3 Pro-Tips for First-Time Home-Buyers
Updated: Jul 15
The housing market has been frenzy recently! After one year into the Pandemic, now we’ve seen a phenomenal surge in the home sales -- a whopping 23.7% (and prices up 14.1%) nationwide compared with January 2021.
Are you tempted by the record-low mortgage rates?
Are you eying for more open space and/or a "Zoom room"?
Are you feeling the growing pain of FOMO?
As someone who recently became a first-time homeowner, I would like to share three things I’ve learnt throughout the journey and some useful resources I collected.
Hopefully these tips can help you make decisions that are best for your wallet, your family – and most importantly, your own well-being.
(Most of the tips are based on my own research and insights. This post is not sponsored by any of the mentioned websites.)
#1: Figure Out Your Priorities
It is not enough to justify the home-ownership purely due to FOMO or the pride of home-ownership. Before shopping for a new home, understand the financial costs to make sure you’re ready to buy instead of renting.
To help you crunch the numbers, I recommend this rent vs buy calculator -- the most complete calculator I’ve read among many of its kind. From the comparison you can also see that in high cost living areas, buying is rarely cheaper than renting unless you keep it for at least several years.
Home-buying is a forward-looking process. If you are leaning toward buying, understand your lifestyle and identify the type of homes that best suits your needs.
Finding your next residence is a “lead pass” to a future self with your imagination of your ideal life.
What are your top priorities in the next few years?
What’s the place of your new home in your vision for a better future?
For example, after careful thought, my partner and I narrowed down to the following
1) Affordability: “Forward” price-to-rent ratio ≤ 18, assuming the rent increases to the pre-pandemic level. We’re not looking for our dream house so getting a good deal is our top priority. Take into account the HOA fees for condo/townhomes.
2) Condition: Be move-in ready and easy to maintain. At this stage we want to focus our time on our careers instead of housekeeping.
3) Location: Be located in a safe and walk-able neighborhood close to the city - within 25 min by public transit or 10 min drive to several key locations in the city. The convenient location will also matter for our future renters.
4) Amenities: Include garage parking. Digging out of “nor’easters” (snowstorms in New England) is not fun. Plus, we travel a lot so we’d like to leave our car with a peace of mind.
You can go through a similar exercise of making a list of your top priorities that best meet your needs. This will help narrow down your search, and avoid wasting time touring homes that don’t meet those requirements.
For example, if your priority includes your children’s education, then a good school district might be on the top of the list; if you enjoy (or plan to do more) outdoor activities, then proximity to the lake shore or public parks would be a must; if you are on a tight budget but don’t mind doing home improvement projects, then focus on finding a “fixer-upper” in the rough.
#2: Research the Home-Buying Process
The home-buying process can be exciting yet daunting for first-time home-buyers. It’s often tempting to rely on friends or a random articles or videos for your home-buying education. However, just like how you should follow the No.1 financial advice, “don’t follow all the financial advice you read”, do your own research about the home-buying process to get the full picture.
Here is a list of resources to help you get started:
This is a concise step-by-step guide on buying a home.
If you want more details, this guide does a great job as a one-stop wiki. It covers almost all aspects of the homebuying process including budgeting, home search tips, mortgage, tax benefits and legal basics.
3. Online realtors and real estate websites: Investopedia: The 7 Best Real Estate Websites of 2021 and Best Real Estate Websites For Buyers And Sellers In 2021
These lists compare all the major real estate websites with pros and cons in details. I recommend you try out different websites and then pick your favorites. My personal favorite online realtor is realtor.com, which provides an accurate transaction history (compared to Redfin) and maps of noise indicators and flood risk.
#3: Start Touring Early
Allot at least 3 months for home-tours. This will ensure you see all your options out there.
As you tour homes, remember not to "fall in love" with any one home. This will likely lead to irrational decisions that you will later regret. Instead, keep your options opened.
After touring around 20-30 homes, try to come up with a shortlist of a couple of homes you'd be happy to buy. Then start making the offer for your favorite one. You will not be as disappointed if your offer does not get accepted, because you have other options! Plus, you will have more negotiating power because you are not stuck on buying that one home!
After you tour in-person, you will quickly refine your preferences and priorities outlined from Lesson #1.
I recommend Redfin as an easy-to-use online broker. It provides a convenient search and home viewing experience to narrow down the list of properties you want to tour. It also allows you to schedule home tours with just a few clicks.
Happy touring (virtually or in-person)!! Remember,
There is simply no such thing as the “perfect home in the perfect location at the perfect price”. You will have to make some sacrifice.
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