Buying real estate for the first time
Gather your documents.
Get your documents in order. You'll need to have the following at hand:
Two years of tax returns
Pay stubs for two months of work showing your year-to-date earnings
Bank statements for two months, including checking and savings accounts as well as any investment accounts you might have. For investment accounts, you may want to show up to six months' worth, depending on how volatile they are.
Credit card statements for two months (if you don't pay off your credit cards every month)
You might need more than that if there's anything unusual about your financial situation—for example, if you work in a field where bonuses tend to be large and irregular or your employment status is precarious.
Avoid letting emotions drive your decisions.
As you go through the process of shopping for your first home, it will likely be one of the biggest financial decisions of your life. You may also find yourself emotionally attached to a particular house or neighborhood. If you can't see yourself living anywhere else, you're probably dealing with emotions driving the decision-making process and not just your head and wallet. This is understandable but needs to be avoided in order to make a rational decision.
Remember, this is an investment that needs to be properly researched and evaluated, not a home that fulfills all of your dreamy notions about what it should look like. It's important to remember this throughout the entire process, from looking at properties on Zillow to negotiating with a seller after having made an offer on their property.
Learn where you can afford to buy.
Knowing your budget is important. If you’re thinking about buying real estate, being conservative with your budget is a smart move. If you have a mortgage and have to pay for repairs and property taxes, it can create a stressful situation.
If you think you might spend money on other things besides the house, like dining out or entertainment, include those amounts in your calculations to make sure that you don't overspend. You should also consider how much of the home's value will be consumed by interest payments in the first year or two after purchase.
Prioritize what's most important to you.
Define the problem. In this case, your problem is that you want to own a home, but you don't know where or how to start.
Set your goals and prioritize what's most important to you. You might be looking for a particular number of bedrooms, a house in a specific neighborhood, or something with a high walk score so you're not relying on your car all the time. Make sure these are things that are achievable within the context of your budget and timeline; otherwise, it'll only lead to disappointment further down the road.
Don't compare yourself—or your goals—with other people's needs and preferences. Everyone has different parameters and priorities when it comes to purchasing real estate: some folks are willing to sacrifice proximity to work or school while others will accept higher commuting costs if they can get their dream home in an ideal location.
Think beyond the house itself and pay attention to its surroundings.
After buying a home for the first time, it can be hard to know where to look. But there's no need to overthink everything. Understanding what matters to you and what doesn't and then keeping in mind that the house is only part of the equation will help your home purchase go smoothly and stress-free, giving you time for the fun stuff—like hanging out with your friends and family, taking care of your pets, or working on projects instead.
Schools matter: Some neighborhoods without good schools may not be right for you even if everything else looks good.
Safety matters: Many neighborhoods have high crime rates, so consider how safe they are before moving in or buying your next home there.
Transportation matters: Many neighborhoods do not have public transportation nearby, so consider how close you'll be able to get to public transportation before deciding which neighborhood is right for you.
Be realistic about how long you'll be in one place.
Think about how long you'll be in the house. If you're planning on moving in a few years, or if you know your job requires you to relocate often, buying a house probably isn't right for you.
If you decide that buying is right for you, carefully consider which neighborhood will make the most sense for your family and lifestyle. Remember that many other homebuyers are also looking at the same neighborhood as it becomes popular and desirable. Do research to find out what makes sense for your situation.
If you have a lot of time to devote to renovating, then buying an older home that needs work could be a good idea. But if your time is limited because of other life commitments, then consider purchasing something newer instead.
Finally, remember that life happens! Make sure it's realistic that you won't need to move soon after making this purchase before diving in—nobody wants their first real estate experience to turn into an expensive hassle!
Understand that real estate is local, not national.
You are not the first to think that what happens nationally with real estate should be reflected in your local market. But it doesn’t work like that. Real estate is a very local business and you need to know as much as you can about your area. Are prices up or down? Is there a lot of inventory? What is the average time on the market for homes in your area? Do houses sell fast or slow or somewhere in between?
There are many reasons why things might be happening locally that don’t reflect national trends, but here are some of the biggest ones.
Local home prices reflect supply and demand, so even if it’s relatively cheap to buy a house from one state to another, that doesn’t mean that every city has low prices all of the time. For example, there might be more jobs available in certain towns than others throughout different times of year.
Real estate laws vary from county-to-county and state-to-state. Some areas have seller disclosure laws where sellers have an obligation share information with buyers before they purchase their properties while other states don't require anything at all! In addition, some areas require inspections while others let buyers decide whether they want them done (or not).
It's important to understand what you're getting into before buying a home.
Purchasing a home for the first time is an exciting proposition, but it's important to understand what you're getting into before jumping in. Buying a house is a big commitment—the reality of homeownership includes financial and personal costs that should be addressed thoroughly. It's not enough to just be able to pay your mortgage each month; you must also be prepared for the other costs associated with buying and maintaining a home. To make sure you're ready to take this step, consider whether or not you are:
Prepared for the long-term commitment of buying vs renting
Ready for the extra fees that come with owning rather than renting
Able to afford an emergency fund
