First Time Home Buyer’s Guide To Buying A House
This post is a 4,000+ word beast and that’s because it needed to be. So grab your popcorn, a cold beverage, and absorb the following content as best you can. We are diving into some great information for first time home buyers, including tips from some of the internet's best Real Estate professionals. It took almost a month to create, and is for the benefit of you, the reader. If you find this guide helpful, please consider sharing it socially with the buttons on this page.
Buying a home is one of the largest financial transactions in one’s life. If it’s your first time buying a house there’s likely a chance you’re intimidated by the process and amount of money involved. Raleigh Realty is here to help you every step of the way whether you’re buying a home here in the Raleigh area or anywhere in the world. This first time home buyer’s guide is sure to be a helpful resource. Below, you will see a visual guide, use it like a map guiding you from the beginning to the end and feel free to make it your own or share it with others if you find it helpful.
In this article you will learn:
- How to buy a home
- Top tips from some great mortgage lenders, specifically for first time buyers
- Top tips from some of the best Realtors, for buyers
- How to develop a plan, execute it, and ultimately walk away with a highly successful first real estate transaction!
- Home buying mistakes you must avoid!
- Do lowball offers work?
- How to buy a home in a sellers' market
- What happens after an offer is accepted
Let’s talk about how First Time Home Buyers can make their first purchase a great one:
10 Critical Steps in Buying A Home for the First Time!
The purpose of this article is to help first time home buyers as they begin to approach the real estate market. By the end of this article you will be an informed home buyer and your understanding of how to approach a real estate transaction will save you time, money, and headaches.
This particular topic has been written about by many before me, and I’ve had the benefit of pulling together some of the top resources online to pull it off.
We begin the home buying journey at step #1
Educate yourself on the home buying process
The most important step in the home buying process, especially for first time buyers, is educating yourself on both the real estate market and home buying process. You’re going to want to understand everything about a real estate transaction from neighborhoods and schools, to the words real estate agents use, all the way to identifying the right type of mortgage to fit your needs.
It’s important to understand that there is more to a real estate transaction than jumping into a real estate search and choosing the first Realtor that contacts you. In fact this is a dangerous way to go about your home buying process, especially if it’s your first time.
Before you start looking for homes, start looking for the RIGHT TEAM to help you. It is not as much fun researching Mortgage Lenders and Real Estate Agents as it is to search for homes on the web, I understand that. It’s also not fun losing thousands of dollars because you chose the wrong team to represent you!
If you’re anything like me you would rather jump in the pool vs. check to see if it’s cold first. If this sounds like you, my suggestion is to read this article by a top Realtor in the Metrowest area of MA, Bill Gassett, entitled ‘Financial Mistakes of First Time Home Buyers.’ Real estate is a little bit different than jumping in the pool, you can’t just buy a home and learn from your mistakes as you go because it will cost you tens of thousands of dollars. That’s why it’s extremely important to educate yourself on how to buy your first home, understanding the process form beginning to close will save you a lot of time, money, and headaches.
One of my favorite articles to share with first time home buyers is written by a top Realtor in Colorado Springs named Andrew Fortune. Andrew’s article is entitled ‘First Time Home Buyer Tips: How To Buy Your First House’ and the reasons I find it so helpful is
1. The images are great for visual learners .
2. It includes guest posts and advice from top Realtors like Kyle Hiscock , Lynn Pineda, Joe Manausa and Debbie Drummond.
3. The content is jam packed with tips for first time home buyers!
These are great resources to begin your education. Now it’s time to Find Money.
When Buying a Home, Shop For The Best Mortgage
In this section you will find tips from both mortgage lenders and Realtors who will help you understand certain terms, processes, and give you the best tips when shopping for money. This section is a long one. You will be borrowing hundreds of thousands of dollars, it’s important for us to be detailed.
