The Home Buyer’s Guide To Your First House
Sifting Through The Real Estate Jargon
I can’t keep plants alive and have a strict dietary regimen of Pop-Tarts. Needless to say, buying a house was never on my radar. It wasn’t something I thought I’d be financially able to do. The current housing market is more competitive, intimidating, and expensive than ever.
Younger potential buyers (yes, I’ll call myself young) don’t have the same job stability, support, and geographic anchors our parents did. We’re doing things later because we want to, but also because we have to. The median age for homebuyers hovers around 47 (it was 31 in 1980).
But last year, I found a way to buy my first home—a two-bedroom craftsman bungalow. Even as I signed the bazillion pages of paperwork, I still didn’t think it was real. But it was. Though daunting, I found a way to make it happen. Friends, believe me: If I can do it, you can, too.
Terms To Know
Let’s start by familiarizing ourselves with real-estate terms! Here are a few to know:
All Cash: When a buyer comes in with literally all cash to buy a home. Often, these people are investors or are looking to flip a home.
Appraisal: A professional opinion on how much a home should cost. This is often based on the condition of the home and the current market.
APR (Annual Percentage Rate): An interest rate you’re charged annually based on what you’ve borrowed from the bank.
Closing: A meeting between the buyer and seller (and real estate agents) where you sign legal papers to finalize the deal.
Down Payment: A portion of the home’s price that a buyer pays upfront with cash. More on this below, but it’s usually zero to 20 percent of the home price.
In Escrow: After the seller accepts your offer, you have 30 days (sometimes more) to conduct appraisals and inspections. With this info, you may re-negotiate the house price based on something being wonky (like a cracked foundation) or even back out based on your findings.
Loan: How much a bank is willing to lend you for this whole “buying a house” business. A few variables are factored into the bank’s decision, including your salary, whether you’re a first-time buyer, credit score, etc. Every bank is different, so talk with multiple lenders to see what they’ll offer.
Mortgage: What you’ll pay monthly directly on the home once you buy it (like rent, except it goes back towards your home in the form of equity). Your mortgage cost is based on your downpayment and APR. Most mortgages are fixed for 30 years, though there are 15-year options, too.
Offer: What you formally submit when you want to buy a house. Your realtor will help you determine a cost to begin negotiations. This isn’t binding, as you’ll go through escrow and can back out at various points, depending on appraisal and inspection.
PMI (Private Mortgage Insurance): A banking fee for homeowners who put less than 20 percent down at the time of purchase. It’s basically a way for you to say to the bank, “Know that mortgage I pay you every month? Well, in case I lose my job or someone finds all the gold treasure I’ll have buried in my backyard, I’ve got ya covered.” You might pay between $30 and $70 per month for every $100,000 borrowed…but again, every bank is different!
Realtor: This one is easy! A realtor works for you in the journey of homeownership. They’ll be your best friend throughout this process—sending you listings, setting up showings, and eventually helping you write up an offer.
How To *Actually* Buy A Home
Okay, now that you’re a pro at terms, let’s walk you through how to actually use them.
1. Find Your Realtor. Where do you get one of these magical realtors? Get a recommendation! Mine came from a friend who had a similar style and budget to mine, so the realtor “got me” right away. Nextdoor, Yelp, and our good friend Zillow are all great places to find realtors, too. You can even walk around neighborhoods you like and see who is selling homes. (Yes! You can call the number on for-sale listings!)
Whomever you decide to work with, you’ll want to stick with them throughout the buying process (as opposed to calling a new realtor every time you see a house you love). As for cost: The seller pays the real estate commission of both the listing agent and the buyer’s agent, which is usually wrapped into the price of the house.
2. Create A Dream List—Then Be Realistic. A realtor can help you figure out what you value in a home (neighborhood, bedrooms, cool fireplace, a pool shaped like a pineapple, etc.) and then send you listings that match your preferences. But another part of their job is to help you narrow your wish list down and be realistic about what you can afford. Ultimately, you should never feel pressured into a financial obligation that you can’t make good on.
Conversely, you should figure out what your deal breakers are (unless you’re looking for a fixer-upper. In which case, you’re reading the wrong article!). You probably don’t want to pay tens of thousands of dollars for a new roof, new foundation, or broken plumbing. Unlike renting where a landlord will make these fixes, home updates can out of your pocket (or can be negotiated into an offer). It’s okay to have a list of non-negotiables when shopping for a house. And the inspection will help you decide if the house meets these criteria.
