This piece is a compilation of great advice from real estate agents and homeowners on the topic of what first-time home buyers should know. I strongly recommend reading through each comment — it could potentially save you a significant amount of money and headache!
The most common piece of advice that real estate agents commented on, by the way, is always get a home inspection. It may cost you $250-500 and can easily save you far more than that. But beyond that, these are the points people made, along with links to the full comment:
- Just because you have a pre-approval letter, doesn’t mean you’re guaranteed a loan (link)
- Consider hiring an attorney who can ensure things are up to scratch (link)
- Try to find multiple lenders (link)
- Consider how long you’ll stay in a property (link)
- Know your credit score (link)
- Utility bills can be more expensive than you think (link)
- Get a feel for who your neighbors are (link)
- Account for additional costs like homeowners’/condo association fees and repairs (link)
- Never remove a home inspection from your offer to increase your chance of getting the deal (link)
- Consider the age of the home, and if it’s an old house, see if an asbestos test has been done (link)
- Look at what your property taxes will be (link)
- Watch out for shoddy renovation work (link)
- Look for a property that you can use as an investment as well (link)
- If you’re buying a house with a basement or crawl space, check the foundation for cracks (link)
- Check past heating bills (link)
- Check if you may be liable for costs of putting in sidewalks in future (link)
- Quality of materials matters (link)
- Consider checking the sex offender registry for your new neighbors (link)
- See if there are any easements on the house (link)
- Watch out for contractors that bait and switch (link)
- Have a condo expert review the status certificate prior to making an offer (link)
- Have a radon test done (link)
- Consider the possibility that you’ll be changing jobs in future, and the possible commute (link)
- Be proactive: see as many houses in as fast a time as possible (link)
- Try to find good, responsive lenders and realtors (link)
- A house with a lot of wallpaper can be a problem (link)
- Test for lead-based paint (link)
If you have anything to add to this and you’re qualified to comment (i.e. you’re in the real estate industry or you’re a home buyer who learned a valuable lesson), you’re very welcome to make a submission here and I’ll add it.
Something that we have actually seen a lot, is people thinking that their pre-approval letter means that they are guaranteed a loan. We see people go out and make other large purchases, such as cars, before they have gone through the underwriting process with their bank of choice and then ultimately can't get approved for a loan due to their debt to income ratio being too high after the other purchase. Our advice to everyone looking to purchase a home is always to do as little financially as possible until you sign the documents saying that you are the new owner of the home.
--Brittany Hovsepian, The Expert Home Buyers
Hire an attorney to help with your home purchase. We see all too many cases after the fact where clients need our help. Non-disclosure claims are on the rise, buyers often over pay or ignore what are clear red flags to us.
--Charles Gallagher, Gallagher & Associates Law Firm
A home loan is generally the way to go for most people who want to buy a new house. This is a great way for the person to afford a new home for their family. Unfortunately, some people make hasty decisions and do not know what to look for when buying a home for the first time.
Sure, taking a good look at the home itself is important, but one thing that you may overlook is the fact that some lenders tend to charge more fees or have unpleasant terms and conditions related to their contracts.
Many people tend to apply to one company and then sign a contract. You are limiting yourself in this way. Try to find multiple lenders and see what each can offer you.
Bottom Line: When buying a home for the first time, consider multiple offers to find the best deal.
--Thomas Bradbury, GetSongkey
My #1 piece of advice is to consider how long you are likely to stay in the property. If there's a decent chance it's going to be less than five years, they shouldn't buy in the first place.
The transaction costs involved with buying and then selling a home are significant. While every market will be different due to local taxes and other costs, in NYC, most owners will pay a total of ~10% to buy and then sell a property. That's a huge amount of money and if you don't give the property enough time to appreciate, you'll lose money, even if it appreciates slightly.
Also related to this, one of the biggest benefits of owning a home is the ability to exclude capital gains on the sale of your primary residence (up to $250,000 for an individual, $500,000 for a couple). The longer you own your home, the more likely it is that your home will appreciate and be a good investment, allowing you to take advantage of that tax brak.