If you're wondering what you can afford and want a quick estimate on what your cost per month will be here's a mortgage calculator you can use. In order to provide the best possible information for first time buyers we needed to interview the experts, here's what transpired:
We interviewed Daniel Walker, a local Raleigh area Mortgage Loan Officer with DNJ Gateway Mortgage to help first time home buyers. We asked Danny to share his top 3 tips, specifically for first time home buyers. Here is what Danny said:
#1- Compare your loan options.
There are many great programs out there for first time homebuyers and each has benefits, restrictions, and drawbacks. A mortgage professional will outline and compare these with conventional programs to see which meets your needs best.
#2- Don't fear the PMI.
Many homebuyers make the mistake of waiting until they can put 20% down to begin their home search. This usually means spending more money on rent instead of building equity in your own home. Private Mortgage Insurance (PMI) allows you to place a smaller down payment in exchange for a small monthly premium until you get to the 20% loan to value (typically 6-8 years). It's actually cheaper than most people think especially compared to waiting years to save enough.
#3- Be careful with the fixer upper.
Many times the first time home buyer wants to find a house at a lower price point that they can progressively "fix up." Often times without the experience or funds for needed repairs, the bills add up quickly. Throughout the loan process these transactions may also hit roadblocks with inspections and appraisals that do not meet acceptable standards.
This is great advice for all first time home buyers who are shopping around for mortgages. A lot of people are still under the impression they ‘can’t’ afford a home because they don’t have 20% to put a down payment. Those days are long gone. When we begin working with clients who haven’t spoken to a lender yet, they typically ask ‘What do I need to know about mortgages?’ so we wrote an article to help answer that question.
Are you familiar with the differences between a mortgage pre-qualification and a pre-approval letter? A mortgage pre-qualification is an informal process that gives you an estimated amount you can afford, while pre-approval letter means the lender has given your file a thorough examination, ran your credit score, checked your W-2 income data, bank statements, etc. A pre-approval letter is far more powerful when you go to make an offer on a home.
There are a lot of great first time home buyer programs for local NC folks as well!
Work With a Top Local Realtor®
It’s important to understand that not all Realtors® are created equal. If over 66% of people are selecting the first Realtor® they interview with than 2 out of every 3 people didn’t have a chance to compare Realtors®. You want to hire a TOP LOCAL REALTOR®.
So our first piece of advice is interview more than one Realtor®, and if you interview us first we will encourage you to interview others as well!
In Raleigh, North Carolina, there are thousands and thousands of Real Estate Agents. Many of them are great, and you’ll know which ones are when you interview more than one. Some Realtors® want to sell you a house, others want to sell you a lifestyle that meets your needs and will give you a great financial start on your first home purchase. These two types of people are very different, so hire the one that makes the most sense for you.
The intelligent buyers and sellers are going to interview several different agents, and are going to look at a variety of factors before choosing the one they like best. It’s important to ask the right questions if you’re a buyer or seller. Do you want a tech savvy Realtor®? Or a Realtor who is going to net you the most money for your home utilizing today’s top strategies?
If you’re selling your home and you want a Realtor® who understands technology than you wouldn’t hire a Realtor® who doesn’t have a website, right? A lot of Realtors® will tell you that they post your listing on every major website as if it’s something special. The MLS auto syndicates listings to every website that belongs to that market.
What you want is a Realtor® who is tech savvy and understands how the web works. If 95% of people are finding homes online it’s important your home receive as many eyeballs as possible. The other day we had 1,500 social media shares, and if each person who is sharing has 2,000 people in their network that’s 3 million people who see your listing.
Reverse prospecting is one of, if not the BEST way to sell a real estate listing. If your Realtor® doesn’t know what reverse prospecting is, RUN. I mean that. Don’t trust your hard earned equity to someone who may not know what they’re doing.
If you’re selling your home you need a great marketer and a great sales person. That means when you meet to interview Realtors® you should be asking questions about their marketing strategies and their sales strategies. How will you market my home differently from all the other Realtors®? Is a great question to ask for those of you selling your home.
