You can buy your first home in a crazy housing market for the right price without overpaying, skipping inspections or compromising by getting a house way out in the sticks. It seems like an impossible task; it really is more about how you go about doing it as opposed to having luck involved.
The best way to get the best price on your first home was to get away from high prices of living in a metro area. When I moved to a more affordable city, homeownership went from something I wished for to something feasible because of how I looked at my location changed from emotional to practical.
If you work in a career that allows flexibility, you will have to decide if you want to stay in a high cost city for the next few years or make the switch to a low cost city to avoid making your dream of owning a home unattainable. Finding a market where the average home price is commensurate with the average income is most certainly an advantage when looking for your first home.
This wasn’t about “settling,” it was about making a smart buying decision.
Our Money Was Right Before We Started Looking at Houses
One huge advantage of being debt free made this possible. No car payment, no student loans, no long-term obligations to hinder the use of my equity.
Because I have no debt, my ability to be approved for a mortgage is much easier and the amount of additional money that I can borrow has decreased comparative to if I did have debt.
Along with having great credit score, being debt-free gave me more borrowing power, and ultimately I was able to secure a mortgage with the lowest current interest rates and the best terms available.
Good credit + no debt = leverage.
The Actual House-Hunting Process Didn’t Begin With a Perfect House.
The very first round of properties viewed could have been classified as “almost” houses, meaning they were small, overpriced, located in bad neighborhoods, had bad layouts, had bad smells, and had sellers that were unwilling to entertain reasonable offers.
However, every house shown has helped the buyer refine what it is they want in a house, narrow in on what is important to them and develop their instinct on what is a good deal vs. what is hype.
The bottom line is that the more houses viewed, the more confident the buyer will be and the faster they will be able to make a decision.
The Real Estate Agent was a Secret Weapon
The decision was made to select a real estate agent based upon experience, responsiveness, and strategy rather than just randomly selecting an agent. A good real estate agent is more than just someone who opens doors, they also negotiate, act quickly, identify risk, and develop a competitive offer.
A good real estate agent has excellent communication, is knowledgeable of the local real estate market, and has excellent negotiation skills, which will save time and money.
An effective real estate agent will be the buyer’s advocate, as opposed to just helping them locate a home.
The Buyer Found The Right Property By Looking Where Others Were Not
While most buyers were focused on new homes and bidding wars, the smarter buyer was focused on homes that had been sitting on the market.
Homes with poor-quality photographs, poor marketing, and/or minor issues are frequently overlooked by buyers and are therefore considered “hidden gems.” An example was a house that had not been marketed well. It had plenty of space, a garage, a yard, and was livable, all while avoiding the panic that accompanies a bidding war.
- I was able to make a successful offer under the list price.
- My negotiation efforts were fruitful.
- The inspection went really well.
- The appraisal came in at the same value as the agreed sale price.
There was no chaos or panic or buyer’s remorse.
The Mortgage Approval Process Had More To Do With Strategy Than Income Level
We had a borrower with an unstable income source and we created a mortgage strategy based on their most stable income. Most mortgage lenders want stability, good credit, and little debt, rather than large income swings.
Comparing rates, terms, and overall flexibility with multiple lenders also helped us determine the best mortgage solution; without affecting credit score.
Mortgage shopping = leverage.
Why Did It Work When So Many Others Were Not Successful
- Not because of exceptional timing.
- Not because of good fortune.
- Not because of taking risky chances.
Better successful elements included:
- Selecting an appropriate (affordable) city
- Keeping a debt-free status
- Keeping credit history in good standing
- Touring enough homes to be educated on the true value of homes
- Employing a strong real estate agent to represent the buyer
- Targeting less-traveled or unrecognized listings
- Conducting negotiations quietly, versus chasing the hype in a current real estate listing.
In a seller’s market, it is not about winning bidding wars; it is about being patient, in the right position, and preparing correctly; and knowing when to be part of the crowd or when not to be.
The best home for a first-time buyer may not be the one that everyone wants; it may be the home that no one else has seen yet.
