It's house hunting season, which can be an exciting and yes, stressful time. Living in a sellers market, it can seem like an incredible challenge.
Today we'll go over how to financially prepare and give you a map on finding a place that you love that's still within your budget!
Home Buying Tips for a Hot Market
If you’re thinking of buying a house, you have to be prepared. Besides being a huge purchase, you have rising interest rates and hot markets that can make it difficult to find a place you love that’s still affordable.
If you’re a first-time homebuyer or it’s been awhile since you’ve had to house hunt, I want to lift some of the burden.
Today I’ll give you a high-level view of the buying process so you’ll have an idea of what to expect along with some tips and resources to keep you on track with your big financial picture.
In this episode, we’ll dive into:
- Ways you can prepare your finances
- What to look for during the house hunt so you’re finding a hidden gem and not a money pit
- Explain what to consider with your offer and the closing process
We have a lot to cover, so let’s get started!
Resources on Buying a House
If you’re looking to buy, here are some resources to help you find an affordable place you love!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Jumpstart Your Marriage and Your Money
- 5 Days to $5K: Free email course on how to find, save, and earn extra money!
- How to Snag a Great Deal When Buying a House
- What You Need to Know About Mortgages
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.
See how Coastal can help you with your mortgage needs!
Rollover Your 401(k) Easily with Capitalize
We’re grateful for wonderful partners like Capitalize. Not only do they support the podcast, but they help make managing your money so much easier.
Did you know that it’s estimated that there are currently over 24 million “forgotten” 401(k) accounts? In fact, the average American changes jobs every 4 years.
And because of the Great Resignation, you or someone you know might be changing jobs even more
It’s an extreme case of out of sight and out of mind. Is your old 401(k) in there somewhere, left behind at a job you're no longer with?
One huge benefit with an IRA is you get to choose how your money is invested, not your old employer.
If you want to consolidate your old 401(k) and have more options with how you invest, it may be time to roll them over into an IRA.
With Capitalize, they handle the process from start-to-finish – for FREE. They handle the process from start-to-finish, and yes that includes calling the 401(k) provider on your behalf.
Find out how and get started today!
Before You House Hunt, Get Your Finances in a Good Spot
Even before you start shopping around for a lender or real estate agent. Take some time to run the numbers and review your finances. Verify that you can handle this transition to homeownership.
I know interest rates are rising, so there's this temptation to jump in and get started as fast as possible, but it really does pay off for you to sit down and use those mortgage calculators online to get an idea of what you can comfortably afford.
Budget Beyond the Mortgage
Besides the mortgage, you need to include in your budget home insurance, property tax, and maintenance costs. Knowing those numbers puts you in a better spot when you do shop around for lenders.
So, how do you find lenders? The first time we bought a house, we used a mortgage broker who compared different lenders.
The second time we did a little more legwork on our own scouring online and we went with our credit union Coastal since they not only had great rates but they offered some discounts with their Daymark Realty team.
It is a bit of work upfront. But you can significantly save money.
As you're shopping around, make sure you're not just looking at the lenders, but that you also are looking at the right mortgage option for you. If you don't have a significant down payment.
There are different loan programs like FHA, VA, and USDA that can make it easier to buy. Weigh the pros and cons of each of these to make sure that you qualify for them and that they work for you.
Pre-approved Versus Getting Pre-qualified
I do want to clarify two terms. You want to get pre-approved versus getting pre-qualified. Pre-approval means the lender went over your numbers and told you how much you qualify for with borrowing. Versus a prequalification was, is just an estimate.
If you're in a seller's market where you have to move fast, you definitely want to have that preapproval letter.
As you talk with your lender, they're going to give you their rates and numbers. But you still want to make sure that what they say you qualify for is what you feel comfortable with.
You can also start shopping around for a real estate agent. Ask for recommendations from people who not only bought a home, but they're happy with it. Also interview your agents, see how knowledgeable they are about the area, the market, and how effective they've been for their clients.
Now, with those pieces in place, you have a lender. And you have your agent. You can now go house hunting, feeling comfortable that your finances are in a good spot.
The House Hunt
While you're working with your lender on getting pre-approved and you're trying to find a real estate agent. This is also a good time to sit down and figure out. What are your priorities for the house that you want to buy?
What type of house, first of all, are you looking for. Are you going with a single-family, condo, or townhouse?
Do you want to live in a neighborhood with an HOA? What size house would make you most comfortable? If you have a yard, how big do you want it? Or do you even want a yard and have that maintenance?