Once you’ve hired the right Realtor® for the job, it’s time to develop a plan.
Buying a Home? Create a Strategy!
You have formed your team. Now it’s time to develop your plan with all members on the same page.
Set aside a list of priorities for your home and rank them from most important to least important. It’s important that you understand you’re not going to find the perfect home. You’ll need to be ready to make some sacrifices, and having a clear list of your priorities will help you make a great decision.
Is location important to you, and how does that location relate to your work commute? What type of economic factors could potentially play a role in home appreciation or depreciation? There is a ton of different factors that are going to come into play when choosing a home, so make sure you know what you’re looking for and that it’s specific.
A lot of times I’ll work with buyers who are asking to see homes in Raleigh, Durham, Chapel Hill, and I have to stop them. Without picking a particular location you’re setting yourself up for wasted time, effort, money and a decision that isn’t based on any data. A lot of the time these are clients relocating to the Raleigh area who need a Realtor’s help. Our recommendation is to spend time in each different city, understand what makes them different and how that relates to your list of priorities. Once you have a clear understanding of which location you’d like, it’s time to move on to the criteria of the home you want to purchase.
You’ll want to have a clear understanding of how your criteria (price, location, #of beds and baths, etc.) matchup with the homes you’re looking for. In some cases you may be shopping in a price range that will make it tough to meet your criteria for the location you’d like. At this point the question becomes are you willing to change the location or change your criteria to fit the price point and location? Each client is different, however there is no right or wrong decision, just a belief that location is what matters most to people.
If you’re shopping for a home in the Raleigh area, say you’re looking at the town of Cary and Apex because those are the locations you desire. These cities are more expensive than Holly Springs and Fuquay-Varina, which are 15-30 minutes farther south. A lot of our clients will see homes in Holly Springs and Fuquay-Varina and want them based on the pictures, and the fact it meets all of their criteria other than price. We have to take emotion out of it and ask them what’s more important to you, location or your other criteria? Normally they will thank us for driving them back to the CLEAR and SPECIFIC set of priorities they have already written down, where they wrote location as the #1 priority!
Emotional decisions can cause you to divert from your plan. Strong Realtors® wont let you make decisions based on emotions because they will understand what you want before emotions play a role in your decision making process.
Finding a Home is The Fun Part, Enjoy it!
The BEST and EASIEST way to find a home is to have a CLEAR and SPECIFIC plan. You have your team, you have your plan, now it’s time to execute it. Treat real estate like a sport. A football team doesn’t go into a game without a plan or strategy to beat the other team, just as you shouldn’t be searching for a home without a plan or strategy in place to find the perfect one. What makes some teams better than others is their ability to adjust if something isn’t working, remaining agile is important in your home search.
It’s important to understand, especially for first time home buyers, your home search is likely to begin online, and there are significant differences between searching online and in person for homes. Technology today has given people the ability to enhance photos so much so that it can create a distinctly inaccurate representation of the home. A lot of times photos will portray a room or a backyard as being a lot bigger than it really is. People can become emotionally attached to a property before they even see it. It’s happened plenty of times that someone decides they’re going to buy it without even seeing it. A strong Realtor will ensure you don’t fall into that emotional trap.
Finding a home is not your job, picking the best one for you is. Your Real Estate Agent should have processes in place to ensure you are alerted the second a home comes on the market matching your criteria. A lot of Realtors® will expect their clients to find the home and then they will unlock the door for them to see the home. Or some take it a step further, they set and forget their clients with auto-pilot emails of notification listings from the MLS. First time home buyers may not understand what a Realtor® should be doing to assist with their property search, the should be doing EVERYTHING possible to find you that home.
What Happens When There Are No Homes Available?
