Buying your first home is an exciting (and nerve wracking) time. You’re finally ready to put down roots and you’re committing to it in a big way.
While you’ve probably been up to your ears in mortgage meetings and lawyer consultations, how much attention have you paid to what the details of actual home ownership looks like?
When buying my first house I was preoccupied by the excitement of planning my decor and fear that I was committing to a 20 year loan.
But, after that buzz died down and I was settled into owning a house, I realized there was a lot more I should have considered when making my decisions.
Based on my experience, I’ve written down my top tips for buying your first home. Take a look below and let me know if there’s anything you’ve considered that I haven’t.
1. Figure Out What Mortgage You Can ACTUALLY Afford
Before you look at houses, and DEFINITELY before you go to the bank for a loan, figure out how much mortgage you can afford to pay.
The bank will often tell you that you can afford a mortgage WAY out of your actual budget. While maybe you “could make that number work” you’d likely be in a house poor situation that will make day to day life financially stressful. It’s important to crunch your own numbers and figure out what you can actually afford – don’t just take the bank’s word for it. (Remember that banks are in the business of making money!!)
To figure out the size of mortgage you can comfortably pay each month, you’ll need to sit down and make a detailed budget. Don’t leave anything out.
Remember that, on top of your mortgage payments, you’ll also be responsible for paying property tax, homeowner’s insurance, HOA or condo fees if you purchase a townhome, and possibly Private Mortgage Insurance (if you have less than a 20% downpayment).
Dave Ramsey suggests making sure your total monthly payments (including all the stuff listed above) are no more than 25% of your take-home income – I think that’s a pretty excellent idea.
I’ve found that only spending 25% on mortgage/insurance/property tax is a good rule to allow us to still save and live comfortably
And don’t forget to look a few years into the future.
Are you planning on having kids? Will you lose your second income if a baby comes along? And will you be able to afford your mortgage then?
We bought our house based on what we could afford with two incomes, and at that time we were well within the 25% rule. BUT, now that I’m staying home with our child, our mortgage is more than 25% of take-home income, and it’s definitely a bit of a stretch at times.
2. Don’t Pay More Than the House is Worth
Over-paying for a house isn’t a huge risk if the selling market is slow or moderate where you are, BUT, in certain areas (usually big/popular cities) it’s easy to end up buying a house that is priced at way more than it’s worth.
That’s all fine and good if the market stays booming, but if it drops then some people might end up having to sell their homes for less than they paid.
To make sure you’re not paying too much, get your potential home appraised and don’t pay more than it’s worth.
You may have to put in an offer before getting the home appraised, but you can make your offer contingent on the appraisal estimate closely matching the seller’s asking price.
Buying a house is a great time to start figuring out your go to homemaking hacks. One of my favorite weapons is the Instant Pot. Check out my review here or scope one out on Amazon.
3. Get Pre-Approved
Getting pre-approved means that before you start house hunting, or at least before you put in an offer, you get the bank to agree to give you a loan. There are lots of advantages to pre-approval, but the biggest ones for me are:
1) You’ll know exactly how much money the bank is willing to loan you and therefore how much you can spend on a home (though you’ll need to do your own homework and budgeting to see how big a mortgage you can ACTUALLY afford).
2) Sellers and realtors will take you more seriously because they know you’re ready to buy and that you actually have the means to purchase a house.
If you’re not sure how to start the process of pre-approval, just give you local bank a call and they’ll get you started.
4. Consider putting 20% Down
If you put 20% down on a home, you won’t have to buy mortgage default insurance or Private Mortgage Insurance (at least in Canada), and that stuff can cost 3.1% of the price of your home (that’s $10,540 if your house costs $350,000 and you put down 10%).
It might be worth it to hold off, save aggressively, and budget hard for a while if it means you’ll save upwards of $10,000.
5. Say No to Big Condo or HOA Fees
If you’re considering buying a townhome or condo, take time to calculate how much your monthly fees will be when combined with mortgage payments. Ask yourself if it’s still affordable for you.
We bought a townhouse as our first home because it was cheaper than a detached home (and because we LOVED it). BUT, we pay a HUGE amount in condo fees each month to maintain our beautiful, but old, townhome complex.
