What We Wished We Knew Before Buying a House
For Jessica and I, buying our first house was an emotional moment and one of the most “adult” things we had done up until that point in our lives. Though it was a lot of fun looking at different houses and envisioning our dream home, there was also a lot of information to take in as new home buyers. There seemed to be a long list of things to do before we could sign those closing papers. These are some things we learned along the way and knowledge that we wish we knew before buying a house. Maybe they can help you along your own home-buying journey!
1. Estimate a budget first.
Whether you’re buying a house or just trying to develop better financial habits, having and following a budget will be very useful in helping you meet your goals.
There is a lot to consider besides the purchase price of the house you are buying. We didn’t realize there were all these costs to consider:
- The down payment. Paying a higher down payment can reduce your PMI (private mortgage insurance). Ideally, expect to pay 20% of the total cost of the house for your down payment.
- The principal and interest. If you have a good idea of what your interest will be, enter the information into a mortgage calculator to determine your monthly payments for your house.
- Property taxes for your city. Your local government will likely have a property tax they charge based on the appraised value of your home. In our county, taxes are about 2% of our home’s value.
- Home owners insurance. Like your car, you need to have homeowners insurance prior to purchasing your house. Be sure to shop around for good rates to lower this potential cost.
- HOA fees. Your house will most likely be part of a community that has a homeowner’s association that helps manage the neighborhood. We’ve seen costs that range anywhere from tens of dollars to hundreds of dollars a month! There are amenities included with the HOA fee so make sure you determine if the cost is worth it to you.
2. Know your credit score.
The credit score that you see when you check Credit Karma can be different from one the lenders might use when calculating your interest rate. Since we are looking at home buying, the lenders will evaluate your credit history using their criteria to determine your ability to pay for a mortgage. If you have never rented property under your name in the past, this might lead to a lower credit score than expected, as we found out the hard way! To our knowledge, there’s no way for you to see your mortgage credit score until the lender checks your score.
Refer to these additional resources for more information:
3. You can haggle down your house’s price.
For first time home buyers it may seem like the seller has an advantage over you since there is a lot that you don’t know. Keep in mind however, that they want to sell the house! If you happen to be buying from a builder, they might also have end of quarter or end of year quotas that they have to meet, so don’t be afraid to give them your lowest offer.
When the builder first told us about our house, there were already plans for it to be built. We knew they wanted to sell this house by the end of the year to meet their target. With that in mind, we could have started with a much lower initial offer. However, the seller showed us their already-marked down price and we hesitated to ask much lower.
When we submitted a slightly lower offer, the builders accepted it the very next day. They were obviously pretty happy with the price our offer! Looking back, we could have probably started with a lower offer and kept negotiating to come to a price we both agreed on.
At the end of the day, you are the one who will have to live with your purchase. Don’t be afraid to offer a price that is within your budget and make sure you have no regrets about the price you paid for your house!
4. Learn who’s who.
There are many parties working together during the home buying process.
- The first that you might meet with is the seller who you will be buying the house from.
- Unless you pay cash, you will also need to have a lender that help you finance your house by lending you the money that you will periodically pay back (plus interest).
- There will also be a title company that operates as a third party on behalf of both the seller and the buyer. They will be the ones who you transfer the funds to for closing costs and the seller will give them the keys to the house to hold onto until the closing documents have been signed.
It’s a good idea to learn the terminology and who’s who in the home-buying process. The internet will be your best resource here.
5. Have a move-in timeline.
Be sure to have a timeline for when you want to move into your home. If your new home is a primary residence, you must move in and change your primary address by 60 days from closing and live there for at least one year. This is to prevent mortgage fraud situations since house flipping and rental properties are financed differently from primary residences. This is important to keep in mind when considering the time it takes to buy furniture, move in, transfer utilities to your name, and change your address within 60 days.
Buying a home will be one of the biggest decisions that you make so it’s important to be well informed going into it! Don’t be afraid to ask questions and not rush through the process.
What was your home-buying experience? What advice would you give to first-time home buyers? Let us know in the comments below!
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