Welcome back!  In this blog, I will continue to share my advice for you as a homebuyer so that you can be prepared in today’s challenging market.  

Budgeting

And now my next piece of advice. Live per your new budget now to stress test it.  Maybe you’ll be transitioning from having a roommate to living on your own.  There are great online budgeting tools that you can use to see where the money from every paycheck is going.  If your mortgage payment is going to be higher than your current rent payment, bank those extra funds monthly to see how you fare.  You’ll want to make sure that you have a little bit extra left above your proposed monthly budget to be able to save for those emergencies that undoubtedly will pop up here and there as a homeowner.  And I’m sure there are improvements that you would like to do to the home to make it your own.  It’s never a good situation to be house rich and cash poor.  Chances are that you’ll still want to keep up a social life, as well as eat out once in awhile after buying your first home.

Save, Save, Save!

Next, plan to save, save, and then save some more.  You will need money for the good faith escrow deposit, for your down payment, which is the % down you are agreeing to cover while the lender fronts the rest, closing costs, which usually amount to about 3.5% of the purchase price, and funds to possibly cover an appraisal gap.  Due to how competitive the market is, realistically you will not be able to ask for any concessions as you would be able to in a more balanced market, not the current strong seller’s market we are in. 

You will also need to pay out of pocket for the appraisal at the time it is ordered by the lender, as well as for any inspections that you wish to have performed, which are usually a home inspection and a wood destroying organism inspection, also known as the termite inspection.  Together, plan for anywhere from $500 - $1000 to cover these costs.  

Expectations

Now let’s talk expectations.  When you think of your first home, what is the vision you see in your mind’s eye?  Does the home have the perfect yard with beautiful landscaping and a white picket fence, is the house freshly painted and decorated to perfection, is it abundantly spacious with 3 plus bedrooms, and 2 plus baths?  Not to bust your bubble, but you need to understand that the house in your budget will most likely not be perfect and won’t look like pictures on Pinterest. 

To avoid disappointment, your expectations need to be brought in line with your budget when looking at potential homes.  This will be the case in every situation, but especially at this time in the market when the prices and interest rates are going up quickly, and your buying power is reduced. Your first home most likely will not be your forever home.. 

Considering this, think about the very most important must-have features that you need in a home right now.  Could you live with just one bathroom instead of two?  Could you live with older aluminum windows for awhile, maybe ones that don’t open easily?  Could you live with a bathroom where the bathtub caulk is slightly stained with mildew?  View potential homes with an open mind, and compare structural limitations like awkward roof lines, or an oak tree growing within a foot of the home, to other issues more cosmetic in nature, like an outdated kitchen backsplash that can be updated over time.

Stay tuned until next week when I provide you with my final pieces of advice for being ready when purchasing your first home in today’s market.

Thank you!!