Millennials are so amazing. We are a generation focused on uplifting others, entrepreneurship, and defining success on our own terms. One trend among my peers is homeownership at a "young" age. I definitely got the homebuying bug early on and almost can't believe I'm at the point of presenting a first-time homebuyer guide to the internets! During my last semester of grad school, while my classmates and I were negotiating job offers and scouting places to live in new locales, I realized a few things:
- I would rather buy than rent.
- I didn't yet know where in Houston I want to live.
- Moving back home would fast-track my savings goals.
That last one was a little hard to swallow, I can't lie! Yet, it has been one of the best financial decisions I've made. Living at home as an adult is not at all the mark of shame it was in prior generations. Among millennials, it's typically viewed as an enviable setup and smart money move. I am very thankful to my parents. I can't tell you how many people told me they were jealous of the fact that I could live at home and that they'd do it in a heartbeat if they could. Plus, I was able to help my family with all kinds of things and spend more time with them. I spent a little less than two years saving and about three months seriously searching before I found a home with the features I wanted, in my desired location and within my price range. Below are the first-time home-buying tips I found helpful in the process. If you want to buy a home in the near future, keep reading!
Tips for the First-Time Homebuyer
Define your timeline.
When do you want to purchase? Factors that will impact this include whether you currently have a lease and when it will expire, if you have a big event on the horizon such as a wedding or the birth of a child. One piece of advice I'll share is not to be a slave to your timeline. Don't make a decision due to pressure. If you don't find a home you love before your lease is up, you can always seek a shorter term option or look for someone to sublease, if needed. My timeline was relatively arbitrary since I didn't have any major events dictating my housing situation--just the drive and desire to own a home of my own.
Analyze your financial situation.
How much do you need to save between now and the time you want to buy? If that isn't workable with your income, go back to step one and adjust your timeline. After I set my timeline, I determined how much I would need to save each month in order to meet a goal for down payment, closing costs, furnishings and moving expenses. Then I had that appropriate amount automatically diverted from each paycheck into a savings account. Discover Bank online has one of the best interest rates I have found so that's where I kept my housing coins. While I saved, I monitored my credit reports and scores using apps like Credit Karma and free monthly FICO scores provided by my credit card company. I also checked my free credit report at three different times each year.
*Assessing your credit-worthiness is also part of this equation because, if you have areas for improvement, you may need more time to work on them.
While you're Waiting...
The time after you've decided to buy but before you're ready to engage a realtor can still be very productive! Use this time to explore and narrow down the areas of town you like best. Assess and research your home furnishing needs. Determine the style and size of home you'll need. Following are some questions to ask and answer during this in-between time:
- What style of home do you want/need?
- Are you willing to commute to work? How far?
- In what part of town do you spend (or want to spend) most of my time? Think friends, events, church, etc.
- How big is the gap between the home furnishings you own now and those you will need?
Answering these questions helped pass the time and maintain my excitement level while saving and searching. During this time, I realized that my church, job, and frequent social haunts were all in the city, which helped answer a lot of the questions. Another useful thing to go ahead and do during this time is prioritize your wants and needs in a home. This may change after you start physically looking but it's good to have a starting point. I quickly decided I preferred a one-story home and needed an attached garage. Of course, the kitchen had to be large enough for me to make magic in. Apps and sites I found helpful during this time are Zillow, HAR, and Pinterest. As a first-time homebuyer, the articles linked below were helpful in getting me up to speed on house-hunting lingo and different things to expect.
Assemble your team.
Once you achieve or get very close to your savings goals, it's time to get pre-approved and select a realtor. For a realtor, I met with a couple before going under contract with someone who I felt demonstrated know-how and genuine concern for my goals. I think it's best to choose a realtor based off solid personal recommendations. Both realtors I met with came recommended by a family member and knew my desired area like the backs of their hands. If that is not possible or doesn't work out, do some online searching to find realtors experienced in the area where you want to live, read their reviews across multiple sites, then set up meetings to feel them out.
A good realtor can also provide you a list of reputable lending institutions for your pre-approval. That is how I found my loan officer. You will communicate with these two people a lot. I'm talking multiple times a day via phone calls, emails, and text messages when it comes time to making and negotiating an offer! For this reason, you want to make sure to choose professionals who are good communicators and demonstrate a certain level of follow-through. Don't be afraid to look around on your own but, in most cases, official communication should go through your representatives (realtor, loan officer, and attorney, if applicable). My uncle (who's also my contractor) actually found the house I ended up buying and my realtor set up a showing with the listing agent.
Don't get caught up.
Emotions can run high when house hunting. It's easy to fall in love with a home's features but affordability can be another matter altogether. If you're working with a professional and thorough realtor, he or she won't show you homes that are outside your price range unless they believe there is ample room for negotiation (Unless you're on Property Brothers and they're trying to give you a reality check). They should also be realistic with you about affordability in your desired area. With that said, it's ultimately up to you to stick to your budget.
When planning to buy a house, I set a price range and clung to the bottom of it at the start of my search. Just magine the Dave Chapelle meme where he's clutching his money to his chest! This gave me some "room to grow" and once I honed in on my dream area, I realized that I'd need it! Location was the biggest factor for me and since I chose an area that is very hot in terms of real estate and development activity, prices were jumping. I had to move closer to the top of my range but was still able to find something affordable for me.
Stay ready so you don't have to get ready.
Buying a home takes a lot of paperwork. Before you even get the opportunity to catch a hand cramp from signing a zillion documents at closing, you'll be asked for a hefty number of documents regarding your assets, debts, living situation, employment, and more. Make sure to keep track of important documents in order to avoid unnecessary delays or derailment of your process. If you have questions about anything that's being asked of you, reach out to your loan officer and realtor to explain. For example, my loan officer requested a certain retirement account document. For whatever reason, the company that manages my retirement accounts was unable to produce it. Once I understood what information was needed from the document, I was able to communicate this to the benefits department at my job and come up with an available document that contained the same information.
Buying a home takes a lot of paperwork, calls, cash, and research. It can seem overwhelming but is totally possible--if I can do it, you definitely can! My first-time homebuyer process went pretty smoothly so I hope these tips are helpful to you. Let me know if there is something related you want to see here. Thanks for reading!
P.S. more adulting reads: