Buying a home is a huge decision, and the buying process is long and complicated. As a HUD-approved housing counseling agency, our coaches help homebuyers at any step. Whether one is considering homeownership or already making mortgage payments, we are here to offer help along the way.
When shopping for a home, it’s tempting to focus on things like the number of bathrooms, location, etc. Those things are important. But there are many other important things that should be higher priorities.
1. Start with homebuyer education.
If this is your first home, or you are returning to homeownership, get First-Time Home Buyer Education. Seek a HUD-approved housing counseling agency. With certain kinds of mortgages, one must get a certificate showing they have completed this education. Unfortunately, too many homebuyers wait too long to get the education certificate. The sooner you take this course, the more it benefits you.
A good home buyer education course covers a lot of topics. The course starts with preparing for homeownership. Then it covers financial topics like managing money and understanding credit. After that, the course covers qualifying for a mortgage and shopping for a home. Anyone seeking a home buyer education certificate as a last step has already bypassed most of those topics. Take the course in the beginning, and every step of the process will be easier and better informed.
2. Learn to budget and manage your finances.
If you’re carrying debt, look at ways to pay this down before entering into a new mortgage. Learn how to create a budget to afford your new mortgage and avoid financial trouble down the road.
Home buyer education will teach you many of the responsibilities of homeownership. This includes unexpected expenses that might come along. It’s crucial to have emergency savings to pay for insurance deductibles or emergency repairs. As a renter, your landlord was responsible for emergency repairs. As a homeowner, you’ll need to prepare yourself for these situations.
If you have a lot of revolving debt, a credit counselor can help you come up with repayment options. This will include a workable budget and expert advice on paying down debts over time.
3. Find out what assistance you qualify for.
The advice of a housing coach/counselor from a HUD-approved housing counseling agency can help you explore your options. There are mortgage assistance programs for people in different situations or geographic areas. A local coach/counselor will know what programs are available in your area. They’ll also offer a neutral overview of the kinds of mortgage loans available to you. Your mortgage lender will help you compare those options as well. But start with pre-purchase counseling and education first. Make sure you’re looking at every option. A coach/counselor from a HUD-approved housing counseling agency will help you understand the terms of your new mortgage.
This step is especially important for people with student loan debt. New rules from Fannie Mae have made it easier for people with student loans to qualify for mortgages.
4. Get prequalified before home shopping.
Before you look at real estate listings, get pre-qualified so you know how much you can afford. But don’t let the amount a lender is willing to give you be your guide! Lenders will let you “max out” your mortgage, but it’s easy to borrow too much. Just because you can get approved for a particular amount, doesn’t mean you should borrow that much.
Do your own math or work with a housing counselor to figure out how much mortgage you can truly afford. Check out our Mortgage Calculators to get started.
Once you have a realistic idea of what you can afford, you can limit your home shopping accordingly. Don’t fall in love with the perfect home only to find out that it’s way outside your price range. Do the math first, and then don’t even look at the homes you can’t afford.
5. Think about the future realistically.
Are you trying to get into the right school district for your kids? Then you have a pretty good idea how long you’ll be in the home. But otherwise, don’t assume you will be in the house forever. The average homeowner sells after 6 years and moves up to something better.
That means it’s important not to demand absolute perfection. Your first home doesn’t have to be your dream home! Most homeowners move several times over the years, and there’s nothing wrong with that. We’re not saying you should have to move in 6 years, but be aware that you might sell this home sooner than you might think.
That does mean resale should be a consideration. Part of buying a home is making sure it’s a good option for other potential homebuyers when you’re ready to move up.
6. Considerations when shopping for a home.
The actual home shopping process is nowhere near the top of this list; that’s no accident! It’s important to do the right prep work before getting to this step.
Once you’ve started looking at houses, you have a lot of considerations. Every situation is different, so no two buyers will have the same top priorities. In general, though, some of these factors are more important than others:
Location affects resale potential, which we already established is an important consideration. The bottom line is, you want a home in a place where people want to live. Spend some time in the neighborhood. Drive through during different days of the week, and see what kind of location you’re really looking at.
- Besides being able to sell the house when the time comes, location will affect the value of the home at that time. Is the area on the rise? Are people fixing up houses or are things falling apart? Your realtor might have a sense of these answers. A quick tour of the neighborhood will offer some obvious clues as well. Are many roofs in need of replacement, or do they look like they’ve been replaced recently? What about the siding/paint on the houses themselves? Do many houses have newer windows?
- Crime rates are an obvious deterrent in certain locations. If your neighborhood has a crime problem, be careful. Assume it will get worse before it gets better, and that means it will be harder to sell the home down the road. Not to mention your own safety and security!
- School may be one of the most important factors in a location. Good schools will help you sell a home more reliably than most other considerations. And if you’ve got kids, you want them in the best schools available.
- Transportation is another factor in choosing a location. Is it convenient to main roads or highways? Would a commuter consider it a good location for getting to work in the morning? If traffic is particularly bad in the area, that is a strike against a location.
- Amenities can make a difference. Look at things like shopping, entertainment, public services, religious centers and restaurants. Also be on the lookout for negatives in this area. Is there a waste dump or sewage treatment plant nearby?
- Be aware of any extra costs associated with the location. Does the neighborhood have an HOA? Are there toll roads nearby? Any extra local taxes or auto licensing requirements? One area might pay more for simple things than what you’re used to—find out what the going rate is for lawn care services, drain cleaning, snow removal, etc.
The property itself will depend on your priorities:
- Handicapped access
- Size of home
- Size of lot
- Style of house (architectural style, single vs. multi-floor)
- Number of bedrooms
- Number of bathrooms
- Size/style of kitchen
- Garage or covered parking
- Pet friendly?
- Fenced yard
- Patio/deck/pool/hot tub
- Flooring (carpet, hardwood, tile?)
All of these considerations are separate from the price. Base this on your budget and the borrowing process. Depending on what you can afford, the things you’re looking for might not all be possible. It’s up to you to determine what is most important.
The age and condition of the property are big factors as well. Are you handy and willing to do some renovation work? You might be able to get more of what you’re looking for in your price range. If the idea of fixing up an older house doesn’t appeal to you, you might have to give up more of your wish list. Shop instead for a newer home in your price range.
Sustainability is another important consideration, especially for the millennial generation. Does the property have renewable energy sources? If not, are there local incentives or rebates for converting to renewable energy? DSIRE, or the Database of State Incentives for Renewables & Efficiency, lets you search for policies and incentives in your area.
This will affect the location as well—what would your carbon footprint be if you commute from this location? Are you able to walk to local amenities? Are there bike paths or pedestrian trails convenient to the location?
Perform an energy audit on the home to be sure there are no efficiency problems. Look for bad windows & doors, insufficient heating and cooling, and inadequate insulation. There are professional services that can do a thorough evaluation for you.
A LEED-certified green building might be high on your wish list, but there are relatively few such homes currently in the US. You might have more luck looking for Energy Star certified homes, but bear in mind the average home in the US is 35 years old, so not many houses have been built with the more recent focus on efficiency and sustainability.
The best advice we can give when setting your top priorities when home shopping is to listen to the experts. Your realtor, housing counselors, mortgage lender… these professionals have been doing this a long time and they’ve seen a lot of homeowners make mistakes. They’ll be happy to help you avoid going down the wrong path or overlooking important considerations.
Don’t hesitate to reach out for pre-purchase housing counseling and education to ensure that you’re on the right path and have your priorities straight. We offer home buyer education workshops online and in person in Southern California, and HEOPA Pre-Purchase Counseling as required under the Home Ownership and Equity Protection Act.