The Realities of Buying Your First Home

The Realities of Buying Your First Home
By now, it's no secret: reality television is far from reality. Whether it's finding the love of your life or the home of your dreams, "reality" TV creates unrealistic expectations about one's ability to achieve what these shows' "stars" appear to accomplish in a single episode. As a first-time home buyer, I've experienced this phenomenon firsthand. Seldom do our favorite house hunt-themed television shows acknowledge the true realities of the home buying process, such as the importance of putting together a team of professionals who make sure everything moves along smoothly every step of the way, not to mention the (often harsh) financial realities of buying a first home.

A great team is a must

One of the most important things a first-time buyer can do when beginning their house hunt is to cultivate a truly spectacular team. From day one, the two MVPs are the real estate agent and the mortgage lender. In an earlier article, we covered how to choose a real estate agent. A good mortgage lender helps buyers understand the [differences between various types of loans, be responsive to counter-offers, close quickly (if the buyer chooses to do so), and provide the buyer with a fair rate. After buyers have accepted an offer, it's time to build part two of the team: the real estate attorney, inspector, and in some cases, an oil tank sweeper. Most buyers know they need an attorney, but it's common for first time home buyers to be unclear about a home inspection and oil tank sweep. "It's highly recommended that buyers get an oil tank sweep when there are not any records that indicate the property is free of an oil tank," says Mike Grogan, owner and inspector of Oil Tank Sweep, NJ. "If a property ends up having an oil tank, it's best to know up front. Removing an oil tank and doing soil remediation from a leaking oil tank has the potential to cost a homeowner as much as $50,000 to $75,000." Find an inspector who is clear about what his services are and offers a detailed report with photos. For example, some services are additional like a radon and termite inspection. Home inspector John Lisle, of Inside and Out Home Inspection, explains that a standard home inspection does not include a radon or termite inspection. Buyers know they need an inspection, but most don't think to ask about radon and termite inspections. "Some mortgage lenders require a termite inspection certificate, so it's best to always double check with the lender. Typically, lenders do not require a radon inspection, but I especially recommend it in areas that are known for having high radon potential." Lisle adds that a detailed report is important because it reveals problems home buyers will either need to negotiate with the existing owner or be prepared to pay for themselves. As we outline in a previous article, inspection failures can be costly.

Financial realities

There are many websites that offer quick mortgage payment calculators which attempt to determine how much of a payment a buyer can realistically afford, based on income-to-debt ratios. While those calculators are a good starting point, they don't paint a completely accurate picture. Part of creating a realistic budget means including a buffer that provides room for expenses, such as insurance premiums, property taxes, and repairs or renovations. At some point during the course of owning a home, the funds needed to cover these items will increase. If the initial planning did not leave room for the house payment to grow accordingly, buyers could find themselves struggling financially. Home insurance can reach extreme cost levels, and insurance companies are unable to provide an accurate quote until buyers have the exact address of the home they would like to purchase. As soon as a home offer is accepted, it's a good idea to shop around for quotes. Real estate expert Steven Seigel of the Luxury Team says, "I always recommend that buyers stick within a budget that will not cause them financial stress. Upgrades can always be made by purchasers in the future." He further stressed that while cosmetic upgrades were possible, changing the location and underlying layout was not.

The allure of instant luxury

It's easy for popular home design television shows to lull first-time home buyers into believing they'll be settling for nothing less than granite counters, hardwood floors, and smart appliances. I know, I know: it's difficult to hear (I'm just the messenger!), but these are often not realistic budgetary possibilities for the first-time home buyer. Samantha Reeves, Agent Education Manager at Veterans United Home Loans, says, "The popularity of different luxury items varies by market and price range of the home." This means that while buyers may want natural stone countertops, open floor plans, or a master bathroom with a walk-in shower and large tub, these features may not all be available in their price range. However, if the location of the home is advantageous for the buyer and the floor plan is aligned with their preferences, upgrades can be made slowly based on financial availability. Or, buyers may choose to factor in less expensive upgrade alternatives which may be able to be made sooner by purchasing a home that is under budget. For example, engineered quartz or stone are less expensive alternatives to natural stone countertops. These selections offer the same look and feel, for substantially less cost. Instead of natural hardwood floors, buyers can price engineered wood flooring, which offers greater durability at a fraction of the cost. Small compromises can create the same feeling of luxury at a more realistic price point. These relatively easy upgrades can be implemented between the purchase of the home and move-in day, and should be taken into consideration when homes are being evaluated for purchase. The reality may initially seem as if first-time buyers will never be able to afford what they want, and should prepare themselves for disappointment. This is not the case. When looking for a home, it is important to keep long-term aspirations in mind and choose properties that have the underlying requirements necessary to fulfill the buyer's dreams in time. Moral of the story? There's a lot that goes into buying a first home. Unless buyers are rich, or extremely fortunate, there's going to need to be a sense of compromise.

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