Home Hunting: That Elusive First Home

My first home-hunting trip resulted in purchasing a fixer-upper: A structurally sound house, albeit small, with historic features like clapboard siding and corner boards and one-over-two-pane stained glass windows. My list wasn’t long, and the house sounded right up my alley.

If you’re young, a fixer-upper offers possibilities. But there are so many factors to consider when buying; it’s overwhelming: Everything from what kind of neighborhood you want to live in to your wish list of rooms and features.

Before you contact a real estate agent, a necessary step in searching for the first home is to get your feet wet by looking at listings and doing preliminary house hunting to generate a checklist. The checklist would include stuff you appreciate, like the neighborhood, the house’s condition, the state of the block you’re investigating, and whatever else comes to mind.

Steps to Buying a Home

Whether you’re a first-time buyer or a seasoned homeowner, the steps in buying a home are the same.

• Contact a Realtor
• Line up your funds with the home you want
• Put together financing, including prequalifying for a loan

Contact a realtor

Your budget can tell you how much home you can afford, and you should call a realtor with that information. If you haven’t created a budget, check this out.

The first place to look to get a starting number is the line in your budget today that covers your current housing. You do this for two reasons: It gives you a sense of what you can afford today to pay for housing, i.e., e, a monthly number. Secondly, it brings in a second factor in house buying, i.e., e, are you getting ahead by buying a home or just staying where you live today?

Then contact the realtor. Realtors do a great deal for you; every home buyer benefits from one.

Match your funds with your dream home

You’re about to invest in a structure that you will call home for the foreseeable future, so figure out your plans and goals as you work out your home size. For instance, if you’re married, are you building a family? More mundane issues include: Do you need a single-stall garage for your vehicles and toys or a sprawling garage? Granted, this is working out the dream home.

Most people dream big, then live with the outcome, i.e., they incrementally grow rather than in one big growth moment. But there are no hard and fast rules, so use your imagination. Just get the home’s size and features to match your funds. Consider the following question:

Old or new housing?

Do you want to buy from existing stock or build something brand new? Building a new home is nice but riskier, which might affect your home mortgage rate. On the other hand, buying from existing stock is generally less expensive and easier to schedule on your calendar.

Line up the funds

Once your budget and dream home line up, it’s time to find the funds. Right out of the box, it’s best to turn to those savings accounts you’ve worked on for the last few years to discover a downpayment amount. Or consider buying a home without a downpayment. It can be done. Read on.

Home Prices: Ready to Research?

Then it’s time to get serious about your search. The first place to begin is the price you want to pay. It’s called the price range. The price range can be easy to determine if you check your budget and find out what you paid in the last twelve months for housing. That gives you a number, then consider how much higher you are willing to spend on housing per month and you are approaching your price range.

When figuring out the lowest price you’re willing to pay, wonder out loud what condition the property should be in for you to buy because the lowest-price housing stock may need repair. Experts say you can save as much as ten percent by buying low. In reality, many people change something about the house they’re moving into, so how much sweat equity do you want to commit to?

Home inspectors

There are several things to consider when pricing a home. An excellent move is to hire a home inspector. Your realtor will probably bring one in.

What do Home inspectors do?

They inspect the prospective home from top to bottom and find any faults that need addressing. But understand that homeowners in today’s market may not want to come down from their asking price because of a home inspection. Still, it’s a good idea. Here’s what they inspect:

• The basement or lower floor, and utility closet: Walls and floors, plumbing, HVAC, furnace, hot water heater.
• The upper floors
• The roof or attic

A typical inspector is concerned with the house’s structural integrity, the home’s cosmetic integrity, and the systems that operate in the house. So the inspector will comment on the structural integrity of the framing and the foundation’s integrity.

The most glaring problems an inspector will discover will be problems with the electrical system, the plumbing system, or the heating and air conditioning system, but be sure to closely read all the parts of an inspector’s report because problems with the foundation or framing of a house (cracking foundation or sagging roof) can be some of the most expensive repairs.

With an inspector’s report, you can start calculating an offer for a home.

How to Calculate the High-End Price

You should come in with a high bid when buying a favorite house. The price you offer should have several components to consider:

• Compare the asking price to the tax value of the neighboring properties.
• Consider the length of the listing. This can be reasonably short, but you may not want to raise your bid or re-calculate it into your offer if it’s long.
• Check the current market condition. If the economy is contracting, where are housing prices? If the economy is expanding, where are housing prices?
• Check the inspector’s list for the house’s to-do items and the related final cost, including money you’ll have to pay after the sale.

The place might be the dream house you’ve always wanted. My first house was a “dream house.” It took a while to find it, but I found it. If a house leaves you a little cold, consider moving on. While you may love the house, the neighborhood doesn’t always impress. Home buying has many factors, so keep your ideal house list in mind. After considering everything else, your desire to own the place might decide your offer.

Time to Line Up the Funds

Now let’s discover financing.

There are several sources you can use to finance a home loan. Use your savings, borrow from relatives, get the homeowner to fund it, or go to a financial institution. Research how to buy a home with no money down. 

Here are the steps to borrowing from a financial institution:

• Check your credit score
• Calculate the monthly payment amount you’re comfortable with.
• Steps to prepare to visit a bank. Sometimes, bankers are fast talkers. Get ready.
• How many years do you want to finance?

credit score

Think like a banker when you examine your credit score and credit report. Consider your comfort level. People just entering the market have been “spooked” by credit cards, and rightly so. Figure out the monthly payment you’re comfortable with and resolve with this number. The calculation will also help determine the length of the loan.

If you don’t like carrying debt, even a home mortgage, and want to pay it off quickly, should you finance for a shorter term, say fifteen years, rather than a 30-year mortgage? You could go as low as ten years.

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