In my 20s, the idea of buying a home or apartment was similar to how I felt about going to college when I was a tween – I knew (or hoped, anyway) that it would happen one day but rarely thought about it or how I’d plan for it. Now that I’m 30, though, more friends and acquaintances are taking steps toward becoming homeowners – and some have actually achieved it. Impressive, right? But also intimidating as hell.
In an effort to get a little bit of education about what goes into the process of buying a home, I talked to Seattle-based broker Matt Parker, author of The Real Estate Agent Talks and Real Estate Smart: The New Home Buying Guide. I also grilled my friend Sarah who, at age 29, bit the bullet and bought an apartment in Brooklyn. Like me, she was a real estate newbie, so she learned a lot during the process.
Below, seven things first-time home buyers should know before taking the plunge.
Run Your Budget
Coming up with a home-buying budget isn’t the same as running one for renting. It should factor in what it’s going to cost to actually maintain the home – not just what you can afford to pay up front. “Create a budget and profit and loss sheet that shows the money you make and spend every month,” says Parker. “A pro forma budget for buying a home should include the payment you might have to put down up front, the furniture you’ll buy to fill the place, the utility costs you’ll take on, and savings for the inevitable improvements your home will need – an unexpectedly broken washer and drier, for example.”
It’ll save you a lot of time and headaches later on if you take the time to get pre-approved with a bank before you’re ready to actually buy. “Get pre-approved with a lender,” says Parker. “This first step will probably prompt lots of other questions about the process, and you might be motivated to read books on home ownership and research loan amortization – never a bad idea.”
Know What Your Nonnegotiables Are
When you’re really serious about buying, make sure you’ve created a list of features that any property should absolutely have. This is different than your wish list, which could be bonus features you’d like to have but can live without. “I would have saved time and energy by figuring out the few things I absolutely needed in a home before looking at anything,” says Sarah. “These are different when you buy than when you rent: Over time, you can upgrade appliances or build a closet for more storage, but you can’t make a busy street quieter or hope the cats-only building you love will let you get a dog one day.”
How long do you see yourself living in this house or apartment? Factor that into your buying decision. “We spend ten years, on average, in homes we buy,” says Parker. “Discern whether or not you think you’ll be in this location for about five years. If you see yourself there for that long, think about what your lifestyle will involve at that point.” In other words: Will you want to get a pet? Have a kid? Work from home? All these things will make an impact on how many rooms and what kind of features you want in a place.
Don’t waste your time checking out places if they’re not in your concrete price range.”Do your homework and don’t tease yourself,” says Sarah. “There’s no benefit to looking at houses that are out of your price range. There are always bigger, newer places, and people with more money to buy them, so do your soul searching, evaluate your finances, and then measure each place with your personal rubric.”
Prep Your Paperwork
It may not be fun, but you’ll be glad you got these things in order in advance so you can be ready to make an offer. Parker suggests you have the following ready to go: Income documentation, tax returns, and asset documentation (bank statements). “Don’t buy anything expensive while you’re trying to buy a home, since you’ll need two to three percent of the purchase price for an earnest money check,” he says. “Also, be prepared to have your credit run and referrals called.”
Parker advises people see at least five to 30 units before making an offer on one. “View as many homes or apartments as possible,” he says. “I suggest you use Redfin, which is verified to be the most accurate real estate website.” Also, the best time to shop for a place is when you’re not in a rush. “Young people tend to shop for homes in less time than they spend when they’re buying a car,” says Parker. “Slow down to speed up – there is always another house! You should spend ten times the amount of time looking for a home than you did picking your last car, and you’ll be happy you did.”
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