Home Buying Tips

I recently went through the process of buying my first home about 6 months ago. While that does not make me an expert, I learned a few tips that might help others in the current market. Now that I've had time to reflect, these are some of the most important concepts in my opinion.

1. Consider doing without your own realtor.

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Doing the research yourself can save you 3% of the total price of your new home if you can do without your own realtor. Each realtor involved is paid 3% of the sale price at closing by the seller. The seller passes this cost onto you (the buyer) in the total price of the home. I was able to negotiate the seller down an extra 3% because I didn't have a realtor. 3% of my new home was a savings of about $4800! The catch is that I had to do all of my own research. I checked out school districts, neighborhoods, flood zones, etc. I had to find my own comps and determine the average price per square foot in each neighborhood that I was considering. I had to make every phone call to have the seller's realtor meet me at each house. It was a lot of work, but definitely worth saving $4800.

2. Consider a hybrid loan

The most common loans that I see are 30 year fixed loans. This means that your monthly payment never changes for 30 years. Another option is the adjustable rate loan which means your monthly payment will change yearlybased on current interest rates. Younger home owners on a budget seem to stay away from adjustable rate loans because the monthly rate could potentiallybecome higher than they could afford. Adjustable rate loans start cheaper than fixed loans, but could adjust higher. Risk is involved. I chose the middle ground called a hybrid loan in the form of a 5/1 loan. This means that my loan is fixed for 5 years, and then adjusts every 1 year based on current rates. My rate turned out to be 2.625% for the first 5 years, and after those 5 years, it can increase a maximum of 1% per year. It is also capped at 8.625%. I also asked about the current 30 year fixed rate which was 4.4% if I had chosen that. This means thata 5/1 hybrid loan ischeaper for at least the next 7 years in my case.If I move in the next 10 years, the hybrid loanwill have saved memoney. Can you guess howmany years theaverage person stays in a home? It's approximately 7. I love my new home, but I doubt I will be living in the same place 7 years from now, much less 10. Too much can change in 7 years. I may have octuplets in the next 10 years and need a bigger house. I hope not, but who knows what the future has in store for me. When it comes time to get a home loan, evaluate how long you believe you will keep that home. What are the odds you won't need a bigger home or need to relocate for work in the next 10 years? There are also 7/1 hybrid loans available.

3. Shop for a cheap interest rate

I eventually went with the 2nd of 3 banks that I visited. I wanted a company/loan officerthat was efficient, knowledgeable, and cheap. Make sure to speak with at least 2 banks to compare.

4. Don't buy a home you can't afford

I purchased my first home before marriage, and I was pre-approved for a crazy amount of money. I almost couldn't believe it. I was pre-approved for a home that would cost 79% of my take-home pay. That would leave 21% of mysalary to survive each month. SCARY! I ended up purchasing a home that was approximately 38% of my take-home pay each month whichI still consider on the high end if I hadn't gotten married. Dual income now makes the payments even easier.

5. Consider buying the cheapest home in the neighborhood

I purchased what is probably the cheapest and smallest home in my neighborhood. By doing so, I was able to purchase a home inthe nicestneighborhood I could afford. Another benefit is that every house in the neighborhood is selling for more money. When I eventually put my home on the market, I will offer comps of other houses in the neighborhood - all of which are more expensive than mine. Therefore my home has a better chance of appreciating in value. The most expensive house in the neighborhood has no comphomes in the neighborhood to demonstrate it's worth and likely will not appreciate as well as the cheaper homes.

6. Don't get emotionally attached to a home before it's yours

Getting emotional in the home buying business can cost you a lot of money. The first home I wanted to purchase was listed at $170k, only 4 years old, and was about 1900 square feet. It was beautiful, but overpriced. I put in an offer for $151k. It was a slightly lowball offer, butits a buyer's marketand the house was overpriced. The seller countered at $169k so I walked away. Had I been emotionally attached to the home I might have paid $169k for my dream home. That house is still on the market 6 months later. I ended up paying $156k for a home that is 8 years old with 2200 square feet. It wasoriginally priced at $180k. My home is cheaper, bigger, and actually nicer than the first home I attempted to purchase. Walk away if you don't get the right price. Don't settle.

7. Don't worry about insulting the seller with a low offer

The market is VERY much a buyer's market. Offer less thana fair price and see how cheap you can get your new home. If the seller does become insulted, walk away. There are PLENTY of great homes on the market. You will find what is meant to be.

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Posted in Landscaping Post Date 07/26/2019


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