What distance from work are you looking for? Or if you have kids, how far away do you want to be from their school?
Talking about and defining your must-haves is incredibly helpful for your real estate agent because then they can tailor their search for what you need. They can also temper your expectations about what you can find in the area for your budget. We have an entire episode where I interviewed Coastal's vice president of real estate, Louis gamma.
And he broke down how to go about your house hunt so that you can find neighborhoods that are hidden gems. And that checkoff a lot of things on your list while still keeping you on your budget. I'll include a link in the show notes.
As you're going through this house hunt. I just want to tell you. Sometimes that is an apt description, especially if you're in a hot market. It can be chaotic with other buyers competing for a limited amount of homes. As you're going through the houses and places and taking these tours. You'll start noticing. That certain things on your list are going to get adjusted.
There may be priorities you felt were must-haves. That moved down on that list and vice versa. Where there's something you thought that wasn't such a big deal, but when you're in that space, in that house, you realize that it's very important to you. That's normal.
This actually happened with my mom when she was buying a house here in Raleigh in 2020. She had a list. She had prepared her must haves and want to have, but as we were looking at different properties in the area, Things got adjusted and shifted.
It seemed a little stressful at the time, making these adjustments. But it worked out to her favor because now she's in a home that she loves and it has all the main features that she wanted.
Just make sure you're not sacrificing too much just to buy a house. I would hate for you to be in a home that you don't like with the 15 or 30 year mortgage. Ideally, you want to find a place that has all your must haves in a neighborhood that you love.
When you do find that spot. You can then put in your offer.
Putting In Your Offer and The Closing
All right. Let's talk a bit about the offer. You may include contingencies with your offer. Meaning certain things have to be fulfilled such as a home inspection. Financing selling your existing home or appraisal.
Depending on the market, you may decide to waive some of those contingencies, but please be aware of the potential downsides of that.
Personally with how large a purchase. This is, I'd keep the inspection and appraisal.
How much should you offer? This is where you want to work with your real estate agent and why it's so important to interview them beforehand. You want someone knowledgeable so that they'll have the information about what's selling in the area and give you recommendations on what's more likely to be accepted.
In a competitive market, it can be emotionally exhausting because you have so many sellers. Making multiple offers on a few homes. When I was helping my mom out with buying her house, that was the situation. We saw quite a bit of homes we put in offers and yes, there was a temptation at one point to break the budget because of the timing.
Of her going back to work in the fall. But with some patience and diligence, she thankfully found a wonderful home in a fantastic neighborhood. So if you're buying any sellers market, Please don't get discouraged. If your first offers aren't accepted.
When you put in an offer. You're also going to be putting in some money upfront. It's known as earnest money deposit. Some people call it good faith deposit.
Basically, you're signaling to the seller that you're serious about buying this money will be held in an escrow account and we'll go towards your down payment or closing costs.
It's there as a protection. If the buyer falls through on their end. The seller gets to keep that money. However, if one of the contingencies in your offer happens, let's say the home inspection failed. You'd get that earnest money back.
Now let's say the seller accepted your offer. Now, what? Typically, this is where things like your home inspection and appraisals happen.
A home inspection lets you see if there are any major issues with the house and an appraisal is for your lender to verify that home is worth the loan.
Some needed repairs may come up during inspection. Depending on that market and whether or not you waive those contingencies. You may or may not be able to negotiate on the price.
In the meantime, your agent's going to be assisting in getting the paperwork prepared for closing. This can include things like checking the property title. So make sure you're in contact with them. So if they need anything from you, you can quickly get that to them.
Assuming everything goes smoothly, you'll get a closing disclosure from your lender, telling you how much you need to have ready. You and your agent will do a final walkthrough of the house you're buying. Then it's closing day.
Just a heads up, expect a lot of paperwork. The good news though, is that your agent and the attorney there should be able to walk you through step-by-step with everything. Ask any questions you need to and have before you sign.
Finally, we get to the best part. Getting your keys and moving into your new home. There you have it.
If you're a first-time home buyer, it might seem a lot. But once you have a place that you love. You know, what's worth it.
Support the Podcast!
Thank you so much for listening to the podcast! If you enjoyed this episode and found it helpful, here are some ways to support it.
- Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and becoming financially free, please share.
- Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your review on Apple, Spotify, or Audible.
- Buy me a cup of coffee!
Photo by Daniel Frank