Buying a home for the first time can be exciting… and overwhelming. Especially when you see homes being purchased at a median cost of $426,000 in Massachusetts and flying off the market as soon as you can find them.
With these current real estate trends, it’s understandable that you may find yourself tempted to impulse buy the first home you find – one doesn’t check all your boxes and worse, one that could hurt your financial goals and keep you locked into a mortgage well into retirement.
Nobody wants this. You don’t want this and I don’t want this for you! Trust me when I say it’s worth the patience and doing things the right way. The right way meaning buying a home that you love, of course, and one that doesn’t break the bank.
I know what you’re thinking… “Yeah, that’s all well and wonderful, Maura; but where do I even start?”
That is possibly the best question you could ask a top-performing Keller Williams Realtor in Massachusetts. I know exactly how to get you through this trying time and I’d be happy to help you. First, let’s start with my top 10-tips that I’ve assembled to help first-time homebuyers tackle the home-buying process. Buying a home should be a blessing, not a burden – so let’s walk through these tips together.
Top Ten Tips for First-Time Home Buyers
- Pay off all debts & set aside some emergency cash.
Owning a home is EXPENSIVE. Once you purchase your dream abode, you become responsible for SO many things. Broken faucets, leaky shower drains, frozen pipes… the possibilities are endless when it comes to maintaining a home and the costs can and will add up. So, before even thinking about buying your first home, wipe your slate clean and pay off all of your debts and prepare an emergency fund for up to 6 months of expenses.
2. Determine just How Much House you Can Afford
Budget, Budget, Budget. It’s easy to fall in love with a massive beauty but can you afford the massive mortgage payment attached to it? You need to budget accordingly and leave room for other necessities (including HOA fees, taxes, insurance, etc.)
For example, let’s say you bring home $5,000 a month. Multiply that by 25% to establish your maximum monthly house payment of $1,250. Based on a 15-year mortgage with a 4% fixed interest rate, here are the home options you can afford (not including taxes and insurance)…
Let’s do some math:
- $187,767 home with a 10% down payment ($18,777)
- $211,238 home with a 20% down payment ($42,248)
- $241,415 home with a 30% down payment ($72,424)
- $281,650 home with a 40% down payment ($112,660)
That’s an easy way to find a number in your ballpark. But don’t forget that property taxes and homeowner’s insurance will affect your monthly payment. You’ll also need to factor those numbers in before settling on a maximum home price.
If you use the above example and enter $211,238 into this handy mortgage calculator, you’ll find that your maximum monthly payment of $1,250 increases to $1,515 when you add in $194 for taxes and $71 for insurance. To drop that number back down to your monthly housing budget of $1,250, you’ll have to lower the price of the house you can afford to $172,600.
Since property tax rates and the cost of homeowner’s insurance vary, check with your real estate agent and insurance company for estimates to calculate how much house you can afford.
3. Continue to Save up for that Down Payment
Rule of thumb? 20% (or more) of the total house price is recommended as a down payment on a home purchase.
4. Save for Closing Costs
Remember when I said maintaining a home was expensive? I meant to say buying one was as well. Along with your down payment, you are going to need to set aside money to pay for closing costs. On average, closing costs are about 3-4% of the purchase price of your new home. Your mortgage lender will give you a total number so you know what to bring with you on closing day. You may be wondering what this fee covers. It covers:
- Appraisal
- Home Inspection
- Credit Report
- Attorney
- Homeowner’s Insurance
5. Get Preapproved
Did you go ahead and clear your debts, stay debt-free, and save your money the down payment as well as the closing costs? YES! Then you are ready to go ahead and start your application for a loan. I happen to know the best loan originator around if you are looking.
Stephen J. Lewis
Licensed Mortgage Originator
Branch Manager
c. 781-706-1145
o. 978-750-1080 x.11
e. [email protected]
Preapproval is important because it shows sellers that you’re a serious buyer which is a great way for a buyer to stay ahead in a competitive market.
6. Find a Home for Sale in your Price Range
This is the FUN part. According to recent data reported by the National Association of Realtors (NAR), most buyers either found the home they purchased online (50%) or through a real estate agent (28%). Doing both sets you up for success! You can find your dream home simply by looking through my listings or contacting me to do the search for you.
