Ask Robina - April 25, 2023

Hi Robina! 

I am not sure if this is a topic you cover but would appreciate advice on purchasing a home.  My fiancé and I are looking to purchase our first home together. We both have successful careers with strong incomes, no debt, save for retirement, and have savings for our first home.  We have been hearing various opinions about purchasing in the current market but want to start building our future together.  Do you have any advice for first-time home buyers?   

Thank you! 

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Hello Friend, 

Congratulations on the pending marriage and being a first-time home shopper (maybe buyer).  I am not trained in the real estate market or pretend to have all the answers to buying a new home.  What I can do is share with you my checklist of items to look for and/or wish I had known when I purchased my first home. 

DREAM LIST 

Before you rush into shopping it would be good for you and your partner to create a list of wants and needs.  Don’t be afraid to dream in detail or with broad brush strokes.  Once you start shopping you will quickly learn what you do and don’t like.  In something this big it is okay to be picky but there generally will be a concession of something along the way. Just make sure it isn’t a MUST-HAVE.  For example, a cul-de-sac can’t be added on in the future. 

TIP ~ The selling agent should be different than the buying agent.  As far as I know, it isn’t illegal for the same agent to represent both sides but it sure does muddy the water.  Don’t be afraid to seek out another agent if this happens. Agents often work with a team and hand off one side of the transaction. You want someone watching out for your best interest. 

BUDGET 

Some may say the budget should come first but it feels like having to eat your veggies before you get dessert.  Buying a home is exciting so I say dream a little upfront. Note I said a little. Then get to setting your budget.  If you follow Dave Ramsey you will know that he recommends your mortgage not exceed 25% of your pay.  It is a fair rule that will help keep you out of trouble in the future.   

What types of things do you need to budget for? Here are my go-to items:   

• Mortgage (principal and interest) 
• Property taxes and Insurance 
• This is not a consistent monthly item so you will need to save for the payment or build it into your escrow. I am a fan of paying both with my mortgage payment. 
• Utilities  
• Depending upon the type of structure you currently live in the change in utilities may be significant. It is good to ask for all utilities and research the average monthly bill.  Homes cost more than apartments and older homes may be less efficient than newer ones.  Some of the utilities to consider are Gas, Electric, Propane, Water, Sewer, Garbage 
• Repairs and Maintenance 
• Set aside money each month for future maintenance so you aren’t caught off guard by an emergency fix. 
• Landscaping 
• Depending upon the demands of your jobs, it might be worth it to hire a landscaper, If you purchased in a developed neighborhood with an HOA check to see if it is included. If so, it is likely for the front yard only, not the back. 
• HOA 
• Speaking of HOA.  This can be an extra monthly, quarterly, or annual cost. 
• Pool 
• Are you going to maintain the pool or hire out? 

This list isn’t inclusive and isn’t intended to scare you off.  Too often, people forget to factor in the living cost when purchasing a home, and staying within a reasonable budget will save you stress in the long run.  With the uncertainty of the world for the last five years, my family and I have been able to navigate the waters because we didn’t take on too big of a mortgage. 

INTEREST RATES & FINANCING 

There is no denying the interest rates are higher than just a few years ago.  Don’t let that deter you all together.  Doing research and being informed will help you find the right loan. Home prices have been dropping as the interest rates have increased so that dream property isn’t entirely out of reach.  Interest rates were at 9% when I purchased my first home, so there is hope.   

Word of caution as you look at financing… If it seems too good to be true, then it probably is.   

Others may have their own opinions on this, but I tend to steer away from variable interest rates, low rates the first year or two and then tiered increases, or anything of those flavors.  It is great to be optimistic that your income will increase as the interest rate does, but your home and peace of mind aren’t worth gambling with.  Best to go for a fixed-rate loan and refinance in the future as rates drop.   

IMPORTANT TIP ~ Get a home inspection before you purchase anything.

OKAY, NOW FOR THE FUN STUFF 

In the beginning, you started with the DREAM list and this is where it comes into play.   

The following is going to be less about the money and more about the home.  While you can refinance a home for a lower interest rate it isn’t as easy to modify the home to add items you may have passed up on. Again, the following aren’t to discourage you but to support you in picking the best home for you and your future. 

What age of house do you want? 

With all the renovation shows that have sprouted up over the last decade, it may be enticing to take on a fixer-upper.  I have never done a renovation for one reason, time.  The two things I hear about renovation are (1) It always takes longer than planned and (2) it always costs more than planned.   