With the money we spend on condo fees each month, we could hire somebody to keep up the lawn, garden, and clean a detached house weekly.
In hindsight, it was good to get into the housing market, but if we’d rented for a year or two and saved aggressively, we could have afforded a small home that would not have come with condo fees.
Condo fees seem to be higher with older places (and places with more amenities), so keep that in mind when looking.
6. Check That the Condo is Well-Managed
If you are buying a condo or townhome, have an expert look through the condo documents and history to be sure it’s well-managed. Our realtor hooked us up with somebody who was experienced with reviewing condo docs.
You’ll want to make sure that the condo/townhome board has enough money to take care of needed repairs and that they don’t do special assessments often.
A special assessment is where the condo board can just demand $10,000 or more from each condo owner to complete urgent repairs – this happens because the board didn’t budget properly for needed upkeep.
Try to see if it looks like they’ll need a special assessment soon – for example, have they been putting off repairs that are piling up and not building a big enough reserve?
7. See if Your Home is in a Natural Disaster Zone
Something many people never consider is the effect a natural disaster could have on their home, because of its location.
Find out if your home is in a flood zone, tsunami zone, or a high-risk earthquake zone. It shouldn’t be hard to find this information, and it could save you a LOT of loss in the long run.
Be sure to ask your insurer about how this would affect your home premiums and coverage.
8. Look at Who Did the Finishes
When you’re looking at homes it’s really easy to fall in love and become blind to certain things. This sort of happened to us.
With our townhome, we took a quick look around and then came back again. We loved so many things about the house but it wasn’t until we moved in that we realized we’d glossed over a lot of things.
The tiles on the kitchen wall didn’t fit cleanly around the electrical outlets. There were weird gaps in the flooring. It was obvious that somebody had upgraded this home but they didn’t know what they were doing. Many things had NOT been done by a professional.
Luckily, this was all superficial stuff and nothing structural, so it’s not a HUGE deal. However, when we’re trying to sell, those details could scare off buyers.
9. Get an Inspection
Before you buy a home, you should ALWAYS get a professional home inspection. Sometimes there are things wrong with a home that are not immediately obvious, and only an inspector will be able to see them.
The inspector checks for things like the stability of the structure and any mold problems. And that’s all stuff you NEED to know about before buying.
It might be tempting to skip this step to save money, but it could seriously backfire on you.
10. Look for Signs of Asbestos
Something that doesn’t cross many people’s minds is checking for asbestos. I LOVE older houses. They have so much character and charm, but in houses built before about 1990, there’s a chance asbestos was part of the building materials.
Now, asbestos can actually be NOT a big deal.
It isn’t usually a problem if you’re not planning on doing renos. But if you’ll do anything that disturbs drywall or ceilings, you’ll want to:
a) buy a newer home OR
b) learn about the extra steps you’ll need to take to do renos on a house with asbestosLooking for Asbestos probably won’t be part of a regular home inspection (it wasn’t part of ours). That’s because you’d often have to cut off a piece of drywall or ceiling and send it in for expensive testing to know FOR SURE if there was asbestos.
If you really want to reno, and really don’t want to deal with asbestos, you should probably buy a home built after 1990.
11. Look at Zoning and Structure if You Want to Reno
If you’re buying a home based on how much you’ll love it after you do renos, you’d better be sure to check and see if you can actually complete the renos you’d like to do.
Are there any zoning issues that would stop you from expanding the size of the home or from adding a secondary suite?
Are you hoping to knock out a wall that could be a load-bearing and essential to the structure?
Make sure to check out all the angles before you buy a fixer-upper.
13. Use a Realtor
Okay, using a realtor to buy our home was SO helpful. In fact, I really think every first-time buyer (probably EVER buyer) should use a realtor.
She told us the right questions to ask, found us somebody to critique how the condo was being managed and got us a good deal on our place.
We got recommendations from family and that’s how we found our realtor, but you can also find reviews online to make sure you get a good one!
Put the Tips for Buying Your First Home to Use
There are so many considerations to make when you’re buying your first home, but lots of people get through the process and have a great outcome!
So use the tips above to help guide you through purchasing a house, and don’t be too shy to ask questions along the way!
What do you think are the most important things to consider when buying your first home? Did we miss anything? Let us know in the comments!