So while owning a home has a lot of benefits, its major drawback is you become locked in. I heard someone say renting buys flexibility which is a great way to put it and if your life is likely to need some flexibility, renting is the way to go. (EDITORS NOTE: see our piece on when to rent vs buy for more considerations on when to rent vs buy).
--James McGrath, Yoreevo
My husband and I are real estate agents. Here's our advice:
Your credit score is always critical. It's the go/no go dividing point that lenders use to determine whether or not they will even consider you as a mortgage candidate. Knowing what score your lender requires is critical, especially now. In the few months since COVID19 hit the scene, one of the lenders we recommend has raised their minimum credit score from 620 to 680. More change is likely if the pandemic lingers.
Even if you were pre-approved a few weeks ago, you need to 1) monitor your credit score, and 2) stay informed about your lender's requirement to make sure you qualify when you are actually ready to sign a contract and begin the mortgage process.
--Sandy Walker, walkersriversideproperties.com
Utility bills can be substantially more expensive if you're moving up
If you have never owned a home before, the costs of your utility bills may surprise you. Many first time buyers are moving up in size from a small home or apartment where the landlord paid part of the utility bills. These buyers may assume that the amount of their utility bills will remain similar to where they moved from. However utility bills, especially electricity and gas, can be dramatically different between a 1,200 square foot home and a 2,000 square foot home. A safe bet is to plan on paying double whatever you paid for utilities as a renter. Even if your new home doesn't cost two times as much as your previous home, you will be better prepared for the costs of your utilities.
When you buy a house, you also buy a neighbor
Whether it's the neighbor with the messy yard, or just a neighbor who is difficult to get along with, having a bad neighbor can lead to emotional stress or even unexpected costs. I once had a neighbor who threatened to sue me if I put up a fence between our two properties without getting the property surveyed. At the time, I didn't have any plans to put up a fence, and had never indicated to my neighbor any plans to do so. What I learned later was that this neighbor's attitude was well known to the rest of my neighbors who intentionally avoided contact with her.
If you're buying in an area you are unfamiliar with, it can be beneficial to knock on a few doors around the neighborhood and get a feel for who your neighbors will be. They might also have some insight into the house you are considering buying. A neighbor who seems intent on sabotaging the sale, should be a warning. That same neighbor might also do the same thing to you when you're ready to sell. Worse yet, if you have a litigious neighbor and they sue you, you will have to disclose any pending lawsuits against your property when you sell.
--Robert Taylor, The Real Estate Solutions Guy
I think the most important thing for people to consider that their lenders try to convey, but aren't always successful, is the *true* cost of home ownership. It's easy to look at the mortgage amount and say, "We can handle that," but some buyers--especially first-time buyers--fail to account for additional costs that might not be included in their mortgage like homeowners'/condo association fees, utilities, and repairs.
Always make a budget before purchasing, and in that budget, set aside some cash that you're going to regularly save for emergency repairs. Remember, too, that just because you're *approved* to buy a half million dollar home, doesn't mean that you *should*. That approval amount is usually the maximum amount of loan you can carry, and might not allow you to live as comfortably as you'd like.
--Michael Bradt, mbradtlaw.com
Due to high demand, I have seen multiple offer situations where a buyer may consider removing home inspection from their offer to increase their chances of securing a deal. This is a bad idea, especially for first time buyers who may not truly understand the costs of owning and maintaining a home. A good home inspector spends time going through all of the mechanical and structural pieces of a home beyond what the naked eye can see. By not having a professional review these big ticket and often costly items, a home buyer is putting themselves at risk.
