At this point, I’ve seen so many episodes of “House Hunters” and “Fixer Upper” that I should know what I’m doing when it comes to buying a starter home.
But the truth is I don’t have a clue.
If you’re interested in becoming a first-time homeowner, you might feel equally overwhelmed. And no amount of HGTV will change that.
6 tips for buying a starter home
For help, I turned to a knowledgeable realtor from my hometown: Katie McDevitt, who, along with her parents and husband, slings houses at Hamilton Village Real Estate.
Here are six tips for buying a starter home based on her advice.
1. Find a buyer’s agent
When you see a house you like, don’t simply call the agent listed. That agent is the seller’s agent. As a buyer, you want someone to represent you — and only you.
“If you contact a different real estate agent, they can represent you through the transaction with your best interest in mind — instead of the best interest of the seller and usually at no additional cost,” said McDevitt.
To find a buyer’s agent, you can contact a different person within the listing agency or get recommendations from friends who’ve recently purchased homes in your area.
2. Prioritize location and price
A shocking one-third of American households are cost-burdened, which means they spend more than 30 percent of their income on housing. To make sure you can afford your starter home — now and in the future — set a budget and stick to it.
“A lot of people try to push it and go for the maximum dollar amount they qualify for, trying to keep up with the Joneses,” realtor Scott MacDonald told Bankrate. “Stay within a reasonable budget so that you don’t overextend yourself and get yourself into trouble.”
And remember: This is your first home. It’s not going to be the biggest or prettiest around, but it should be in a winning location. Look for a neighborhood with well-maintained homes that’s close to amenities and in a good school district.
MacDonald likes seeing tidy yards and “for sale” signs rather than “for rent” signs. He said long-term residents lead to a better return on your investment down the road.
3. Budget for the closing costs
The listing price of a house might seem like a steal, but it isn’t your only cost.
“You do have to factor in some other costs,” said McDevitt, including inspection and upfront lender fees, which occur right after you reach an agreement, and attorney, insurance, document, and additional lender fees, which occur at closing.
In general, closing costs are between 2 and 5 percent of the purchase price. So, for a $200,000 house, they’d be between $4,000 and $10,000 — a hefty chunk of change when you’re purchasing a starter home.
4. Consider a future buyer’s perspective
Although it might be hard to imagine selling your house before you’ve moved in, McDevitt said you should think about resale value.
“There are many factors to consider, and a good real estate agent can help you with this,” she said. “Things like school district, surrounding properties, potential development, zoning changes, and even general location will affect your property if you end up reselling it down the road.”
So be sure to discuss the pros and cons of different properties with your agent. And when you choose your starter home, consider what a person might want down the road.
If you plan to upgrade or renovate the home, McDevitt also recommended researching what similar starter homes have sold for. “If possible, you don’t want to put more money into the home than you could get out of it,” she said.
5. Keep emotions out of it
When I buy a starter home, I bet I’ll struggle with this tip the most. I can imagine myself falling in love with a farmhouse that’s crumbling around me — and buying it anyway.
“Sometimes buyers will fall in love with the way a house looks or the way it’s decorated,” said McDevitt. “It’s fun to envision living in a house — but it’s important to keep your emotion subdued so you can think more clearly about things like the structure of the house.”
And on the flip side, if you’re turned off by paint colors or furniture, McDevitt said you should look beyond the details. “Those can be easily changed once you own it as long as the house seems to otherwise meet most of your needs,” she noted.
6. Get a home inspection
When you put in an offer, you can make it contingent upon a home inspection — including radon, pest, and sewer inspections, said McDevitt.
Make sure the home inspector is licensed and has a good reputation in your area. You also should accompany the inspector during their appointment and ask questions about anything you don’t understand.
McDevitt noted that an inspector shouldn’t give you estimates for how much it will cost to fix or replace items; instead, you should give the inspection report to a contractor, who can provide estimates for issues that concern you. You might even be able to get a credit from the seller for repairs.
Buying your first home is an exciting step in your financial journey. Follow the tips above, and hopefully your investment will pay off for years to come.
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