Ultimately, when wading into the residential real estate market for the first time, you want to ensure an inaugural home buying journey that is equal parts enjoyable and successful. To help you navigate those early steps, our first-time buyer's survival guide to buying your dream house is below.
Take stock of your financial situation
Foremost is to verify your credit score. The higher the score, the better your interest rate, which can save thousands of dollars on your loan. On the other hand, if you're unhappy with your score, take the time and steps necessary to improve your standing.
Additionally, examine your cash situation and what you plan to contribute to the down payment. For example, are you putting down the standard 20%? If not, you may be subject to paying private mortgage insurance (PMI) for a portion of your loan (until you reach at least 20% home equity, among other means).
If you're in the position to make a cash offer, you need not worry about most of the above. However, sellers want to see proof of funds before accepting a cash offer. So even if you bypass the lending process, you want to shore up your funding before making an offer.
First-time buyer tip #1: Make a budget—for pre- and post-sale costs
Once you've reconciled your finances, craft a budget to hone in on what you want to spend on the home. One of the first-time buyers' biggest missteps is failing to account for all the costs involved in the home purchase. Unfortunately, even the smallest oversight can place you in a financial bind when you can least afford it.
Before the sale, you're responsible for: the down payment, appraisal fees, inspection fees, closing costs, moving expenses
After the sale, you're responsible for: mortgage, insurance, property taxes, PMI or HOA dues or both (if applicable), utilities, and general home maintenance and upkeep
Of course, higher-end homes in more desirable locations mean higher costs. So too does purchasing a property in need of extensive repairs or renovations. It's also worth building in a safety cushion should an emergency arise or those repairs are unexpected.
A budget allows you to account for every single expense before and after your real estate transaction and make adjustments before any monies exit your bank account.
Partner with a knowledgeable real estate agent
As rewarding as a home purchase is, even seasoned home buyers and investors will agree the process is fraught with potential hurdles, hiccups, and delays. It's not that home buying itself is a difficult proposition—it's not. The vast majority of deals are executed without issue. However, the sheer number of moving parts involved in buying a home can make for a bumpy ride for those unaccustomed to the ebb and flow of procuring real estate.
It's why partnering with a seasoned, knowledgeable real estate agent dramatically simplifies the process for first-time home shoppers. More than just someone who identifies homes to match your budget and wish list, a dedicated agent serves as both guide and advocate throughout the home buying process.
From market research and locating properties to offers, inspections, and negotiations, on through to the closing process and beyond, top agents demystify the process for their new clients while providing support every step of the way.
First-time buyer tip #2: Ask questions—lots of them
To overcome the uncertainty of home buying, ask questions—lots of them. Particularly for a first-time buyer, where every moment is uncharted territory, if you don't understand or are uncomfortable with a step in the purchase process, make inquiries until your comfort level is met.
As we've already noted, your professional real estate agent is a wealth of information and experience. So is your lender, the home inspector, the appraiser, or any service vendors or contractors. Anyone tasked with helping you secure your first transaction. It's your money and future home, and you are entitled to being 100% confident in all aspects of the marketing.
Strengthen your home buying position with a pre-approval
For those financing their first home purchase, pre-approval is vital in securing your purchase. But you don't have to wait until you're in the midst of a home search to meet with lenders. Meeting with a lender before your search allows you to solidify your buying strategy in two ways.
The first is knowing precisely what you can afford. Your pre-approval automatically narrows your search to those areas and homes that fall within your approved financing. Finalizing pre-approval allows you to zero in on specific neighborhoods and home types without worrying if you'd be approved for them.
Second, a pre-approved offer is far more attractive to a seller than those that are not. Unlike pre-qualification, which simply deems if your finances are sound enough to purchase a home, pre-approval means financing is in place. All you have to do is find a home and make an offer. Sellers love buyers who can commit to closing the transaction, and short of attractive all-cash offers, they prefer offers that come with pre-approval letters.
First-time home buying tip #3: Shop around for your loan
A common misconception among those entering the marketplace for the first time is that rates are static between lenders. While it's true they remain in relatively close proximity, rates do fluctuate between lenders. As do the services they provide and the programs they offer. You should shop for the lender that best suits your home buying needs.
Not only do you stand to save thousands of dollars with a lender offering a more competitive rate, but you can access different purchase programs designed for first-time buyers. Your real estate agent will offer lender recommendations to get you started, but the choice is yours to make. Take your time and vet several candidates before deciding on the right lender for you.
Maintain a focused home search
Foremost, adhere to your budget and the specific locations that fit those numbers. Then create a list of what you need from your home and those items you'd like to have but are less important. Finally, as you search for houses, remain focused on those homes that fall within your set parameters.
Though you may be tempted to stretch yourself beyond your initial guidelines, remember you chose those criteria for a reason. Are you going to love an underwhelming house just because it's in your preferred location? What if it's a beautiful home in a less-than-ideal community?
Of course, the answer is you'd rather wait for the right combination of home and location. You'll find it if you stay patient and keep your search focused on what you want, what you can afford, and where you want to be.
First-time buyer tip #4: Identify acceptable compromises
To avoid a frustrating home search, don't make a rigid wish or must-have list. Instead, keep your options open. Yes, you must focus on the elements most important to you in a home, but be flexible. Be willing to accept one great feature at the expense of another, less critical amenity, especially if the rest of the house checks off many boxes for you and your needs.
When you find that (near) perfect home, make a competitive offer you're comfortable with. In tight, competitive markets, the difference between acceptance and rejection is often just a few thousand dollars. If it's a property you feel passionate about, work with your agent to present an offer that's difficult for a seller to refuse.
If you're unsure, never feel pressured to bid on a home that you might later regret being accepted. It's a dynamic, constantly changing real estate marketplace. As a new buyer, take your time and enjoy the process so you're confident you get it right the first time.
Are you ready to explore the best of Downtown New Jersey real estate and discover your dream home? Contact Properties by Southern today to help you find homes for sale in Jersey City NJ. Allow our team's experience and expertise to be your guide as you navigate the New Jersey luxury homes market.