There are a lot of first time home buyers in Raleigh. Right now they’re experiencing some frustration because of the shortage in homes for sale. There are certain times when a Realtor® must utilize strategies, and spend marketing dollars that are mutually beneficial to their clients and their business.
One strategy that we utilize here at Raleigh Realty is a neighborhood direct mail marketing campaign. The reason we do this is because sometimes there are 400 homes in one Raleigh subdivision and no homes for sale. If our buyer wants a home in that subdivision we will find out if anyone is interested in selling with marketing campaigns. We hire a freelancer to gather the data that meets our clients criteria and we send a letter asking if they're interested in selling because we have a buyer interested in a home specifically like their's.
This strategy is mutually beneficial to us and to our clients. We aren’t afraid to spend marketing dollars on our clients in order to ensure they find the perfect home! We ask homeowner’s in the area if they’re interested in selling their home because we have a buyer who is looking for a home in that neighborhood that matches their home’s criteria. If there is a match we set up an appointment to see the home.
When you find the home you love it's time to make an offer. Having a top Realtor is beneficial when making an offer because there are certain strategies that work, and there are ones that don't. In order to buy the home at the best possible price you'll want to gather as much data and information as possible to build your case. You'll want to develop a lot of reasons the home should be priced lower, include examples from nearby homes, and build your case. It's important to be strategic in your initial offer, because you can always go higher, you can't go lower.
We strive to make the home searching process easy and fun. In Raleigh that has been a challenge lately with the shortage of homes for sale, however utilizing creative strategies has paid off for our clients!
Once we find the right home it’s time to make an offer.
Negotiating the Offer When Buying a Home
Making an offer is exciting. It’s a game of give and take with just the right amount of give to make sure both parties are happy with the deal. The first thing you need to do is gather information on the sellers and figure out if they priced their home preparing to negotiate down or if they have their home priced firmly. Use this data to understand just how much they will move.
First determine if it’s a buyer’s market or if it’s a sellers’ market because your strategy is going to be different. Some homes are priced just right, and others might be asking for too much, so it’s important to know what you want and what you want to spend.
Understanding the competition is another great way to drive the price down. You can show how other homes are priced and compare the differences with the sellers. Using the neighborhood comparables can be something you can use to your advantage and if you can’t find a way to use them, there is a good chance you already have a good deal in front of you.
If it’s a buyer’s market we suggest our clients ask for 10% more than they want so they have room to meet in the middle with the sellers. If it’s a strong sellers’ market we urge our clients to not to expect much room in negotiations, instead to focus on asking for things other than a price reduction.
If you let emotions drive your decision you may end up purchasing the wrong home that’s why it’s important to ensure you aren’t becoming emotional both when finding a home and when negotiating. A lot of people can become angry or upset during the negotiation phase, and it’s important to stay positive, and calm.
Staying happy, positive, and relaxed during negotiations is more likely to lead to an accepted offer! Stay positive at all times and if problems occur, which they will, find a solution.
After an offer is accepted there is a quick sigh of relief before clients start wondering what comes after an offer?
What Role Does Earnest Money Play In a Purchase?
There are common questions regarding Due Diligence money and Earnest money. Your typical first time home buyers should read 35 key terms you need to be aware of in a real estate transaction so they understand some of the terms they may not already know. Due Diligence and Earnest money is funds used to secure your intention to buy the home. Due Diligence gives you a time period to view, inspect, and ensure the property is worth the amount you’re spending. Earnest Money is good faith money that sits in an escrow account until 1. You reach the closing table or 2. Comes back to you if you back out before the end of the Due Diligence period.
If you’re in a seller’s market you’re going to want to use Due Diligence and Earnest Money to your advantage. Let’s say you spot a great deal and you know it’s going to attract multiple offers, how are you going to make your offer stand out from the rest? Due Diligence and Earnest Money is a great way to ensure your offer stands out from the rest in the eyes of the seller.
