Most economists and financial advisors would agree that (in the long term) there's really no terrible time to enter the market. A house is considered one of the safest investments as well as the one most likely to help build long-term wealth.
So, you're thinking about buying a house. What do you need to know?
1. Budget is everything: No one will allow you to buy a house you cannot afford. So, the first stop is figuring out how much you can (or want) to spend. There are some great Mortage prediction apps and affordability apps out there to get a ballpark idea of what you may be able to spend. But, the only real way to know is to find someone (a bank, mortgage lender, etc.) that would actually give you money. In this day an age, pretty much no one will accept your offer without a pre-approval, and many buyer agents want to know you're qualified before showing you houses. So, it's not a bad idea to start with a pre-approval in the home-buying process. A good Realtor will likely have a list of lenders clients have enjoyed using in the past is you're not sure who to reach out to for a pre-approval. Also, did you know you can shop around for lenders and it's just one credit pull if you do it all within a month? You can also ask various lenders if they can match or beat other pre-approvals you've received...sometimes they can.
2. Budget is everything (part 2): Yes. More on budget, it's that important. Here are a few pitfalls I've seen in my experience concerning budget when shopping for a house.
Looking at houses outside of your budget: Usually, it costs more because it IS better. Why look at something that you can't have. Clients that tend to do this have trouble being satisfied in their selections and often can't pull the trigger on anything. Whether it's FOMO or just false hope....but it just doesn't tend to work out for the buyer. You won't be able to "sneak" a deal...homes sell for what they are worth.
"I'm willing to spend this much in this area but less in another area: This one too tends to end up in buyers not buying anything. It's just too many moving parts, variables, etc. And, it's often a sign that the buyer really doesn't know what they want or where they want to be. Just set the max budget (you can always spend less) but if you're willing to live in a certain area, why not see everything you could afford in that area? I see this a lot when clients start considering the suburbs, they think they'll get a way bigger/better house for much less...what we are really seeing is that yes, you do get a bigger/better house...but for the same price as a smaller/closer in house. Many clients tend to spend the same amount, you just get more square footage for your dollar further out.
I'm going to wait for house prices and interest rates to go down: Historically, if you average the trends...house prices keep trending up and up. Yes, there may be dips in the prices and in the market, but we're not day-trading here. Most people own their home a minimum of 7-10 years....so start thinking longer term when it comes to homes. Now, rates? Yes, it technically lowers the amount of house you can get for your money...but overall the benefits of owning a home outweigh the reasons to wait. There are even lenders willing to offer free refinance options if rates dip within a certain amount of time. The option to refinance lets you get the house you want today and adjust the rate in the future. In the meantime, if you're waiting, you're paying rent...money that will never go to building your own equity.
3. Think of your search in terms of where OR what: This one is very Houston specific. Once you've set your budget you should either pick the LOCATION you want OR the TYPE of HOUSE. In my professional opinion Location, Location, Location is always the top of the list, but, if you have a specific budget and very specific house needs, in reality not everyone can achieve their dream house in their dream location. So, pick your area and your budget will determine what style of house is available to you in that location. Or, pick the metrics you need in a house, and your budget will determine where that house can exist in your budget. One of the toughest parts of the job is when we have to tell a client that what they want doesn't exist in their budget in their preferred area, so having this mindset going into the search can aid in setting realistic expectations in a home search.
4. Don't rely too much on your parents' advice: Home-buying has changed a LOT in the past 30 years. People are more mobile, they get transferred more, they don't tend to live in the same house for 40+ years. Lifestyles and priorities are different, so take some time to really consider what YOU want and what works for YOU. Don't get caught up in what one should have in a house...sometimes those things you think you need are really just societal influences, and breaking out of that thought can open up whole other areas of real estate.
5. Every house has problems: There is no such thing as a perfect house. Even brand new construction can have issues! Every house either has something wrong with it or it will in the future. All houses must be maintained, whether it's new or 100 years old. Getting inspections is a way for you to do your due diligence so you know what to expect or what you can prepare for in the future.
6. Prioritize your "must haves" and your "would be nice" to haves: And, know which ones you can live without...reference #5, even if you're building from scratch, there's likely something that you would like to change once you've moved in, something you didn't think of...so if a house has 4 out of 5 of your "must haves"....that's pretty darn good!
7. Rely on your Realtor: Having an experienced and knowledgable Realtor can really help the home-buying process. They will know what you need to look out for, they will be able to offer creative solutions to help you achieve your home-buying goals, help guide you through the transaction process and the great ones are a continued resource after the sale (reminding you to file your homestead exemption, getting the name of a great painter, etc.).
If you've been considering purchasing your first home, Bungalow Realty would love to hear from you. It's never too soon to start planning the process.