--Danielle M. O'Brien, Parkway Real Estate
Most first time homebuyers don't consider the age of the home when searching for their first purchase. While structural issues can be of concern for homes built in the early 1900's, people often overlook the dangerous building materials that a home may harbor. Asbestos is one of the many dangerous materials that is still prevalent in homes built prior to the 80's today. Asbestos is a known human carcinogen that is most commonly associated with mesothelioma cancer. If you are interested in an older home, it is important to ask if an asbestos test has been performed. If not, you should have one done during the home inspection.
If asbestos is found in the home, it's important to note that it becomes extremely hazardous if disturbed. Also, if you want to have asbestos-containing materials (ACMs) removed, this can incur a hefty bill. On average, asbestos removal can cost from $1,500 to $30,000. Since there is no safe level of asbestos exposure, knowing the risk beforehand is essential prior to following through with a purchase.
--Colin Ruggiero, Mesothelioma.com
The main piece of advice I can share for first time home buyer’s that is often overlooked, and has significant financial impact is to look at what the property taxes are most likely to increase to. In Texas for instance, often times home buyers and lenders will only look at what the property taxes are currently set for on the home, versus what they could, and will likely increase to after purchase.
Most homes have lower (in some cases significantly lower) taxable values versus current market values, thus, when the buyer’s purchase, the taxable value increases the year after purchase, and buyer’s are left with a deficit in their escrow account. This jumps typically takes place in March of the following year and catches buyers off balance with a mortgage payment that can be several hundred dollars more than they expected. This is the most common in areas of the country where prices have seen significant increases, as well as home owners that purchase “flipped” homes that were previously valued significantly less.
Doing a little math on the front end by taking the current property tax rate, and multiplying it by the likely sales price of your future home will help home buyers determine how much the annual tax bill is likely to be.
Another often overlooked cost for first time home buyers, is the true cost of maintenance and home-ownership, and how pricey replacement items for major systems in the home can quickly add up. An old water heater for example in need of replacement can range from $1000 - $3500 for replacement by a licensed plumber, depending on location and replacement type. Landscaping costs, replacing worn and old fences, annual or quarterly pest control, and even tree trimming are items most first time buyers do not account for but can add up quickly.
--Peter Loudis, peterloudis.ebby.com
My tip: watch out for shoddy renovation work!
It's quite common for home sellers to remodel their homes before putting them on the market. When they do this, money drives every decision.
How do I spend the least and sell for the most?
Consequently, corners will be cut. They will purchase cheap, low-quality products, perhaps use the wrong products, and hire the cheapest labor to install them.
This is something that especially targets first time homeowners as they typically will buy a turn-key home that doesn't look like it will need a lot of repairs.
--James Upton, diytileguy.com
The bit of advice that I'd offer to first time home buyers is to look for a property that they can use as an investment as well. This can include a duplex, triplex, or quadplex. It could also be a home with an ADU (accessory dwelling unit) that they can rent out. This will give them the ability to live in a nice place that they own, while having most of their bills paid by their tenants. It is a very powerful tool that can kickstart their financial journey as well as give them their first home!
--Preston Roach, Progress Ninja
When you buy a house with a basement or crawl space check the foundation for cracks. If it has cracks that run vertical, its not so bad. However, if they run horizontal there is a major foundation problem.
--Robert Linker, familydebtplanning.com
A main aspect to look into on homes - especially old homes is to check past heating bills.
Several less-obvious problems may lead to very high heat bills, and giving a quick call to check the billing history on the home may lend some clues.
Some potential causes: Many older homes have poor insulation (or no insulation in places using old plaster and lathe). Old windows are another cause. Electric heaters tend to rack the price up quite a bit. If duct-work is not strung efficiently, or not sealed well, the system may be very inefficient.
Save yourself the surprise of insane heat bills or a $5,000+ furnace replacement on the coldest days of winter by doing your research!
--Kate W., Pleasure Better
Sidewalks. If you live in a town or area with high pedestrian traffic you may be required to put in sidewalks at your own expense in the future. Check your local municipality for more details. The town near us had a rule dating back to the 1980’s that when they repaved a road, the homeowners on that street had to pay to put in sidewalks. This cost some homeowners alone 10K+.
