The U.S. housing market is quite tight. If you’re tired of paying rent, you may notice that a house payment in your area might actually cost you less than rent. However, homeownership is a much bigger financial risk than renting. Once you have a down payment and survival savings built up, you can start shopping.
1. Get the Money in Order: Pre-Approval
Applying for a mortgage can be quite onerous. You’ll need to submit a great deal of personal information and your credit score may suffer a hit that lasts a month or two.
That being said, getting pre-approved for a mortgage can also provide you with a lot of information. You can review all of the information that impacts your credit score and clean up any mistakes. If your credit score is low because you have high consumer debt, it’s a good idea to rent for another year and do your best to bring your debts down.
Once your credit history has been reviewed and corrected, you will have the numbers you need to know to start shopping. If you qualify for a bigger mortgage payment than your current rent amount but are struggling to make ends meet, put your rent payment into a mortgage calculator and use that number to start your home search.
2. Location Matters: Live There Before You Buy
If you’ve recently moved to an area, don’t buy right away. You need to know which parts of town fill up with tourists or students. You need to know if inclement weather impacts one area more than another. You may want to live near a great park or the best schools.
Start your search around either your job or your hoped-for school district once you’ve lived in the area for at least a year. Study tax valuation maps. Carefully consider the style of house you want to buy; you may find neighborhoods full of single-family ranch homes but want a second story. Such a choice may help you simplify your search.
3. Don’t Renovate Immediately
Renovation is messy, disruptive, and expensive. A wisely planned, thoroughly scheduled renovation can be completely worth all the mess and money. Until you hate your small bedroom or basement laundry room enough to deal with the stress of renovation, the project simply won’t be worth the pain.
Live in the space. Paint if you want different colors. Replace flooring if you must. Leave the walls where they are until you are absolutely certain of the footprint changes you want to make.
Carefully consider changes that may require you to move out for a time. Dust, tools, and very small children don’t mix. Keep seasonal pressures in mind as well. If you’re putting a large addition on a small home, you’re going to need a new HVAC system. Replacing a furnace in Minneapolis should be done in the summer; replacing AC in Phoenix should be done in January.
4. Avoid DIY Pitfalls
DIY projects look fairly simple on home repair shows. However, drywall is heavy, and finishing it is a skill that will take time to build. Plumbing is awkward and even a tiny leak can cause costly damage. Electricity and piped gas can kill you.
If you’ve never done DIY, reach out. That handy friend at work might be willing to come to help you learn to tile. Your carpenter family member would much prefer to show you how to use a saw than to help you recover.
Many first-time homebuyers tackle very big projects and become overwhelmed. Start very small. Repair plaster cracks and drywall dings to build up your finishing skills. Study your breaker box and make sure you know what to turn off before you try replacing outlets. Hire a professional before you make a dangerous or costly mistake.
5. Build a Financial Foundation
Homeownership is a wealth-building tool that is second to none. You will get many offers to finance furniture and other decor. If you have somewhere to relax and a bed to sleep on, avoid more debt. Refinancing your home to cover unsecured debt will send your payment up and increase your overall financial risk.
Buying your first house can be incredibly exciting. Don’t take on financial burdens or projects that make your home a burden. Improve your space slowly; save for updates that you want so you don’t get financially swamped.
By: Katherine Robinson, a writer for Lariat Realty Advisors
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