Buying your first house is stressful but exciting.
When you’re a first-time homebuyer, you’re probably eager to take the next steps, so let’s get started.Buying a home is a big deal for your money, so now’s the time to figure out what you want as a homeowner.
FIRST: Do a Gut Check – What’s Your Budget?
Before you start looking at homes (the fun part), it’s important to know your budget.
For now, casually hash out your feelings about money. This will help you later when you meet with a mortgage pro. Write down your current monthly budget:
- Income
- Expenses
- Any debt you have
If you have a partner in the purchase, include their income, expenses, and debt as well.
Just knowing these numbers will help you determine how much you are comfortable spending on a home.
Think about how much money you’re spending now on rent, and how that impacts other areas of your lifestyle.
Having a partner by your side should make the process so much easier. But it can also be a stumbling block if you have a difference of opinion on important matters, or if one of you has bad credit. Either way you need to understand:
Texas is a community property state – what that means for your home purchase
Remember that buying a home is a big decision, so take your time and make sure you’re comfortable with the process and the home you choose. Good luck!
2. Pick a Realtor® to Represent You
When buying in Texas, you can choose a real estate agent to represent your interest.
A good real estate agent can guide you through the home buying process, start to finish, provide valuable insights about the market, and help you negotiate the best deal.
As a first-time homebuyer, it’s critical that you choose a Realtor® you can trust to work as your Buyer’s Agent and put your interest first. You’ll get the personalize guidance of an experienced real estate pro to lead you through a very involved process.
As your Buyer’s Agent we can:
- Put your interest first, ahead of all others
- Advocate on your behalf, we’re in your corner
- Give you advise and opinion, based on market conditions and experience
- Research the Market for you, so you can make informed decisions
- Create customized property alerts, so new listings go straight to your inbox
- Show you property – all property, including new construction, not just our listings
- Write contracts, counters and amendments, and explain your options
- Negotiate on your behalf – we’re in this together
- Handle the details, and there are many
- Keep you informed as the process goes along so you don’t miss deadlines
- Accompany you to close and get the keys to your new home
Choosing a Realtor® to represent you is a critical first step to buying a home. It can save you time, money, disappointment and frustration. Plus, you always know who’s got your back!
DID YOU KNOW? If there’s a sign in the yard, that real estate agent is already under contract with the Seller to put their interest first – above yours.
You might be wondering how real estate agents get paid. Typically, the Seller pays their agent (the Listing Agent is the person who has a sign in the yard) and Listing Agent pays the Buyer’s Agent.
Here’s more information about Buyer Representation in Texas.
Contact A North Point Agent To Get Started!
3. Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage will give you a better idea of how much you can afford and help you narrow down your home search. Here are some of the things you need to be aware of before you start.
Know Your Credit History
Your credit score and credit history are key factors in whether or not you’ll be approved for a home loan and at what interest rate.
If you don’t know your and your partner’s credit histories, get a copy of both credit reports before you begin your home search. Knowing in advance can save you some disappointments – and your creditworthiness will show you what, if anything, you need to work on to get better mortgage terms.
Credit scores are based on a number of things:
- Payment history
- Outstanding balances
- Length of credit history
- Applications for new credit accounts (don’t apply for new credit now!)
- Types of credit accounts (mortgages, car loans, credit cards)
Most buyers need a credit score of at least 620 to buy a house, but a higher score will earn you a better interest rate.
Check your credit score and make sure your report doesn’t have errors. There are three major credit reporting agencies: Equifax, Experian, or TransUnion.
Here’s more information about credit scores and how to get yours, from Consumer Financial Credit Bureau
Reduce Debt-To-Income Ratio
One of the biggest goals for most newlyweds is to reduce debt-to-income ratio – the percentage of your monthly income that goes toward repaying debt, including mortgage or rent costs.
Reducing your debt strengthens your credit score, and helps you get approved for a larger mortgage. Lenders like to see a debt-to-income ratio of less than 36%.
Some first-time homebuyers find that one spouse has great credit and the other has poor credit. In this case, the partner with the higher credit score could apply for the mortgage in their name alone.
However, you should ensure that both spouses are listed on the title. And understand that Texas is a community property state and what that actually means to you as a new couple.
TIP: Do Not, repeat, DO NOT buy anything before closing or allow optional credit checks from anyone – the lender will check your credit history immediately before closing to be sure you still qualify for the loan and that furniture purchase on your credit card could be the very reason you no longer qualify for the loan!
Warning to First-Time Homebuyer: avoid predatory loans
Working with a trustworthy real estate agent will help you avoid bad sales and predatory loans.