--Josh Eberly, 717homebuyers.com
As per my experience, a beautiful interior fascinates people this much that they forget about the “quality” part. Remember, material quality matters. Some materials are highly attractive but not durable. They need replacement earlier than the expensive ones. It means substantial investment after a few years of buying a home. Many buyers cannot judge the material quality on their own, so they should hire a reputable professional or agency to check the qualitative part and conduct a comprehensive inspection. The bottom line is, buyers should not just rely on the functionality but should keep a keen eye on durability.
--Aqsa Tabassam, upflip.com
I have a couple of recommendations for first time home buyers. The first one is something that not many people actually think about, but is definitely something that should be considered. That's checking the sex offender registry to see if any of your potential new neighbors are listed. You want to make sure that the neighborhood you are planning to move into is safe. The second item is to go to town hall and pull all old building permits and check to see if there are any easements on the house. There might be something such as a fire or water damage that wasn't disclosed to you. These are all things that may cause you trouble down the line if you don't look into them before you buy.
--Tonya Davis, vfund.com
WATCH OUT FOR CONTRACTORS WHO BAIT AND SWITCH:
Contractors are notorious for starting a job and taking several months to finish it. You won't have the Property Brothers to renovate your new home therefore be cautious. Never give or pay a vendor his entire draw up front, you don't want them disappearing with your hard earn cash. Check references, bait and switch is something else you must look out for. You contact the vendor for one project at one price and before you know it, they have added in something else that's four times what you were looking to spend. It's your first home and you want it beautiful but don't let your emotions get the best of you. Do your due diligence, use licensed contractors and when all else fails, listen to your good old fashion common sense.
--Chantay Bridges, losangelesrealestatenow.com
Have a condo expert review the status certificate PRIOR to making an offer, not after. Not just any realtor, but one that has extensive experience trading/managing condos specifically.
Why: The status certificate is a vital piece of document that tells potential buyers about the condo; things that aren't visually noticeable eg. whether the unit is in arrears of the maintenance fees, the audited financial statements, the budget, condo rules etc. Typically, buyers include a condition for their lawyer to review the status certificate AFTER acceptance. Having the offer accepted is already a challenge worth celebrating. But finding out that the building has a no pet policy, is running a deficit or is expecting a huge hike in maintenance fees next year, could be a real deal breaker for the buyer. Hence, having a knowledgeable realtor be able to analyze the status certificate prior to putting in an offer leaves no surprises after the fact.
--Margaret Lam, Re/Max Excel Realty Ltd
It's a good idea to have a radon test done before you agree to buy a home. This is something many first time home buyers overlook. It's a small expense that can potentially save you thousands of dollars. Radon is a naturally-occuring odorless gas that can cause lung cancer. It originates from the breakdown of uranium in soils, rocks, and water. Radon gets into the air and can seep into a home through cracks in the foundation. A test will allow you to know if the property has elevated radon levels. Frequently, this test is done by a home inspector. A short-term test usually costs approximately $75. But it's well worth it. A radon reduction system can often cost a couple thousand dollars. A radon test should be part of your due diligence in order to avoid incurring extra costs.
--Ricardo Mello, Manhattan Miami
Access To More Jobs
It's no secret that people are changing jobs more often. A mistake we see people make is to buy a house based on the location of their current job. We always recommend that if they are going to remain local, then they should look to buy homes in a more central location for the jobs that they could transition to next. For example, if you're an engineer and your current job is on the outskirts of the city, but most of the engineering jobs are within the city, you wouldn't want to buy a house 30 minutes further out into the suburbs past your current job. If you change jobs in the next 2-5 years, you could be doubling your commute. Think longer-term about where your next career move could be and when before making your next purchase.
Not Being Proactive
A lot of buyers will find a home online, reach out to their Realtor, and schedule a time to view the property when everyone's schedule aligns. What's worse, sometimes buyers will wait to tour homes until they can bath 2-3 showings into one day to save time.
