First Steps Home Buying

What is the First Step to Buying a Home?

I’ve spent the last hour reviewing a dozen articles on First Steps to Buying a Home. These articles all contain a bias based on author representation or who is paying for the SEO and Ad placement.

Without bias, I’m going to let my author-self write like this is instructions to my children. (I too have a motive, but I’m going to shelve that here, now).

Before taking any “First Steps to Home Ownership” you will need to plot a course. 

A detailed plan. The investment in that plan will have a tremendous return on the time to create it. With a completed written plan course map you will take fewer overall steps in the process. Those steps will also be in a direction of your choosing not under the spell of a motivated salesperson (please note the sales commissions on buying a house are large. You, being the source of a financial incentive to someone you don’t yet know, can place you in financial vulnerability).

The Written Plan will also provide guardrails to guide you along a singular path rather than foraging along multiple paths.

Grab a blank notebook, quiet corner seating, and some caffeine, and let’s begin.

Does your plan involve buying a house with someone else? This will now be a joint endeavor with them. They should therefore also be responsible for creating this plan. 

Categories or Chapters for your Written Plan Course Map should include:

– Timeline constraints

– Pricing and payment parameters (self-imposed) 

– Home Category Attributes 

– Physical Attributes

– Macro Location needs

– Micro Neighborhood 

– Lot criteria 

– Non-negotiable Amenities

– Desired Amenities

All of these chapters should be addressed in writing. Since everything is subject to change, updating, and editing you don’t need to worry about getting it wrong, or perfectly right. Nothing is irreversible at this planning stage. You’re going to learn a bit about yourself in this exercise and come to the realization there may be some Essentialism type choices you’ll need to make based on your hierarchical needs.

First, write a short Mission Statement about your project and give it a title,

Just as:

Kellie and My First Home Together

By next Thanksgiving, we want to arrive at a fireplace residence that is calming, yet with a neighborhood feel.  We desire a commute that isn’t agonizing with a total monthly payment not to exceed $3,500 so we can still eat out once a week. I’ll embrace light home improvement but don’t like ladders or lawnmowers. Kellie grew up in a house on a flight path that had a septic system and we don’t want either. Colonial and Capes are fine, but the Gambrel or Dutch Colonials are instant turn-offs, the latter because I grew up when they played Amityville on TV. Because we don’t enjoy moving we shouldn’t focus on a traditional starter home that we could outgrow almost before buying.

See what just happened there? You’re being called to put a definition on the project through a discussion-style exchange. The way to manifest the dream house is to first visualize it. If you want to Three-Little-Pig-It in a brick house up on the dry ground, then that needs to go in your plan – else someone’s going to waste a lot of time kicking tires on straw houses. 

Once you have your mission statement you can start to define the other key elements.

Timeline Constraints – are you under a departure lease you need to work around? If so, research the penalties for breaking the lease. Is it only a 2 month’s penalty? That may be a very low cost for the luxury of syncing timelines with the purchase of the house of your dreams. 

You can’t Abracadabra your Dream House. You’ll need to watch new inventory patiently. If the stopwatch of a lease expiration is running that will increase the likelihood you’ll need to settle for that lowland straw or stick house, not the high-and-dry brick one. 

If you’ve recently accepted work on a full commission basis or “went out on your own” (to start a company), you will be surprised to learn that mortgage applications for this type of income are averaged backward…. not future looking like most jobs. Therefore you’ll need to complete two years of earnings for your new endeavor to quality.

Other timeline considerations could include an overlap of housing to renovate (sanding floors and painting), moving in (and out) over the course of a few days (instead of a few hours), and availability of movers or other contractors.

If you’re waiting on a gift, inheritance, or divorce to finalize in order to undertake the goal, please resist the urge to start shopping before that occurs. If you engage the train, it will be difficult to stop it without coming off the tracks.

Lastly, If you’re interested in trying to time the market

Don’t. 

You’ll lose focus on the mission trying to find a “sale”.  Read our article on Spring Market if you’re curious about seasonal cycles. And we also have guidance on monthly cycles. 

What about the seemingly upward tendency of interest rates?

No one knows the direction of interest rates. It’s a problem that may never happen. Or rates may rise slowly. Or move in your favor. Running from a falling object may lead you to run over a cliff. Don’t worry about rates until the decision to select a rate is inside of your control. You’re more ap to put unreasonable pressure on yourself causing you to misfire on a tactical decision in the buying process.

Pricing and Payment Parametersbefore you undertake a pre-Approval, set your household budget. 

Why is this so important?

The bank’s underwriting parameters will never know or ask about your personal budget. Nor will they care about your expense for dog sitting, yoga classes, or your decision to eat organic or vegan. It’s up to you to protect budgeting for the things that are important for your lifestyle. Otherwise, your future housing expense will come in and “Bully the Budget”. If you leave it up to underwriting to set your budget, you’ll also notice the budget will become “leaky”.

Otherwise, your future housing expense will come in and “Bully the Budget

John Donlon, Co-founder, GoldCoast Mortgage Service, Inc.

What is a Leaky Budget?  

Do you recall K-Mart used to demonstrate prices ending only in .98 cents? An effort to make things appear cheaper?  When you buy a house you’ll notice the K-mart side of the pricing.

You’ll discover that the real estate taxes on that home are demonstrated at the “last year” (lower) rate (dirty little secret: taxes go UP every year).

After you buy your home you’ll notice that the taxes come up to current tax rates very swiftly. And the valuation (what the tax rate is applied to) will be adjusted from a stale valuation … closer to your purchase price, as my father used to say, PDQ.