7. Research Neighborhoods
Finding the perfect home is important but don’t choose a home based on the property alone. The quality and location of the neighborhood need to be a factor in your decision. Ask your real estate agent for information on crime rates and the quality of schools around your prospective neighborhoods. Calculate your new commute times to see if they seem manageable. Visit the neighborhood at different times and days to check for traffic conditions and noise levels and to see if people are comfortable being outdoors. Only choose a neighborhood that you and your family feel good about.
8. Attend Open Houses
Once you’ve narrowed down which neighborhoods you like the most, visit open houses of homes you weren’t even considering. Why? It’s a great way to learn about where you want to live – maybe meet the people you want to eventually live beside and call your neighbors; become acquainted with the area. The house may not be your dream home, but when do eventually find the house you love, you’ll know because you’ll have something to compare it to.
9. Make an Offer
You’ve found your HOME. You’re already preapproved which is GREAT and you want to make an offer. But, how much should you offer? This is where you can rely on an experienced Keller Williams Agent, like myself, to use my expertise and guide you through buying a home for the first time. It’s important to make sure your offer is competitive but well within your budget and the home’s value. Don’t be impulsive and offer a value higher than you can afford in an effort to subdue the competition. Sometimes, the simplest effort can win the prize.
PRO TIP. Writing a personalized letter to the seller of the home helps your offer stand out amongst multiple bids.
10. Prepare for Closing
Your offer has been accepted! It’s time to prepare for the average closing process of 43 days – which gives plenty of time to tackle a few items.
- Appraisal
- Home Inspection
- Homeowner’s Insurance
Your realtor will schedule the few remaining steps, such as the inspection and final walkthrough and keep you updated every step of the way. As you prepare during this very exciting time, be sure to read every document. If you don’t understand something, ASK; especially before you sign an official contract.
Need help finding a home in Massachusetts or New Hampshire? Get in touch with me, Maura Allard, Senior Real Estate Specialist with Keller Williams Beverly.
Stephen J. Lewis
Licensed Mortgage Originator
Branch Manager
c. 781-706-1145
o. 978-750-1080 x.11
e. [email protected]
Preapproval is important because it shows sellers that you’re a serious buyer which is a great way for a buyer to stay ahead in a competitive market.
6. Find a Home for Sale in your Price Range
This is the FUN part. According to recent data reported by the National Association of Realtors (NAR), most buyers either found the home they purchased online (50%) or through a real estate agent (28%). Doing both sets you up for success! You can find your dream home simply by looking through my listings or contacting me to do the search for you.
7. Research Neighborhoods
Finding the perfect home is important but don’t choose a home based on the property alone. The quality and location of the neighborhood need to be a factor in your decision. Ask your real estate agent for information on crime rates and the quality of schools around your prospective neighborhoods. Calculate your new commute times to see if they seem manageable. Visit the neighborhood at different times and days to check for traffic conditions and noise levels and to see if people are comfortable being outdoors. Only choose a neighborhood that you and your family feel good about.
8. Attend Open Houses
Once you’ve narrowed down which neighborhoods you like the most, visit open houses of homes you weren’t even considering. Why? It’s a great way to learn about where you want to live – maybe meet the people you want to eventually live beside and call your neighbors; become acquainted with the area. The house may not be your dream home, but when do eventually find the house you love, you’ll know because you’ll have something to compare it to.
9. Make an Offer
You’ve found your HOME. You’re already preapproved which is GREAT and you want to make an offer. But, how much should you offer? This is where you can rely on an experienced Keller Williams Agent, like myself, to use my expertise and guide you through buying a home for the first time. It’s important to make sure your offer is competitive but well within your budget and the home’s value. Don’t be impulsive and offer a value higher than you can afford in an effort to subdue the competition. Sometimes, the simplest effort can win the prize.
PRO TIP. Writing a personalized letter to the seller of the home helps your offer stand out amongst multiple bids.
10. Prepare for Closing
Your offer has been accepted! It’s time to prepare for the average closing process of 43 days – which gives plenty of time to tackle a few items.
- Appraisal
- Home Inspection
- Homeowner’s Insurance
Your realtor will schedule the few remaining steps, such as the inspection and final walkthrough and keep you updated every step of the way. As you prepare during this very exciting time, be sure to read every document. If you don’t understand something, ASK; especially before you sign an official contract.
Need help finding a home in Massachusetts or New Hampshire? Get in touch with me, Maura Allard, Senior Real Estate Specialist with Keller Williams Beverly.