Tips for a First Time Home Buyer

FacebooktwitterpinterestFacebooktwitterpinterest

Three and a half years ago Mr. Money and I decided that we’d like to settle down and become homeowners. This was back in 2007 when the market was so-so and real estate was a buyers’ market, but not nearly as depressed as we are currently seeing. We decided in our heads an amount we felt comfortable spending, and went from there. We didn’t really sit down and figure out a budget and how a monthly payment would factor into it. While we certainly made some mistakes when it came to our first time purchasing a home, I have enjoyed the time we’ve lived in the house and all the improvements we have done to make it our own. I’m going to share some tips in hopes that it will help someone else who is searching for their first home.

1. Focus on the long term. We decided that we wanted to buy a house to put down some roots and have some stability in our lives. Unfortunately, we live in a state where we don’t have any family. That’s made it hard on us and we’ve wanted to move numerous times. It’s not that easy to move when you own a house! I would say that if you aren’t planning on being in one area for a minimum of 5 years, don’t consider buying a house. Think about your career goals as well- if you live in an area that’s not conducive to your career, you may have to end up moving to find a better job.

2. Think before you take out a first and second mortgage to avoid paying private mortgage insurance (PMI). When you buy a house, if you don’t put 20% down, you have to take out private mortgage insurance. There are a few ways around it though. We ended up doing an 80/15/5, which basically means that 80% of your house’s value is on the first mortgage, there’s a second mortgage for 15%, and then you have to put 5% down. I hated paying two mortgages each month. It was such a headache, and I probably would have been happier if we had just done a first mortgage and paid for PMI.

3. Save for a bigger down payment. I think it’s great if you can save more money for a larger down payment. Of course, if it means that you drain your emergency fund, then I wouldn’t recommend that. We had saved some money and used pretty much all of it when we bought our house, draining our emergency fund. Bad idea!

4. Calculate a budget and over shoot. We didn’t sit down and think about how having a house would really impact our finances. We knew there would be a mortgage payment obviously, but we didn’t think about house maintenance and all the projects we would want to do once we moved in. Even better, the real reason we wanted to buy was because our rent was going up to $700 a month. Our mortgage was about $1125 a month. We felt better because we were “not throwing our money away in rent each month.” Pfft.

5. Don’t buy a fixer upper if you don’t have the time, money, and skills to fix it. Trust me, it is really fun and you feel amazing when you can make home improvements yourself, but when you don’t have the right tools, the money, or the skills, nothing is worse than an unfinished house.

Of course, there are many other tips out there for first time home buyers. These are just a few of my observations in the three and a half years I’ve been a homeowner.

What advice would you give to a first time home buyer? If you don’t own, what’s the best advice you’ve received about purchasing a house?

Related Posts Plugin for WordPress, Blogger...FacebooktwitterrssinstagramFacebooktwitterrssinstagram

13 thoughts on “Tips for a First Time Home Buyer

  1. Little House says:

    As someone who is hoping to purchase a house in the next year or two, these are great tips. The more I read, the more I want to wait to purchase a house. Mainly because of these tips you mentioned; buying a house is a long-term commitment. Right now I’m thinking we might want to move in the next 2-3 years which means buying a house in our area isn’t a good idea. I’m also well aware of the whole “fixer-upper” thing. We’re renting a house we thought we’d “fix up” and now it’s incomplete and we don’t like it. Of course it doesn’t help that it’s a rental and we just don’t want to put any more of our own money towards it!

    [Reply]

    Mrs Money Reply:

    Little House- Thanks! I think if you buy a house that is newer you’ll have less chances of things being wrong or having to do a lot of work to it. If you’re not into home improvement, I’d definitely recommend that. It’s been quite the ride with home ownership, but I really am glad we did it (for the most part) 😉

    [Reply]

  2. Sandy H says:

    My biggest advice is to not be ‘house-poor’. A friend of mine coined this phrase and it is so true. It is nice to have a big, nice house. But if it means it takes the majority of your money every month to pay the mortgage it isn’t worth it. If you are single, buy a small house. If you are a newly wed and don’t have kid plans buy a small house.

    Also, look at 15 year loans as compared to 30 year. Yes, you can put more toward a 30 year loan but realistically will you? We thought we would, and only did about 2 months out of the 7 years the ‘bank’ owned our home. 15 year loan MAKES you pay more toward the principle of your loan and you end up spending about half on the interest. MORE of your money goes toward your house building equity a lot faster in your home (in case circumstances make you sell before you have been there long).

    Great blog!! I guess I’ve written a lot on this- maybe a post for my own blog! haha

    [Reply]

    Mrs Money Reply:

    Sandy- Yes!! Being house poor sucks. We probably should have bought a less expensive house, but thankfully we’ve always been able to pay the mortgage and have some money left over. I do think that I would have found a house that we could have afforded on one income when we were first looking 3 years ago, but that’s water under the bridge. 🙂

    A 15 year mortgage would be awesome! We went with a 30 year because we wanted the lower payments. We’re thinking about trying to pay more towards the principal now. Exciting!

    [Reply]

  3. Penny Frugalista says:

    Great tips — I wholeheartedly agree with saving enough money to put down a bigger down payment. We saved up 20% to avoid paying PMI and it makes me happy to know we didn’t get stuck paying “extra.” In our area, it costs a lot more for a mortgage than it does to rent (just the nature of the real estate market around here). So we mocked up a budget and decided how much we were comfortable spending on a home. It also helps that we don’t plan to move from this house, ever.

    [Reply]

    Mrs Money Reply:

    Penny Frugalista- Wow! That’s great! I really think that we won’t be in our house forever, but that’s only because we don’t have any family close by. If my husband decides he wants to stay in this state for a long time, we are definitely not moving from this house!

    [Reply]

  4. Yakezie says:

    Enjoyable post Mrs. Money with good tips. People need to also realize that living life and enjoying your home is much more important than trying to time the market to make money.

    It’s about living a great life, and seldom does the rental stock provide as quality a house as the ownership stock.

    [Reply]

    Mrs Money Reply:

    Yakezie- Thanks! I agree with you. I know that we’ll end up losing money any way we go (renting OR buying) so that should be an expectation going into it. 🙂

    [Reply]

  5. Car Negotiation Coach says:

    Great tips. I agree that 5 years is a key number to re-coupe costs if you plan to move. Actually, 10 years is better!

    I lived in my last house for 4.5 years and sold it for about 40k more than I bought it. But with the 15k I spent fixing it up and the 25k in commissions to an agent and fees when selling, I barely broke even and consider myself very lucky!

    [Reply]

    Mrs Money Reply:

    Car Negotiation Coach- 10 years definitely is better! That stinks that you barely broke even. I hate that realtor fees are so expensive!

    [Reply]

  6. Becky R says:

    I agree with having 20 % down. Plus I think before you buy a house you should have 20% down and an emergency fund for 6-12 months in case you lose a job or have an illness or injury.

    Also live on one income (if you have two.) Do not even count the second income for the mortgage and bills. This way if you want kids someone can stay home with them.

    [Reply]

    Mrs Money Reply:

    Becky R- Those are awesome tips! Had we waited a little longer, I’m sure we wouldn’t be in this house. I always think about where we would be if we hadn’t bought our house!

    [Reply]

Leave a Reply

Your email address will not be published. Required fields are marked *