If you and your (soon-to-be) spouse have demanding jobs that require travel or long hours, you might want to lean towards a newly built or well-loved (already renovated) home.  This will allow more time for you to enjoy the beginning of your relationship and enable you to travel on weekends and vacations without a long-to-do list.  You can hire a contractor to do the work, but it will still require your active participation to ensure things are done as desired.   

Ready for the renovation?  Get quotes before you close to ensure your total budget covers the purchase and the updates. Research the contractor for complaints and make sure they are licensed and insured.  This applies to any contractor, whether it be now or in the future.

A new build can be appealing because everything is brand new. Unless the home is in its final building stages or complete, you may have to pick out the paint, floors, carpet, or cabinets and customize them to your personal preferences. I have purchased two new homes in my life, and while it takes time to pick out everything and work out a few kinks, it has been worth it. 

Purchasing a well-loved home has its perks as well.  For one, they tend to have more character, and the prior owner may have made renovations to bring it up to date.  Perhaps a pool is in the future, and the owner did that too. Landscaping a backyard isn’t cheap and adds to the budget. Older homes tend to come with a complete yard. There are some special homes out there with great energy, a homey feel, and worth the funky fireplace or wallpaper. 

Where do you want your house to be? 

Whether you choose the city or country make sure you give the home more than one test drive.  What does that mean?  Visit more than once.  Viewing a home mid-day when everyone is at work may make it seem like a quiet sleepy neighborhood, and visiting at night may show a different side.  Make the commute, walk the neighborhood, and chat with neighbors to see what life is like during commute times and on weekends.   

How many bedrooms and bathrooms? 

Being a person that packs extra for a weekend trip, I tend to air on the side of caution when it comes to homes. Purchasing a three-bedroom home when I was single may have seemed excessive but fast forward, a few years married and a baby on the way, and the space was perfect.  If you plan on raising a family or just like your own space, it might be worth making the leap now.  If it doesn’t have the space you need then it may not be the place for you. 

What size of land do you want to live on? 

Growing up in the country, the wide-open fields call me and acreage is where my heart is at.  You may be more of a city person, want a small plot of land to manage, or have no neighbors for miles.  Each has its pros and cons.  The bigger the property, the more maintenance but less noise.  The smaller the property, the closer the neighbors and noise.  But… it sure does make borrowing milk or eggs easier. Being in close distance to neighbors can have benefits beyond borrowing produce.  If your family lives far away, it can come in handy when you need help with home, kids, pets, or life. 

Do you know where you want to buy? 

If you are new to the area, start asking people you work with for community recommendations.  Renting is a great way to learn about a place without making a long-term commitment.  If you are looking for a place with nature trails, a dog park, child care, or great schools start to visit places on the weekend.  Don’t be afraid to start a conversation at the local coffee shop.  All your friends were strangers once. And, who knows, the next new friend may know a perfect home getting ready to hit the market.

How far do you want to commute, and how? 

Looking for the ease of walking, biking, or public transportation?  Farm life may not be the answer.  Have a family or love to enjoy your evenings cooking?  Pick a commute that fits your lifestyle.  Speaking as someone who has had a 5-minute commute to 1.5 hours, there is a balance to a reasonable commute time. Life is precious and we can’t get that time back.  

Appreciation and Resale 

While you may not plan on moving any time soon … if it gives you pause it will give someone else pause as well.  

• For example, a 2-bedroom, 2-bathroom home is going to sell easier than a 1-bath. 
• You can’t add acreage. 

• Location Location Location  

• It really does matter.  Check out the school scores and the surrounding community.  Schools have a huge impact on home value and resale. 

Final Thoughts 

The most important tool you can have when buying is to trust your gut. If it seems fishy, there is an answer for every problem, or it seems too good… trust yourself.  This is a decision that will ultimately cost hundreds of thousands of dollars.   

Don’t let your emotions run away and push you to be impulsive or go way over your budget.  It may not seem like it at the time but there is always another house. 

If it is meant for you, it will happen. 

This list is by no means complete, but I hope it gives you a jumping-off point and things to consider.  It is easy to get caught up in the excitement and I am sure you will get lots of advice from other homeowners.  Thank you for entrusting me with this question and know I am rooting for you.   

I wish you and your fiancé the best of luck in finding your dream home, successful and fulfilling careers, a wonderful marriage filled with laughter and memories, and long healthy lives. 

With Gratitude, 
Robina 

Robina is a Certified Money Coach and retired CPA.  She works as a guide for people to discover the freedom to dream again by transforming their relationship with money. If you want to know more about Robina, you can visit her at www.robinabennion.com. 

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