Buying a home is an exciting yet stressful life event. The current housing market is definitely a seller's market with tons of buyers and limited inventory.
"Buyers walk in a home and say, 'This is it!' Then, they see all the business cards [from other agents] on the table and start panicking," says Georgia Stevens, president of the Seattle King County Realtors and managing broker of the Compass Washington agency.
If you are a first-time home buyer have no fear about the competition. Here are five tips to follow when shopping for your first house.
Start with an authentic budget
You will want to know how much home you can afford before you start house shopping. Get on solid financial ground from the beginning. Decide what your price range will be by looking at how much you can borrow and what your monthly budget will be.
A mortgage lender will be one of your first contacts during the home buying process. A mortgage lender can give you a preapproval letter. Getting preapproved on a mortgage will allow you and your realtor to get a gauge on what exactly you can afford. In this day in age with the current housing market, you have to have a preapproval letter from a lender to show real estate agents and sellers that you are a serious buyer.
"I always caution borrowers not to stretch for a home, and to establish a realistic budget that will afford a financial cushion for the future," Scott Lindner, national sales director for mortgage lending at TD Bank, said in an email. "This is even more important in the current uncertain environment."
Learn what to expect before you shop
An experienced real estate agent can help you with the process step by step along with verbiage you might not be familiar with. It is best to be familiar with the process before you start.
"Right now, the emotion is lowest and logic is highest," Alicia Holdaway, president of the Salt Lake Board of Realtors in Utah and an agent with Summit Sotheby's International Realty. says. "As soon as we look at homes, those are going to swap."
Emotions can take over and logic can go out the door. A Realtor will be your logic no matter how much you love a home. Holdaway says she will not take a buyer to see a home without first discussing what a real estate contract says and what terms can be put in place along with negotiations. A Realtor can stay grounded through this roller coaster of a ride.
Be firm on your needs, flexible on the rest
Make a list of the features you need in a home versus those amenities that would be nice to have. Spend a good bit of time thinking about the reasons you want to purchase a home to help distinguish between needs and wants.
Once you have your list you want to stick to those must-have items. You might love a home but it has only one full bathroom. You do not want to settle for something that does not tick off your must-have items.
There is a difference in compromising on cosmetic characteristics and amenities that you do not need in a home. A kitchen might have your must-haves but you hate the paint color. This is something that should not detour you from purchasing a home. Paint color can be easy and fairly budget-friendly to change.
"A house may not be HGTV-ready, but it can be something that can be improved over time," says Stephen Medeiros, president-elect of the Massachusetts Association of Realtors and an associate broker at Keller Williams Realty in Dartmouth.
Don't let negative emotions get the upper hand
Searching for a home, especially in a hot market, can be frustrating. You find a home you like and before you can even discuss it or think about an offer, it is already under contract.
According to Josh Harris, a certified financial planner and lecturer in finance at Clemson University, you do not want anxiety to make you rush into a bad decision. Before you get too worked up, take a break and think about why you are so anxious. He says to get a reality check from your real estate agent.
Holdaway says a good way to prevent this frustration is to not look at too many homes. First-time homebuyers are making this mistake a lot she confides. Doing this will lead to exhaustion and wears you down making you just want to make a decision to get the process over with. "They're sick of looking, and they say, 'I'll make it work. I just need a house,'" Holdaway says.
Stick to your price range and priorities
Buyers want to please a seller so they can seal the deal but this is not always the wisest way to go about the process. In a hot market, buyers are under pressure to make these concessions. Before you make any concessions make sure you completely understand the risks.
Many homes in the current market are in bidding wars. Potential homebuyers must compete with their offer to win the war. A good example is to offer above the listing price. Before doing this, make sure you can afford the higher price and still be comfortable financially.
"You don't want to live for your home," Medeiros says.
"There's always another great house," Stevens says. "This isn't the only one."
