that's why nobody wants to sell. The majority of what's on sale are short sales, HUD homes and foreclosures that are often projects too because of their condition. So a good inspector is a must (you know, the one who actually has a ladder long enough to climb on your roof 🙂
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Yes a good inspector is DEFINITELY a must 🙂
Great tips! I think something everyone should keep in mind is that no matter how much you love a certain house, you will always be able to find another comparable one. Staying detached as much as possible will allow you to make wiser decisions and walk away from a bad deal if you need to.
Thanks Nick! I agree with you.
Great tips Michelle! These are all so important! We paid waaaaaay too much for our first house and I wish we would have spent lower than what we were actually pre-approved for. Oh well, you live and you learn, right?
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Yes you live and learn 🙂
Our inspector was a rock star, and found EVERYTHING. It was kind of scary reading thr report at first, but was able to have a lot of negotiating power to get things fixed. And pre-approval should be REQUIRED before you go out and look. No sense in looking at places you can't get!
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Yeah our inspector found a ton of small things that we got fixed, thank god!
It`ll probably be a couple of years until we`ve saved up enough for a downpayment (it`s a 15% minimum in Norway), but I still like reading about buying houses and such, need to have a goal for my savings! I like that tip about not telling the pre-approved amount! I`ll remember that one!
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Thanks 🙂
Al of these tips are great, I would have to say that if you are buying a house you need to allocate a buffer of about 25% above what the realtor and lender will quote you for a monthly payment. Also people save up enough for a 20% downpayment, I say save up 30% so the extra 10 can go towards a house fund for repairs. I also have to suggest that you need to be well prepared for a shock as far as utilitiy costs in the new house. For an apartment you will pay less than a 100 dollars, for a house you will pay over 250 a month.
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Thanks! 25% sounds like a good number for the buffer.
We want to save at least 30 to 35% for our down payment and repairs/furniture for our next house.
I feel like #2 should be BOLDED AND CAPITALIZED. Its so important not to spend what you're approved for. Borrowing that amount will leave you strapped for cash for the next 25 years.
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I agree! Thanks for stopping by.
I'm so glad that you mention to consider the whole cost. There is so much more than goes into paying for a home than just the mortgage payment, but so many of us forget about that. Good luck on your big decision!
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Yes I agree. And thanks Shannon!
Definitely that last one– even if you have a key ready house and you have that insurance that's supposed to cover repairs right after you buy a house, something is going to happen. For us it was a pipe that was too far away from the house to be covered by the insurance but too close to the house to be covered by the city. Everyone I know who has bought a house has had unexpected expenses.
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Yes there are ALWAYS unexpected expenses. Thanks for your comment!
These are great tips! I'll have to direct my daughter to this post as they are in the process of looking for a house to purchase!
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Thanks Sharon!
My advice would be to NOT find out how much you COULD be approved for. When I got a pre-approval for my house, I first figured out how much house my husband and I could comfortably afford. I then asked for a pre-approval for that amount, because I didn't want to be tempted by more expensive homes that would take us outside our comfort range. Our payments, including taxes and insurance, are currently about $60 below the original maximum, and our income has increased by about 50% since we first bought the house in 2009, so now it's even more affordable for us!
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True. If you know how much you can be approved for, then many are tempted to spend more.
Hiring an inspector is important, just make sure you listen to your gut. After our report I wanted to back out. But I think the agent wanted to be done with us.
Also, good point about buying less than you're approved for. Just because the bank says you can afford something doesn't mean you actually can.
You are right Justin!
Two added points — first on the inspector. I'd recommend an independent inspector, eg, one NOT recommended by your realtor. Remember that your realtor has an inherent conflict of interest, even though he represents YOU. To be paid he needs the sale to go through. If he recommends an inspector that identifies serious flaw with the house, (a) the deal might not fall through and (b) that realtor isn't going to use that inspector again. So save the hassle and get recommendations for an inspector not tied to your realtor. SECOND — I would add a first step to the entire process. Namely, prospective homeowners should first determine whether buying is the right decision. For some, it clearly is. Bust as we saw in the housing crisis, far too many people bought houses who probably shouldn't have.
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Yes you are very right. Hiring your own inspector is important.
Definitely shop around for your mortgage to get the best rate possible. Also, really evaluate your current debt load and see if you can bring it down some before you take on a mortgage. Concerning savings, people really need to keep money aside for ongoing home repairs & maintainance as this is what a lot of people don't prepare for…Murphy will strike at some point lol.
Great tips!
I like the idea of meeting the neighbors, and driving around the neighborhood at different times of day to see what goes on. I found out I wanted to live in other areas just by doing those simple things. Of course I found the house before I settled on the place to live, so it was a little different for me. Living in an inexpensive mobile home makes things easier I think, but if I ever upgrade I will definitely follow your tips.
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Yes meeting neighbors can be important. We didn't do that, but we did drive around the neighborhood.
Of course, you know that we are right in the middle of the process, and your tips are solid.
I would recommend adding "don't fall head over heels in love with a house, before you sell yours!"
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Great tip!
Great tips Michelle!
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Excellent tips Michelle! We thought our house was big enough for us, but as we are finding out now it may be a little bit small if we have another child. I mean we don't want everyone having to live on top of each other.
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Michelle, I agree on hiring an inspector. You will get at least an assurance the quality of home you are buying if it checked and inspected by a competent house inspector.
I will add also to study the location of your house. Is your dream home erected along or within the fault zone or fault line? I believe it is wise decision to know if there is a history of land (soil & rock) displacement in the area where your dream house is located.
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Haha, I used to be one of those–a cashier with no money to buy anything! Then again, cashiers don't really advise people to buy things, just help them do it.
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Don't forget you're buying into an area — keep up with local news to see if any big construction projects are headed your way or make sure that the airport is not too close (planes overhead) or a sewage plant or garbage dump. In my old neighborhood, some businesses are run out of garages and there's the one house that's bought and sold every year because the owners never checked to see what was next door! I've bought curtains and furnishings from the succession of owners over the years and they had good stuff for sale…
Good tips. Our taxes add $600 a month to our mortgage and have to be paid monthly with our mortgage. This whole paying taxes with the mortgage was new to me because what I was used to (parents live in Maine and I grew up there) was a yearly tax bill. This definitely changed the way we thought about taxes and buying a home.
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Thank you for this article, I would like to add a small tip while buying a home which is asking about future plans. Do research about the area that you'll buy your property in or ask your agent because real-estate agents are aware of any future plans that will happen in any area they’re selling property in because they use it as an advantage for the villa or apartment to increase its price. Future plans may be a hospital, bus station, or even a supermarket that is planning to open.
Thank you,
Marc A. Donald http://smart-realestate.com
I am glad that buying a home went quickly and smoothly for you, but most are not so lucky. Buying a home can be a long process. The best thing to do is to sit down with a real estate agent and map out what you can afford, what you are looking for and where you want to look. This is a good way to get the ball rolling. You also need to have an open mind when entering the home buying process.
Great post! These are excellent things to keep in mind and can help save you time, money, and stress later on if followed. Thanks for sharing!