First-time homebuyers are often so anxious to become homeowners that they’ll agree to loan deals that aren’t in their best interest.
For example, you might get approved for a home loan with an exceptionally low interest rate, but the fine print describes massive late fees or other penalties.
If something seems too good to be true, consult with a realtor or financial expert before you move forward.
4. Heads-Up First-time Homebuyer: Plan for Future Expenses
In addition to the purchase price of the home, you should also plan for future expenses such as maintenance and repairs, property taxes, and insurance.
These expenses are often overlooked by first-time homebuyers and failure to plan can be a financial disaster.
5. Consider Your Current & Future Needs
Before you start looking at homes, both partners should have a general idea of what they’re looking for.
First, determine whether you want to purchase a starter home or a house you’ll live in for decades to come.
Most real estate experts suggest that you only buy a home if you’re prepared to live in it for at least five years. Your needs in the next few years may be very different than your needs in 10 or 15 years, though.
Maybe all you’re looking for right now is a small and affordable house that fits you and your spouse, or maybe you hope to find a home with enough space to raise children.
In addition to considering space and location, you also have to think about your budget.
- How much money can you put toward a mortgage each month without feeling financially strained?
- Are you expecting any major financial changes in the next few years?
- Be careful (gut check) do not to rely solely on your mortgage pre-approval, use your common sense.
- You might be approved for a large monthly payment, but this doesn’t mean that you can comfortably afford it.
- First-time homebuyers typically have more success searching for homes at the lower end of their price range, so they have some flexibility in their budget as they adjust to life as homeowners.
6. Choose the Right Location
Consider the location of the home, including proximity to
- Work
- Schools
- Shopping
…and any other amenities that are important to you. Be sure you have access to things that are important to you and your partner.
With more and more work from home options, having lightening-fast internet is more important that ever before.
Dallas is a huge area! Here are some of the fast-growing north suburbs that might work for you. When you choose a North Point agent they can help you with the pros and cons of each area.
7. Decide on Your Must-Haves
Discuss with your partner what you both want and need in a home.
This will help you focus on properties that meet your criteria.
Sorry to say, but it helps to make a checklist and prioritize for both of you, such as discussed in the paragraph above.
8. Be Ready to Compromise
As a first-time homebuyer, you and your partner probably aren’t strangers to compromise.
Although compatible partners see eye-to-eye on a lot of ideas, no two people will ever agree on everything. Learning to make sacrifices and meet in the middle with your partner is one of the best life lessons for first-time homebuyers, and your journey to becoming homeowners can put those skills to the test.
Both partners should separately write a list of your priorities for the new house. This includes
- location
- size
- number of bedrooms & baths
- amount of renovation needed.
Then, you should list your needs and wants in order of importance. When comparing your list with your partner’s, be prepared to sacrifice some of the lower items on your list so that you can both fulfill your most important needs.
9. Home Search & Contract – the Fun Part
As your Buyer’s Agent, we’ll create a search plan personalized just for your unique needs.
We take our time with first time homebuyers, so don’t be shy about asking questions. You’ll get the guidance you need and will know your options so you can make good buying decisions.
Your agent should take the lead on finding the right homes for you to see, but most buyers want to participate in the process. So your agent can set up a personalized search that sends property updates to your inbox.
Finding the right house is a joint effort – not an Easter Egg Hunt. And once you find “the one” is when the hard work really begins.
Your agent will structure an offer that details all the terms and conditions of the purchase. Once buyer and seller agree on the contract, you’re ready for the next important step.
10. Get a Home Inspection & Close
Before you finalize the purchase of your new home, it’s crucial to have a professional home inspection.
Note: You’ll need to have to pay for this expense at the time of service, so it can’t be rolled into your closing costs.
This is done AFTER your contract is in place with the seller, and within a specific number of days.
This step will help you spot any potential problems with the house that might need some attention before you settle in.
Your real estate agent (buyers agent) will be a great source of help and advice throughout this process. So, don’t forget to lean on them for guidance – especially when you’re a first-time homebuyer!
The Bottom Line
Even though you’re a first-time homebuyer, you and your partner should have a thorough understanding of your credit history, your financial standing, and your needs and wants for your home.
Approach this process as a team, and add a trusted Realtor® to your team, and you’ll lay the groundwork for success as new homeowners.
You and your partner should take your time as you get ready to buy a house. Do your research before you look at homes, and make sure you’re both on the same page.
As stressful as house hunting can be, the joy and excitement of finding the perfect home to start your married life can be well worth the effort.
Contact A North Point Agent To Get Started!
We know what we are doing – and we’re here to help!