Buying a New House

Buying your first house is a big first step.  Check out these tips to make your process a little easier:
 1. Explore the different loan types.  The most common loans are 30 year fixed loans.  Another option is the adjustable rate loan which means your monthly payment will change yearly based on current interest rates.  The middle ground is called a hybrid loan.  How much risk can you handle in your monthly payments?  Adjustable loans are initially cheaper, but could become much higher in the future.

2.  Don't use a realtor.  Doing the research yourself can save you 3+% of the total price of your home if you can do without your own realtor. Each realtor involved is paid 3% of the sale price at closing by the seller, and the seller passes this cost onto you in the total price of the home. I was able to negotiate the seller down an extra 3% because I didn't have a realtor. That ended up being a savings of thousands of dollars.  The catch is that I had to do all of my own research during the house search. I checked out school districts, neighborhoods, flood zones, age of the home, etc. I had to find my own comparable homes and determine the average price per square foot in each neighborhood.

3.  Can you afford your home?  
When I applied for a home loan, I was pre-approved for an insane amount of money. I almost couldn't believe it. I was pre-approved for a home that would cost 80% of my take-home pay. That would leave 20% of my salary to survive each month. SCARY! I ended up purchasing a home that was approximately 37% of my take-home pay each month which I still consider on the high end if I hadn't gotten married. Dual income makes the payments easier to handle.

4.  Shop for a cheap interest rate.  Don't just pick one bank and sign on the dotted line. 

5.  Buy the cheapest home in the neighborhood of your choice.  I bought what may be the cheapest and smallest home in my neighborhood. By doing so, I was able to purchase a home in the nicest neighborhood I could possibly afford in my geographical area of choice. Another benefit is that every home in the neighborhood is selling for more money. When I eventually put my home up for sale, I will offer comps of other houses in the neighborhood - all of which are more expensive. My home has an excellent chance of appreciating in value. The most expensive house in the neighborhood has no comp homes in the neighborhood to demonstrate its worth and likely will not appreciate as well as the cheaper homes.

6.  Low ball offer.  It is a buyer's market.  What have you got to lose?

7.  Use an attorney at closing.  You don't want to be signing paperwork that you don't understand.

8.  Don't get emotionally attached to a home before the keys are in your hands.  A lot can go wrong in the home buying process.  Try to enjoy yourself and relax.