Totally off-topic, yet equally important for the purposes of this article, I’ve heard of people creating YouTube videos to send along with their offers. So if you’re a first time home buyer, and you want to set your offer apart from the rest, humanize it. For a long time people would send personal letters and pictures with their offers, today they are sending YouTube videos. Plus you can track how many times they’ve watched the video!
Inspect EVERYTHING When You're Buying Real Estate
If you’re a first time home buyer you should over pay for inspections, even the ones you don’t think you need because it’s a GREAT return on investment. Say an inspector costs you $3-500 yet they find thousands of dollars worth of problems with the home. You have the opportunity to ask the seller to fix them, or for money back at the closing table. So when the inspector cost is $300 and the problems the inspector finds are worth $2,000 back at the closing table you earned $1,700 off the inspection. Sometimes the sellers wont be willing to budge, however you have information which gives you more ammunition when negotiating. You also have a better understanding of what to expect when buying the property, and any problems that could arise.
When buying a home, our team here in Raleigh recommends inspecting everything. Inspections can go much farther than just inspecting the home, you can inspect for radon and other hazardous items that would devalue the property, including bugs such as termites.
Inspections are a great insurance policy. Take your time when hiring a great inspector that you can trust to do a good job, just make sure you start it immediately after an offer is accepted.
First Time Home Buyer's Should Hire a Great Attorney
Hiring a great real estate attorney is a wise investment. Make sure the lawyer you’re hiring is a specialist in real estate law and isn’t a general attorney. While there are many great attorneys you want to find one that specializes in buying and selling homes. If you needed heart surgery you wouldn’t go to a general physician for surgery, you’d find someone who specializes in heart surgery. It’s the same in real estate. You want a legal expert who specializes in buying and selling property.
In North Carolina there are a number of requirements to have a legal and binding contract, and unless you’re in the real estate business there’s a good chance you’re unfamiliar with what’s required. For instance, North Carolina requires a residential property disclosure that all sellers must provide to buyers before a contract is signed otherwise they have the opportunity to back out even after the agreement is signed. An attorney is a lot like an insurance policy that everything you’re doing is by the book and that at the end of the day you have a proper legal contract. Paul Sian, a top Cincinnati Realtor® wrote a great article on when you should hire a Real Estate Attorney. When in doubt, hire one!
A good real estate attorney will be able to help you understand everything that is required. If this is your first time buying a home, a real estate attorney is going to be a great member of your team.
Now that you have found your home, and everything appears good, it’s time to close on the house. Our recommendation is to do a final walk through before heading to the closing table.
First time home buyers are typically a bit intimidated when they see just how much money is changing hands. Try your best to avoid sticker shock. You’ve done your research, you have a great team behind you who have your best interest at heart and have been with you every step of the way. If you followed the steps above, you will be in a great position as a first time buyer. It’s almost time for the fun part…
Receiving the Keys to Your First Home!
Congratulations! You’ve closed the deal and now it’s time to move in. The entire process was a roller coaster ride of emotions, and it probably took a lot out of you. Give yourself some time to relax and enjoy your new home!
Final Thoughts For First Time Home Buyers:
It's critical to find the right people to join your team when you're buying a home. It's also important that you find ways to save money when buying a home for the first time. This includes lenders, Realtors, inspectors, attorney's, and more. If you want to truly be successful in purchasing your first home you need to be willing to invest time and effort into educating yourself on market conditions, neighborhoods, and strategies that will ultimately save you thousands of dollars. Learning from the mistakes others have made before you is a great way to ensure you wont make the same mistakes. With so much information online it's important you weed out what is good and what is garbage. Buying your first home is a big decision and it's not one you should take lightly!
Hi there! I'm Ryan Fitzgerald, a REALTOR in Raleigh-Durham, NC and the owner of Raleigh Realty. Chances are you and I share a similar passion, Real Estate! I also have a passion for technology, sports, and people. Would love to hear from you. Drop me a note in the comments section below and feel free to share this article socially!