We can probably all agree that real estate is the most significant asset the majority of people will ever invest in and that owning a house gives you freedom, security, and peace of mind. Getting ready to become a homeowner is undeniably exciting, but there’s a darker, more intimidating side, too.
Any mistakes you make may cause you to miss out on your dream property, burden you with extensive renovation costs, or get you stuck in a location you hate. Yikes! Fortunately, savvy future buyers can take proactive steps to make sure they make the right decisions and cover all their bases.
If you’re getting ready to make the biggest purchase of your life as a first-time buyer, this guide is for you!
Because we like to take a practical approach to major life decisions, we’ve separated the points to consider into three different sections covering distinct aspects of the process. Although there’s always more to think about, we’ll get you started with the most important things you should be aware of so you step into your adventure armed with essential knowledge.
- Administrative and Financial Considerations
Get ready for miles of red tape, the likes of which you may never have encountered before in your life — and approach every point systematically and with a cool head. Let’s start with some of the key things you’ll need to get done!
- Request a credit check with a major credit bureau to inform yourself where you stand. Your credit score should be at least 670 to fall under FICO’s “good” range, and you’ll need a minimum score of 740 to have a “very good” score. If you’re below this range, consider taking steps to improve your rating. This will help you secure better mortgage rates!
- Get yourself pre-approved for a mortgage before you even start eyeing listings! This step will help you get a better look at your budget and make the buying process a lot easier later. (Mind you, most people should be very cautious about going with the highest mortgage the bank will offer. Be realistic about your monthly payments and consider your quality of life carefully.)
- Plan your budget. Include all the costs you will incur, including the down payment, closing costs, realtor fees, legal fees, and monthly mortgage payments. Investigate property tax rates and home insurance rates.
- Once you are interested in a property, always do a title search to weed out ones with liens and also check if a HOA is active in the neighborhood. This is associated with additional fees.
- Assessing the Property
A home inspection is a crucial step in the buying process, but you can give any property you view a once-over even before you reach that stage. We’d recommend watching YouTube videos made by home inspectors to give you handy pointers. Meanwhile, here are some crucial things to watch out for:
- Check for cracks in walls and uneven floors, which often indicate structural integrity issues.
- Take a look at the condition of the roof, and watch out for interior signs of water damage in the attic and beyond.
- Check the electricity outlets and circuit breakers to make sure everything works.
- Take the furnace, HVAC system, and water heaters for a spin to at least make sure they turn on.
- Inquire about, and visually inspect, insulation and ventilation. Look for signs of mold, which indicate moisture problems, and rising damp.
- Check the windows and doors, both by determining the materials they were made from and looking for signs of damage and drafts. Your grand entrance should ideally be reinforced for your safety.
- Look for, and inquire about, mold, pests, radon, lead paint, and asbestos.
- If built-in appliances are included, ask about their age and energy rating, and check that they work.
None of these steps replace a professional assessment, but they can help you decide whether you want to embark on the next step in the buying process.
- Researching the Neighborhood
If you aren’t sure precisely where you want to live, and you’re covering a wider area on Zillow, you risk falling in love with a house in a neighborhood you know very little about. Keep in mind that Googling basic information tells you little about what an area is actually like to live in, and always try to:
- Test commute times in practice during the same hours you would usually travel to and from work.
- Research crime statistics and safety measures.
- Find out about planned developments and other projects that may greatly change the neighborhood you are considering moving to.
- Research the resale value, including factors that may negatively impact it, and historical appreciation trends, in case you want to sell in the future.
- Many people are afraid to do this, but we’d recommend knocking on your potential neighbors’ doors and introducing yourself if you are interested in a property. This has several advantages. It allows you to understand what kind of people live next door, and it may also give you access to some insider knowledge about the house that you wouldn’t otherwise become aware of.
- In a Nutshell
Although this is not a full list of the things you need to know about investing in residential real estate, this guide should give you a starting point you can build on as you navigate the next steps. So, what now?
We’d advise you to make two lists — one with non-negotiable must haves for a house (so you don’t accidentally fall in love with one that’s not right for you), and one with absolute deal-breakers that mean you won’t consider a property.
After that, choose your real estate agent. Go for an experienced, helpful person you know you will have a good working relationship with and who will go the extra mile to keep you up to date on new opportunities just opening up. The best agents are organized, people-oriented go-getters who understand what you need and will help you go after it.