Shop under your allowable budget and do not use the pre-Approval amount as your guidance. 

If your personal budget doesn’t provide you with enough cash flow to purchase a home of your desire, then you will need to use a scalpel to decide which parts of your lifestyle you’re willing to carve out to supplant your Housing Bully. This exercise forces the hierarchical arrangement of what’s truly important in your life. Maybe the house weighs in more than your 2 week Aruba timeshare or motorcycle …. then again maybe it doesn’t. 

But shouldn’t you make that call, not a Loan Officer?

Home Category Attributes – Houses come in various shapes, styles, and even species, By species I mean it may be a home that you do not own the land it sits on (condo or co-operative) and you may even become introduced to houses (not condo’s) on “leased land” and this doesn’t include mobile homes in communities. There are also multi-family homes, homes with in-law apartments known as Accessory Dwelling Units (ADUs), and houses built in associations (PUDs) where you pay a fee for services and can’t park trucks with corporate lettering on the side.

If you know that your toleration ends at Doc Martins echoing across your ceiling at 3:17 AM you’ll want to cross condos off your list …. other than top floor or townhouse style. If your hearing or olfactory senses are finely tuned, multifamily living could cause tweaks to your operating system, especially around cooking or bath time. Having a tenant help pay your mortgage is, well, certainly helpful, but them ringing your cell phone regarding an overflowing sink as you are boarding a plane, not so much.

Choose a lane. Then stay in it.

Physical Attributes – homes can be divided up into private and public spaces. Private spaces are bedrooms, home office, storage, work areas, and master bath. Public spaces include living room, kitchen, recreation, family, and game rooms. For those who like to host the need for an abundance of public space in the house is important. Others it’s not. Think carefully about the division of these spaces and the requirements you may have. Blending the two attributes can create awkwardness within the functionality of the home. 

Put your pencil to paper for bedroom count. Decide if you really need a used five-times-a-year formal dining room, or you can make do with a large eat-in kitchen. 

Is the home “future expandable” or are you beholden to the use under which you purchase it? The possibility of future expansion is important as it PRESERVES YOUR FUTURE OPTIONS– one of the most valuable things there is.

Could you add a detached garage later? House is perfect except it’s lacking the rec room … what about building out over the attached garage later when the budget permits?

For us, a fireplace was a must-have. For you, it may be a room for a soaking tub. Tall ceilings? Basement (or a dry basement)? Parking and for how many cars? How about central air and 2nd-floor laundry? Do you like a certain heating system? Is natural gas even available IF you chose to install it later? Septic or sewer?

List out your true needs and describe the house that fits those. Also itemize your hard No-No’s.

Macro Location needs – your base camp needs to work for you. Don’t set yourself up for a commute too long to be sustainable. Consider the commute home in the winter. Now consider it with 2 inches of snow on your windshield while you were at your desk. 

If you’re going to relocate, “test drive” the area with an extended stay rental. You may discover greenheads, blackflies, odors, and sounds. The first Sunday morning in our new house my wife and I became aware there was a gun range nearby before long we could set a watch by their opening shot.

While adjacent States may not have a specific tax, know that state funding comes from somewhere. What may appear to be a bargain in lack of income tax may actually be a burden with ”double” real estate tax. 

Unless you’re politically agnostic consider the leanings of your destination town. Are you going to be facing down signs that irk you each time you arrive home? Many people can detach but if you aren’t the type that can, think about aligning your future home with your tribe. 

Micro Neighborhood – so much to cover in this section! I recently discussed beach walkability with a client. His target house was about a mile from a small beach. We talked about how many times he would actually walk to the beach. Maybe 4 times the first year, once the second year, and probably zero the subsequent years.  We recycled this energy and cost back into something more important to him. Finding a home in a neighborhood that provide larger lots for this newborn to play and dog to gallop. Unless your hobbies are showing up in the top-ten list of priorities, don’t let a “theme” (like the ability to walk to the beach) distract you.

Your household values will come into play significantly here. Every neighborhood has a personality to it. We’ve seen neighborhoods defined by Karaoke, non-golfing golf carts, ice skating + barrel fires, community centers, playhouses, annual fireworks, rail trails, and direct access to horse trails or ski slopes. Bike, dog, or walking friendly. The list goes on. Where are you choosing to vest yourself?

Watch for seasonal uses (Halloween in Salem) and proximity to busy colleges that may impact your future quality of life during peak seasons.

Lot Criteria – this is different from the neighborhood. Think about this as a generic location consideration. Shaded or sunny? Yard or parking spaces? Or both? Wildlife or neighbor life? Is a busy street tolerable? 

You can’t (inexpensively) change the topography, environmental smells, and noises, sun travel, light pollution, street lights, or passing car headlights. One family we know has a child’s bedroom bathed in red light 99.9% of each hour of darkness from a new positioned stop light (always red except for an occasional green). Traffic patterns may fluctuate during weekends. 

Non-negotiable Amenities & Desired Amenities – Have fun with this section. Build you lists of “Must Haves” and then also of the dream features which you’d enjoy but won’t kill the deal over. If you don’t build this list, it will be built for you, without your input.

What happens next? – Once you have your Written Plan in place keep it with you. Talk about it and when you run up against the inevitable conflict or paradox, solve it and edit the plan.  For instance, if you need to push the monthly carrying costs lower, you’ll need to increase your down payment, select a property with a lower tax rate or valuation, or move into a lower price tier. Record the outcome in your revised Plan. I’d love to read it if you want feedback on it.

With a published Plan in place, you are now ready to begin building your Team. We’d be honored to play a role in your Your Future Home-Buying Team