Advice for Young, First-Time Home Buyers

advice for young first time home buyers

My husband I were 23 when we purchased our first (and current) house. We were very young and very excited home buyers. Despite having student loan debt, we were determined to follow our dreams and become home owners. When the time came to get serious about buying a home, I was a little overwhelmed. There are so many things to consider as a young, first time home buyer. Here are a few things I wish I knew before I started house hunting:

1) Closing Costs

Closing costs are the fees charged by lenders for the purchase of the home. Closing costs are not cheap! They can cost up to 5% of the selling price of the house. Just keep this in mind when you are getting ready to purchase a house and trying to calculate how much your mortgage will be. I think it’s easily overlooked during the process.

You can’t really avoid closing costs but they can be a great bargaining chip when negotiating an offer. When we purchased our house, the sellers would not budge on price but they did agree to cover closing costs. Score!

2) Repairs and Maintenance 

I did some research and discovered that most people say to budget about 1-2% of the selling price of the house each year for repairs and maintenance costs. After two years of being a home owner, this estimate has been pretty accurate. Over the last two years we’ve re-coated the wood floors, replaced the washer and dryer and water heater. There are still many things I would like do including a kitchen and bathroom remodel!

The key point to remember is that you will be paying more than just your mortgage each month for your housing costs. When you are trying to figure out how much house you can afford, make sure you budget for repairs and maintenance.

3) Getting Qualified for a Mortgage

Despite only having a few months of work history and a boatload of student loan debt, we were shocked with the amount of mortgage we had been pre-qualifed for. It was a lot more than we were planning on spending.  For a split second I was excited thinking about what a nice house we could get.. Maybe we could get that three car garage and finished basement after all. Then I came back to reality.

Don’t be tempted to live beyond your means just because a mortgage company is willing to give you a “big” loan. Remember lenders don’t know your budget or how much you can afford. Only you know what is best for you and your family.

4) Get advice from people you trust 

Getting ready to commit to buying a house and all the responsibilities that come with being a homeowner is a big deal. It’s stressful and overwhelming. I highly recommend that you take advice from people you trust.  When we found a house that we liked, we asked my parents to come with us when we went to a second showing. I was shocked at all the things my parents noticed about the house. “Liz did you see that crack in the ceiling? It looks like water damage.”

“UMMM NO?!”

My parents are experienced homeowners and it seemed like they had a trained eye for looking at houses. At 23, my husband and I knew nothing. Make sure you can find someone you trust for both advice and support during the home buying process.

Are you getting ready to buy your first home? If you already own a home, what is one thing you wish you would have done differently when purchasing your first home?

Comments

  1. We were 23 when we bought our first home as well. I wish we would have considered resale a little more closely. We ended up in a property that was TOUGH to sell. Lesson learned!
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  2. Great advice here, Liz. I think people so often underestimate the costs of repairs and maintenance in home ownership. It really does add up!
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  3. Great tips…we are currently going through the process…well we’re buying a co-op not a house but similar process. We had to provide a lot of information to qualify for the mortgage but even more for the co-op application. We got the loan commitment and are now just waiting for the co-op board interview and approval. Houses in the NYC area are unaffordable for most.
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  4. Your #3 is very important! Don’t let the realtor or mortgage lender tell you how much house you can afford. They know nothing about your household budget and long-term goals. A good way to go about it is to put together a basic, long-term budget that includes saving for retirement, vacations, college funds, etc. then see how much room there is in that budget for a mortgage payment (including property tax and insurance). If there’s room for an $800 payment, then that tells you how large a mortgage you can afford, even if the lender says you could qualify for a mortgage with a $2,000 payment!

  5. That’s great that you were able to take on home ownership at 23! It sounds like you’re very responsible homeowners.
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  6. I seriously underestimated how much repairs and maintenance would cost us – wish someone would have been much more clear on this before we bought our first house!
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  7. Wow, I can’t imagine being a homeowner at 23! Congrats. Home ownership is not one of my goals because of all the things you listed! Also, I am semi-nomadic and can’t imagine staying somewhere for that long. I think for people that want to be homeowners, it’s important to know some of this stuff upfront. Also, I’m glad you had some guidance from your parents. It’s great to have a mentor in big life decisions like this.
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  8. Although I’m 26, I still don’t think I’m ready to buy a house. I’m sure I’ll be ready down the road, but it’s a huge commitment. Obviously money is one thing, but when you buy a house, you’re committing to living there for an extended period of time. I want to make sure that Ana and I both love where we plant our roots.
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  9. Really solid advice! I think repairs and maintenance is an important one. First time homebuyers (myself included) are typically “starry-eyed” and overlook some of the negatives of home ownership.
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  10. Great tips! As I posted a few weeks ago, closing costs can be a bear no matter how old you are or how many homes you have purchased. You need to make sure that you are well prepared for those before you even start looking, and it is hard to find people to trust when buying a home since most people involved with it are going to make money. We were fortunate to work with a friend throughout our recent purchase experience.
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  11. Um, yes, I definitely agree with all of this. I really wish I had known more about the process. We bought a very inexpensive fixer-upper, and it was more work than I ever imagined. If I knew how much work it was going to be, and how much cost was involved (even though we went the DIY route and which is cheap compared to contracting the work out) I don’t know if I would have taken the same path. I might have ponied up a litle bit more money to save myself all of the time and headaches. But then again, I’ve enjoyed the very very low monthly payments. Great tips Liz!

  12. I can’t imagine owning a house right now, mostly because of the costs associated with it. It does seem like first-time home buyers tend to go over budget to get everything they want. It’s important to be realistic, as you said. I brought my parents along with us during our apartment hunt for the reasons you gave. My dad noticed a lot more than we did!
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  13. I would agree with all of these. When it comes to even qualifying for a home loan, the banks have made it much harder to prove your finances and earnings. I have heard many people talk about the materials needed in order to even be considered for a home loan. What use to be a simple process is no longer one. For some, it can take months to even be able to qualify for a loan.

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  14. Great advice, Liz!

    I was baffled at the amount of stuff my sister had to take into consideration when she bought her apartment. And the 1-2% upkeep costs are pretty accurate indeed, especially if you buy an older house.

    Thanks for sharing,
    NMW
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  15. There are so many additional expenses I think a lot of people fail to consider or plan for when becoming first time home buyers. As long as I’m in NYC, I’ll be renting.

  16. Definitely repairs and maintenance are always going to be an issue so it’s best to have the cushion in place once you buy a home and replenish it every year. This year one of our repairs is costing us $6k so much higher than the normal 1% but last year we were at about 1%.
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  17. I also agree that it’s a good idea to bring someone along who’s a homeowner. They would know all the little things to look for.

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  18. This is good advice. Its good to have some extra money set aside either for closing costs. moving expenses or even repairs. My brother just bought a new house and got hit with $4,500 in hidden fees on his closing day. Luckily he and his wife had a bit of money set aside, but it definitely caught them by surprise.
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