When my husband and I purchased our first home, we did so on a whim because our apartment lease was unexpectedly terminated. We had been considering buying a home within the next year or two, but when we found out we couldn’t keep our apartment during that time, we got excited about the possibility of moving straight from that apartment to our first home and kind of rushed the whole process.
I wish someone had been there at the time to tell us what to look for in a home, but we didn’t have any family nearby or any friends who were homeowners. We were pioneers! (Actually, we were just on the young side for getting married and buying a home in our circle of friends – 21 & 22 years old when we got married and 23/24 when we purchased our home).
In hindsight, there are quite a few things I would have done differently had I known what I know now.
5 Tips for First Time Home Buyers
Here are 5 things I REALLY wish we had known before purchasing our first home:
1. Consider the home’s age in your purchase. If the home is brand new, consider the cost to acquire window blinds, finish the landscaping and put final touches on the home, such as gutters. Some homes have these things, but many don’t. So keep a mental running total of the costs you’ll incur out of pocket once the home is yours. If the home is older, consider how close it is to needing major repairs. A 4-year-old home may not need anything major done right away, but if your home is closer to 15+ years old, you may be looking at an HVAC replacement, new carpets, replacing deck boards, and the like.
Here’s a picture of the back yard at our first home. This was taken AFTER we seeded the yard and planted those bushes. See how plain it looks? Major landscaping needed to be done, but to even get it to this point took a surprising amount of money and labor.
2. A steady employment history is important and there will be a LOT of paperwork involved. We were fortunate that we both had good jobs when we went to apply for our home loan. But if we hadn’t had our jobs for at least 6 months prior to that, we would have been in for a rude awakening! I was completely shocked by how much paperwork you have to provide to secure a loan. Lenders look at income, assets, job history, credit score, total debt, and how much you’re willing to put down as a down payment. And they’re not going to take your word for any of this. You have to prove it with paycheck and bank account records! (p.s. using a single bank for all of your personal banking would be helpful in this situation)
3. Keep in mind that 20% of the purchase price of the house is the traditional estimate for a down payment. That’s the rule of thumb we’ve all heard, but I never knew why. I know now that not being able to put down 20% means you must get private mortgage insurance (or PMI). It is essentially your lender’s insurance against the risk they’re taking giving a loan to someone who doesn’t have the money for a down payment. It’s typically 0.5% – 1% of the balance of the loan per year, so depending upon the purchase price of your home, it can really add up! We ended up doing a weird combination of two loans where one interest-only loan served as our down payment. I would not recommend this, as it was a rather risky move. Knowing what I know now, I would probably save up at least half, if not close to all, of the required down payment. There are options if you can’t, but more savings is always a good thing, right?!
4. If you are buying a home on two salaries, consider whether or not you will continue to earn two salaries. The traditional rule of thumb is to look at houses that are 2.5 times your annual salary. Lenders like Capital One commonly recommend keeping your monthly housing payment below 28% of your gross household monthly income. If you’re purchasing a home based on two incomes, you may have some tricky considerations. We purchased our current home on two salaries, but shortly thereafter decided I would become a stay-at-home-mom when our first child was born. We quickly went from having a home that we could easily afford on two salaries to being stretched wayyyyy too far to afford that same home on just one income. Things were very tight for over 2 years after my daughter was born because we were basically sending all of our money to the mortgage lender. It wasn’t until my husband got a promotion and I started making money from home that we felt a little better about our budget. Leaving a job intentionally is one thing; you should probably also consider what would happen if one of you should lose your job due to company layoffs. These days, layoffs are quite common, so it’s a very real consideration.
5. Consider your family’s needs over the next 5-10 years. When we purchased our current home, we didn’t have any children. Fast forward 7 years later, and we have 3! With 4 bedrooms and lots of guests visiting on a regular basis, our girls share a room so we can have a guest bedroom and dedicate the smallest one on the first floor to a playroom. Having our girls share a room isn’t a big deal; they love it. But their brother’s room is tiny. Perfect for a baby, but not so much for a big kid or teenager. If I had to do it all over again, I would have opted for a house with less land and more square footage so all of the bedrooms could be larger.
More Guidance on Buying Your First Home
Capital One’s goal is help first-time homebuyers understand how the home loan process works, so they’ve launched a new online learning center called the Capital One Home Loans Online Neighborhood. It’s a free online resource where you can learn all about home buying. There you will find easy-to-understand articles and helpful videos, as well as information about Capital One’s Home Loans offerings.
The Capital One Home Loans Online Neighborhood covers all stages of the home buying process – from deciding whether now is even the right time to buy and how much home you can afford, to the documents you need to apply for a mortgage. I wish this resource had been available when I bought my first home! I highly recommend checking it out before embarking on your first home buying journey. You can never be too prepared!
I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.