This is a faulty approach in two ways; you may be wasting your time looking at properties you don't like and you may be touring the home too late.
You should be finding properties online and then doing a drive by the property and the neighborhood as soon as possible before reaching out to your Realtor. When you do this, you will quickly weed out homes that match your criteria. Imagine that you're trying to find a home in a well-maintained neighborhood and a couple of the neighbors have cars parked in the yard that they are working on. These are things that Google Maps or the listing may not show. You will weed out properties much quicker with this approach while respecting your Realtor's time and not making them meet you at houses that you instantly realize you don't want to buy when you pull up.
In a competitive market, speed is king. Maybe your schedule, your Realtor's, and the seller's don't line up to see the home for a week. In the meantime, other buyers are getting in to see the property and make offers. You're at a serious disadvantage by waiting to check out the property ahead of the showing with the Realtor.
--Shawn Breyer, eastatlhomebuyers.com
I think that all first-time buyers should start out finding a really good and responsive lender. I have found that a good lender is paramount in the transaction especially with first-time buyers. They can answer all financing related questions and should provide the buyer with a cell phone number and email address. The lenders I work with will also keep their agent in the loop, and it becomes a team effort. The lenders are so savvy when it comes to different programs geared towards first-time buyers and excellent at helping the buyer figure out what is best for their situation. I have also found that good lenders are excellent at helping buyers repair their credit quickly if they need to do so to buy.
Another thing I think all buyers and especially first-time buyers need to consider is finding a realtor who they not only like as a person but who has enough of a track record to be able to guide them. A good agent can save the client thousands through the negotiation of the purchase price, repairs, etc. The seller also generally pays the buyer's agent fee, which is a question I always get from my first-time buyers. Ask your friends, family, co-workers who they recommend as a realtor, and why. Find someone who you can trust and who can answer your questions.
I would recommend that all first-time buyers plan on looking at a few homes before writing an offer. Most people don't know what they want at the beginning of their search or don't understand exactly what their money can buy. They learn as they look at homes what is most important and what is less important. I find that it is very helpful for the buyers and the agent to keep notes of what they liked/didn't like about the properties. When meeting with your realtor make sure you go over what your goals are in the new home. What neighborhoods, price point, things which are important to you and necessary vs what you would like to have. Then when looking know those needs might change and communicate your needs with your agent.
When we see a house that my clients love I always recommend that they walk around the neighborhood to make sure they like the location before we write the offer. I have found that this will either make people fall further in love or kill the deal. Consequently, it saves us all a lot of time and money.
--Jen Snodgrass, jensnodgrass.com
Regardless if it's your first time or not, buying a house can be intimidating. There are just so many things you need to consider and so many minute details that can cost you a lot of money. One, typically, unknown fact is homeowners should probably avoid a house with a lot of wallpaper. It's surprisingly, very difficult to remove, resulting in just another task to deal with once you've moved in. Instead, try opting for a home that hasn't been painted or that can be easily repainted.It's also one of the most cost-effective methods to enhance the value of your home, as you can buy a gallon of paint, rollers, painter’s tape, drop cloths and brushes for around $100. Neutral colours are the best paint selections as it appeals to many people making your house more attractive.
--Keith Melanson, RenosGroup
Not Testing For Lead-Based Paint
While sellers are obligated to fill out a lead-disclosure form in most states under the federal Residential Lead Based Paint Hazard Reduction Act of 1992, I would strongly recommend testing yourself for lead-based paint especially if the house in consideration was built before 1978.
In 1978, the federal government banned consumer use of lead-based paint because it is one of the common causes of lead poisoning. Young children are at a higher risk of being exposed to lead.
I recommend getting a paint inspection and risk assessment by trained professionals to ensure that you are not exposed to lead. Also, test your drinking water for traces of lead by getting in touch with certified laboratories. You can ask your state or local water drinking authority for this information.
--James Reed, PaintSprayerBible
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