First Time Homebuyers – The Road to Homeownership

First Time Homebuyers are Scared

First Time Homebuyers are excited and a bit scared and overwhelmed about the whole buying a home process. Rightfully so. A home is usually one of the biggest assets you will ever purchase! That deserves some thinking time! Let me say this…

You don’t know what you don’t know.

I know what that’s like. Prior to becoming a Realtor, I had no idea about all the ins and outs. I just wanted to buy a home!

There will be lots of people ready to give advice but remember, this is about you and your life. No situation is exactly the same and having an experienced guide with your best interests at heart is key to reaching your goal, on time, within budget and with the least amount of stress.

Having a plan in place is key to achieving your real estate goals. Remember the old says: “If you fail to plan, you are planning to fail.”

Don’t worry, you got this!

4 Steps to Planning for First Time Homebuyers

The plan is pretty simple. It’s up to you to execute so you are in the best possible position and can beat out the unprepared competition in the market.

If you just execute on these 4 steps, you will be in a better position than most seasoned homebuyers (who think they know it all) as well as other first time homebuyers who simply don’t know the process.

#1 – Don’t Fall In Love with a Home Prior to Getting Pre-Approved

It’s the old case of searching for a home prior to know what you are approved for and how much you are comfortable in paying for a mortgage payment. This happens all to often and can be completely avoided if you do things in the proper order.

Once you decide you want to buy a home, DON’T start looking at photos or listings or Open Houses until you talk with a lender.

Your lender will work with you to find the best type of loan for your particular circumstances and financial situation. He’ll ask for some information and run it through his pre-approval program to get you the top dollar they are willing to loan you. Interest Rates and First Time Homebuyer programs can make a difference to your bottom line.

Remember, you don’t have to use the full amount you are approved for.

My best advice is for you to sit down and figure out how much per month you are comfortable in spending for your home. A mortgage payment typically includes:

• Principal Payment
• Interest Payment
• Homeowners Insurance
• Property Taxes

You need to be sure those are included when your lender gives you a monthly payment/total loan amount you qualify for.

Also remember, there will be utilities, maintenance and upkeep associated with homeownership. If you rent, some of these costs are usually covered by a landlord. When you own a home, they are your responsibility.

A good lender will help you figure out what you qualify for with certain types of loans and THEN, what you are comfortable with paying.

Don’t make the mistake of falling in love with a home online BEFORE you talk to a lender. 

That’s like a bride with a $2,000 budget falling in love with a dress online and finding out it’s $8,000. She’s heart broken she can’t buy it and will forever be comparing everything to that – and everything will fall short. 

The best way is to

1) find out what you are approved for

2) figure out what you are comfortable spending and set the budget BEFORE you start looking…

#2 – List Your Needs & Wants in a Home

There are going to be certain things you need in a home that make it work for the way you (and your family) live. These are things that you don’t want to compromise on – truly NEEDS – or why buy a home?

Lots of people confuse Needs with Wants. Sitting down and making a list helps you clarify the difference.

Needs

These are things that would be deal breakers when searching for homes:

• Number of bedrooms necessary
• Number of bathrooms necessary
• Office space or Home school space – if you work from home or home school your children, you will need a dedicated space for this
• Specific School District
• Certain Time/Miles Commute to Work
• Etc…

Once you identify your absolute must-haves, you can move on to your Wants.

Wants

Wants are things that would be nice to have but wouldn’t keep you from buying home if they weren’t there.

After all, as first time homebuyers, this is likely not your forever home. It’s one you will live in and maybe improve up with updates and maintenance.

Take a fence for example. Having a fence is more of a want than a need, if we’re honest. A fence is something that could be added to a home that covers yours needs but is missing the fence “want.”

This is one I am super familiar with. I am a dog person. We have two dogs and the home we bought was perfect for our needs but was missing the fence I wanted so our dogs could run and play. I didn’t let it stop me from missing out on this otherwise perfect home, though.

We bought it, saved up and added the fence – improving the value of our home! See, Need vs Want in action!

Your first home is typically a stepping stone to your forever home. You’ll get to know what is really important to you in your next home, that way.  It also gives you time to build up some equity so you are in a better financial position when you are ready to move up to your forever home!

So, wants could include things like: 

• A fenced yard
• Certain color scheme
• Laminate Floors
• Solid Surface Countertops (Granite, Corian, Quartz, etc…)
• Custom or Built-in Closets
• Certain Style of Appliances
• Open Floor Plan
• Pool or access to a Community Pool
• Outdoor entertaining area (Patio or Deck)
• Barn or Shed
• Landscaping

This could also be a list of “opportunities” to improve the first home you purchase. Adding value to the home just puts more money in your pocket when you do decide to upgrade! (though not all upgrades add value. I’d be happy to discuss this with you!)

Again, know the difference between a “Need” and a “Want” – be really honest with yourself during this process. Eliminate homes from your search that just don’t have the items you/your family need and look at your Want List as “it’s nice to have but I can live without it. Again, it’s an opportunity list to improve and gain equity in your first home.

#3 – Other Factors to Consider

Emotions Run High

It’s easy to get emotionally caught up when looking at homes to buy. Most people love to look at homes. However, be honest with yourself about what you really want to spend and what type of home will work best for you. That way your time will be spend wisely and money won’t be unnecessarily wasted.

Have the Cash You Need when Buying a home

During the home buying process, there are a few places you will need to have some cash at your disposal.

• Earnest Money Deposit – this is part of your offer. The check WILL be cashed and your lender will need to trace the source of the funds. Keep this in mind!
• Inspections – Whatever inspections you choose to have or your lender requires, they will need to be paid at the time of service.
• Appraisal – Most lenders will require the appraisal to be paid for when they order it. Be prepared for that!
• Down payment – If you are not using a 100% loan type, you will need the down payment in cash for closing. Your lender will let you know the exact amount once they issue the final Closing Disclosure. Have access to the money you need to close on your home!

Interest Rates

It’s always a good idea to keep your eye on interest rates. For the last couple of years, we have enjoyed record low interest rates for mortgages.

But, just like they say “What goes up, must come down” the opposite is true with interest rates: “What goes down, must come up.”

Inflation and recession have reared their ugly heads but people still need homes! True, you will pay a higher interest rate than last year but when (NOT “if”) rates go down, just refinance at a lower rate!

#4 – Start Searching for Your 1st Home

Now you know how much you are qualified to spend, how much you want to spend and what your needs are versus your wants. We are ready to start your home search!

As first time homebuyers, it’s a big beautiful world out there, however, you just want your piece of it to work with your lifestyle. We have clarity and can act, now!

Let’s do this together!

GPS Real Estate is You’re Guide to Buying and Selling Homes
in Pendleton, Fishers, Fortville, Geist, Lapel, Noblesville, Anderson, Ingalls, McCordsville, Greenfield and more in Northeast Indianapolis!