Buying a home for the first time is a bit like training for a marathon. A successful end result depends heavily on preparation.
After combing through feedback from our buyers and drawing on knowledge from Open Listings buying agents who have helped buyers purchase almost $1 billion worth of homes, we’ve come up with some insights to help get you through the various different stages of your home-buying journey.
Here are a few key things you should know to successfully navigate the process of buying your first home:
Before you make an offer
1. Think locally
As we’ve mentioned before, opting to go with a local lender can improve your chances of getting your offer accepted.
For the seller, a buyer who is financing their purchase through a local lender might be ideal because local lenders tend to close on schedule than larger or online financial institutions.
For buyers, the benefits of working with a local lender are numerous.
For starters, the convenience of being able to speak with your loan officer in-person is invaluable should you find yourself in a bidding war. Local lenders will also have a better idea of how your specific market operates, which might work in your benefit when they structure the terms of your loan and complete any appraisal contingencies.
Another benefit to buyers who choose to work with local lenders is the quality of service.
Because they often rely on their existing clients to refer them to new clients, many local lenders aim to provide better, more personalized service.
2. Stop, in the name of loan
While we’re on the subject of financing, we’d be remiss if we didn’t provide this warning: don’t do anything that drastically affects your financial situation while you're seriously house hunting.
A pre-approval letter from a lender is not a guarantee that they will lend the money.
It is simply a conditional approval that verifies your creditworthiness as a buyer.
Funds are only guaranteed to the buyer upon completion of underwriting by the lender.
During the underwriting process, your lender officer will dig deeper into your financial history to determine your ability to repay the loan you’re requesting.
While proof of employment and a hard credit pull might be enough to get a buyer pre-approved for a loan, underwriting will require a more in depth look into actual salary figures, length of employment, debt ratio and payment history.
This is why it’s crucial to avoid taking actions like opening new lines of credit, missing any payments, or switching jobs after receiving an initial pre-approval. Any of these factors that could adversely affect the lender’s decision to underwrite the loan.
Failure to completely complete a loan contingency is a common reason that buyers withdraw their accepted offers.
What to know about the offer process
3. Don’t sweat the petty stuff
When it comes to identifying your deal breakers and must haves in a home, it’s wise to follow the 80/20 rule.
Take stock of all the features you want and need in a home. Then, prioritize those features to make sure you’re not sacrificing the things you need (the 80%) for the things you want (the 20%).
If a home meets your bed and bath count requirements, cuts your commute to work in half, and has solar panels already installed, you should reconsider walking away or playing hardball over smaller details like outdated appliances or a yard that’s in need of some TLC.
Unless you’re buying a brand new construction, you should expect some wear and tear.
These are usually relatively easy and inexpensive updates you can make down the road and shouldn’t be deciding factors when you’re contemplating making an offer on a home or settling on an offer price.
Once you’re in contract
4. Get those inspections done ASAP
On the flip side of the previous tip, you should always do your due diligence when it comes to inspections so you don’t miss any significant defects that could drastically affect your desire or ability to purchase a home.
Keep an eye out for larger repairs like foundation issues, outdated or damaged electrical wiring, termites, plumbing and sewer.
If the issue is crucial enough that it significantly impacts the habitability, safety or value of the home, you should be prepared to negotiate a drop in price, make requests for repair with the seller, or cancel the transaction altogether.
What to know if your offer gets rejected
5. Be patient ~ your time will come
In competitive markets, most buyers will lose out on at least one or two homes before having an offer accepted. Think of it like a rite of passage. And, it happens for a few reasons.
The most common reason? Many first time buyers tend to make the mistake of coming in too low with their offer thinking that they’ll have the opportunity to negotiate the price later if the buyer counters.
That’s a big “if.”
In competitive markets, counter offers are not that common.
It’s best for buyers to do a little research prior to deciding on an offer price to make sure that it’ll be in line with other offers that might come in.
It’s a good idea to have your buying agent reach out to the seller’s agent to inquire about offer activity. They can ask the seller’s agent what their baseline is for offers, i.e. “Would your seller consider an offer around/under $XXX?”
Another useful tool for pricing is comps. Ask your buying agent to pull recent sales prices for comparable properties in the area before locking in your offer price.
In the chance that the seller does counter your offer, you’ve got some leverage in the form of data to help you negotiate.
If your offer is rejected, the best thing to do is to use the rejection as a learning opportunity for your future offers.
Have your buying agent inquire about the winning offer, then, compare that feedback to your offer to see where you could improve for the next time.