From the first online search to the final home inspection, buying your first home can be a daunting task. It can be a brutal rite of passage for a multitude of young adults, one that will be experienced by many in the next few months.
If agents are optimistic most years about the spring, this year they are over the moon. Prices are starting to tick up, interest rates remain historically low, and the glacierlike winter has left behind a lot of pent-up demand. “I think it’s going to be a phenomenal spring,” says Cathy Toomey of Stone Ridge Properties in Amesbury. “Every expectation is that it’s going to be very, very busy.”
Newcomers to the market are looking at interest rates, first-time buyer incentives, and prices that might not be there a year from now, meaning they might never get more bang for their buck. But it also means they’ll have a lot of competition. Margherita Verani, CEO of Verani Realty in Londonderry, N.H., hasn’t been seeing the usual number of first-timers in recent years, but that may be about to change. “I think we’re going to see more first-time homebuyers this spring,” Verani says. “It’s a very good market, but you have to be careful.”
There are a lot of potential opportunities and pitfalls, so we asked the experts about the do’s and don’ts of buying your first home.
DO know what you can afford
In a market that’s expected to generate multiple bids on an attractively-priced home, first-time buyers need to be prepared to act. Verani says it’s crucial to know what is most important to you, and to be aware of your financial limits. “What they need to do is set expectations,” Verani says. “Go in, get your credit checked, and see what you can afford so you know realistically what you can do.”
DON’T put too much information on social media
Negotiating the price of a house is like a game of poker: tip your hand and you are going to lose money. Toomey says buyers and sellers should not post information for others to see about the progress of a potential purchase or sale. She cited a recent example of buyers who were about to make an offer, and then noticed on the seller’s Facebook page that the homeowner was desperate to move the property. The buyers made a lower offer, and it was accepted. “Know that the buyer or seller will be looking at your Facebook page,” Toomey says. “The reality is, even if I think my Facebook page is private, you just don’t know who knows who. There’s a lot of risk by putting that information out there.”
Though first-time buyers might have a vision of what they want, they may not be able to find it or afford it. “It is not unusual for a buyer to buy something quite different from what they were originally going to purchase,” Toomey says. Matching what you want and what you can afford might mean going to a town you hadn’t considered, and if the town is more important, it could mean looking at condos rather than single-family homes. “A lot of younger kids grew up with all these luxuries,” Verani says. “They go to buy a home and expect it to have the same sorts of things. Set realistic expectations. What do I need over the next couple of years, and what’s realistic for me?”
DON’T be afraid to talk to a lawyer
Often, a buyer will bring in a lawyer at the end of the process — the closing. Jay Lee, an attorney at the law firm of Gallagher & Cavanaugh in Lowell, says that’s a backward approach for many people. An attorney often isn’t necessary at the closing, Lee says, because the bank’s closing attorney typically has the buyer’s best interests in mind. Legal help is better utilized earlier in the process, Lee says, particularly when a purchase and sale agreement is being worked out. If a glitch arises, it could keep you from missing an opportunity. “You want the purchase and sale agreement to leave you enough outs. You want contingencies,” Lee says. “If I can’t get my loan in a certain time, I can cancel. If an inspector comes up with something, I can get my deposit back. You want the ability to further negotiate.”
DO shop around for lenders and first-time homebuyer programs
There are several opportunities available to first-time homebuyers that can save them thousands of dollars in the long run. For buyers who don’t have a 20 percent down payment, there are Federal Housing Administration loans that will finance up to 97 percent of a home’s value. There are several other programs that will help finance or even pay for a down payment. In order to get the best loan for you, it’s important to shop several different mortgage companies, including local banks. “Don’t be satisfied with one just because it’s a pretty good rate,” says Lee, who has represented buyers, sellers and banks in the real estate process. To avoid pitfalls and potential litigation down the road, Lee recommends taking advantage of a first-time homebuyer class like the one that is offered at the Merrimack Valley Housing Partnership in Lowell. For $100 per household, the class aims to simplify the buying process and covers every step, from negotiations and picking the right neighborhood, to mortgage applications and credit. Some banks will even give credit on their mortgage rate for buyers who complete the course.
DON’T pick the wrong agent or lender
It is a life-altering purchase, and your biggest advocates throughout the process will be your real estate agent and mortgage broker. Ask a lot of questions before choosing either. “Don’t use a real estate agent that makes you feel pressured or rushed unnecessarily,” Toomey says. “The agent should be patient and listen to what you have to say. And the agent should be asking you the right questions.” Verani suggests putting just as much effort into picking a lender. “Using the right mortgage company is as critical as using the right agent,” she says. “If you don’t use the right mortgage company, you’ll know about it about three days before close because there’s a glitch, and that’s the last time you want to hear about any problems.”