3. Figure Out How Much You Can Borrow. One big misconception when it comes to buying a home is that you have to have a big chunk of cash for a downpayment. And while there is some truth to this, there are options out there that make the home buying process a bit more accessible (though not entirely—there’s still a lot of work to do to make housing truly accessible).
That said, a few less traditional options include a USDA loan, a FHA loan, or a HomeReady Mortgage. You can also borrow from a 401k or, if you’re a Veteran, you also can get a VA loan, which means 0 percent down and, often, lower interest rates.
Also, buying a house is more than paying a mortgage. There are closing costs, HOA fees, and other miscellaneous expenses. Your realtor can walk you through all of this—just a good thing to keep in mind while budgeting!
4. Apply for a loan. Next, you’ll want to figure out how much a bank will loan you to buy a house. Alternatively, most real estate agents have lenders they work with and will give you their top recommendations.
Big banks usually lend more easily, while smaller lenders and Credit Unions better understand appraisals and the specific regional markets. It can be tricky to get the absolute best interest rate as a first-time home buyer, but that is totally normal, so don’t stress!
And note that you’ll likely be approved for way more than you probably want to afford, so don’t let the big number sway your budget. Oh, and you never have to pay a loan officer for their services!
5. Go look at homes. Lots of them! Take photos and videos to look back on as you’re trying to make a decision. And try to have fun!
One pro tip: Scope out an area three to six months before buying and watch the market. Spend some time walking around the neighborhood so you can get a feel for where you’ll potentially live. Stop by in the morning, in the evening, or on weekends to see how the area changes throughout the day.
6. Make An Offer. You found a home you loved?! It’s time to put in an offer. Your realtor will help with this and together, you can decide on your offer price (which is generally determined by your market and how competitive housing is where you live). Then, you wait. 😰 And the waiting is entirely dependent on the seller—they make take hours to review offers or a few days. Take a breath and go for a walk (or a few). Trust that if it’s the right home for you, it will all come together.
You can also “sweeten the deal,” as they say, by putting a personal touch to your offer (humanizing that big chunk of money just a bit!). The only reason I got my place is because I wrote a “love letter” to the seller, explaining my connection to the neighborhood and the volunteer work I’d done for my Neighborhood Council. It helped me compete with the other offers, despite them being higher.
Remember: Selling a home can be an emotional journey and not every seller is looking to make the most money. Some want to ensure their home will be loved and cherished by the next owner, too—so don’t be scared to tell them who you are and why you love the home!
7. Go Go, Escrow. Your offer was accepted!? Now you’ll close and go into escrow. This is where you’ll settle up your loan, APR, PMI, etc. and do a bunch of inspections to ensure the house is sound and that everything is up to code. You are there for this—and you want to be there to ensure everything is looked over—just know the inspector will tell you EVERYTHING that’s wrong with the house. But that’s their job! It can seem scary, but every home has its issues, and you get to decide what’s a dealbreaker for you (Termites? Likely, yes. Outlets that need to be updated? A much easier fix!)
8. YOU DID IT! Finally, you’ll settle upon any contingencies or last-minute adjustments. For example, my sewage pipe needed fixing, so we negotiated money for repairs into the deal.
Then (drumroll) you’ll get those KEYS! Then, have someone take a requisite picture of you outside your new home and make yourself a congratulatory Pop-Tart. You’re a homeowner now!
I know it feels like a lot. When I look back on buying my first home, it was a lot of fun and also very stressful! It’s natural to be overwhelmed; a good realtor and loan officer will walk you through the harder points and make you feel comfortable in your decisions.
(Also, as a note: Cities are expensive, so ain’t no shame in the simplicity and low-stress life of renting long-term, promise!)
Rebecca Leib is a writer, podcaster, and comedian who’s appeared in the AV Club, Bustle, and Marie Clare. Her writing is in VICE, Reductress, LAist, Los Angelino, LA WEEKLY, Art Etc. and on NatGeo, NBC + NBC Digital, Disney, Investigation Discovery, and CBS. Most recently, she worked as a writer/producer on National Geographics’ “Brain Games” reboot with Keegan Michael Key. Check out her comedy/history podcast, “Ghost Town,” and find her on Instagram and Twitter at @RebeccaLeib.