Buying Your First Home

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Ah! The American dream of owning your own home. It’s exciting, stressful, and rewarding all at the same time. At the age of 25, I just bought my first home with my boyfriend and we are so excited to finally have a place of our own. After renting a 700 sq ft- 3rd floor apartment for two and a half years, we decided to put our money for renting a bigger apartment towards our first home. We felt it was a smarter decision really since the price of just renting a 2/2 apartment is the same as mortgage, and we are at least investing in ourselves and our future.

However, when buying your first home, you don’t realize the how long and stressful the process is. Not to mention all of the unforeseen expenses that come with it! I decided I wanted to write a blog about our experience and hopefully give some helpful tips for other first time home buyers.

First step to buying a house, is getting a pre-approved. BUT I want to tell you my first step. Do your research on what is involved in buying a home. There are a lot of upfront expenses that you don’t take accounted for. When you’re young like us, you think you just need a 3.5% down payment for an FHA loan and you’re golden. WRONG! So, my first step is budgeting your money and making sure you have enough saved and then some before you even start looking at houses (to not kill your dream later on!).

What are these other costs you ask? Well, I’ll be happy to tell you since no one told us when we went to buy our house. On top of a down payment for the house, you need to pay for an inspection, appraisal, closing costs, and a homeowners premium which all will be explained more later.

So after the first step of doing your research and making sure you have enough money to buy a home, find a mortgage broker to get pre-approved. I wouldn’t find just any mortgage broker. Ask your friends and family who they have used in the past. You are going to be working with this person for the next few months, so find someone trustworthy, experienced, and has a good attitude! The first mortgage broker I sent my information to, gave me the highest amount we were pre-approved for. However, they failed to go over what I am looking to pay on monthly basis (mortgage). So for a month, I was looking at houses WAY over my budget! Luckily, the realtor I was working with had us get our stuff reviewed by their mortgage broker who they refer, who did a way better job of explaining what we were getting ourselves into. He took what we wanted to spend on monthly basis, and gave us the amount we should be looking for. It was about a $60k difference! You may be pre-approved for a lot, but you want to make sure you can actually pay your mortgage.

Real quick: what is included in your mortgage. If you have escrowed (combined all expenses) into your mortage, you will be paying for your mortgage, mortgage insurance (FHA Loan), property taxes, homeowners insurance, and interest. If there is any HOA or dues for the community you purchase in, that will be a separate from your mortgage.

Once you have a better understanding of your estimated mortgage, it’s time to find your dream home, or dream starter home! Work with a relaxed realtor who wants to work for you. I’ve met many realtors who are just so anxious to sell you a home that they don’t take the time to care about what you want. My realtor was fantastic and patient with us! Searching for a home might be a whole other blog, but all I can say now is have patience.

Once you find a home you LOVE (I capitalize LOVE because this is a big investment, so make sure you LOVE it!), you need to put down a deposit to hold the house, or put it “under contract”. Deposit amounts will be given to you by your realtor and they vary on the price of the house. There are generally two deposits, or the rest of the down payment is owed at closing. The entire buying process takes about 45 days from the time your offer on the house is accepted to your closing date- the day the house is yours.

After the deposit has been made, you need to set up an inspection which can be around $500+. An inspection includes an overall inspection of the house, your 4 point inspection, wind mitigation, and termite report. The inspector will give you a general idea of the condition of the house so you know what to look for in the future expenses wise- such as a new roof, or AC unit. They test everything in the house- water, appliances, electricity, roof, windows, etc.

Shortly after the inspection, your mortgage broker will work on getting the house appraised which will costs you another $500+. The appraisal will tell you how much your house is worth. Once the appraisal comes back more than what you are taking a loan for, you can begin looking at home owners insurance.

Your mortgage broker can recommend some companies for you, or you can research on your own. The house is your new baby, and ANYTHING can happen, so as expensive as insurance can be-make sure you’re covered! Living in South Florida, we have to have hurricane coverage, but flood coverage is separate. As tropical as it can be here, we also have what feels like monsoon season where it just rains every single day. When you select a homeowners insurer, you have to pay a premium which is generally the amount of a full year of insurance. We definitely were not expecting this in our budget plan! This amount is usually due before closing, and most insurance companies will offer a payment plan for the premium.

Now it’s time for closing costs! Your closing costs are generally 2-5% of the purchase price. Closing costs can be negotiated with the seller to where they pay for half of the costs, or more. Remember the realtor works for you, so it’s best to be completely honest with them as far as finances go. We told our mortgage broker and realtor that we did not have money for closing costs, so we would have to find a seller willing to negotiate with us. Luckily, when we finally agreed on a house, we ended up negotiating with the seller to pay all of the closings costs upfront and raise the listing price so that we pay it back with our mortgage. To keep your mortgage low though, I would highly suggest having the money for closing costs!

Now you have closed on your house, the keys are in your hands, and you are officially a homeowner. Whatever you just spent to get the house, expect to pay more! If there are any renovations, appliances needed, furniture, decoration- it all adds up!

We were very excited to jump on the homeowner train fast, but knowing the process and what is REALLY involved in buying a home would have helped us out more. While I had a few home buying lessons throughout the blog, here are some tips I would give to others:

  1. BE PATIENT! Especially if you are buying a home with a partner. While you’re going to be disappointed and disagree a lot, it’s best to find a home you both love together. (P.S. I wasn’t kidding about the disappointment- you get sad a lot!).
  2. Save, save, and save! Owning a home is no joke. Things break, and they are expensive! Always be prepared for the worst, especially if you are looking at older homes.
  3. Budget your bills correctly, and try not to go over budget. Many people think that they can afford more, but that’s how they get into debt trouble! The right house will come along, but you have to -again- be patient.
  4. Don’t be afraid to say no. It’s your house and your money! Don’t settle for anything less than you want to. The house we purchased was the one, but there was a big issue with the AC unit. In the span of a week, the AC broke twice, and it was old. We had a family friend come check out the unit, and they said to expect a whole new unit with ducts in the next year or two. The seller refused to put in a new AC unit because their AC guy said there was nothing wrong with it. This was a big deal breaker for us because the price of a new AC unit was going to costs us around $4000! That’s a lot of ca-ching for a young couple. The realtor bought us, from his own pocket, a one year warranty on the AC if anything else breaks in the unit to make sure we had some time to save up. So, don’t be afraid to voice your concerns because there is always something that can be done- or it’s just not worth it.

I hope that this blog helps someone buying their first home! I’d love to hear from others who have tips or experiences to share when they purchased their first home.

-B.

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