My Best Advice for First-Time Homebuyers
Here's What You Need to Know Before You Buy
Buying your first home can be a daunting task, but with a little knowledge and preparation, you can make the process smoother and more manageable.
We'll walk you through the key steps involved in buying your first home, from assessing your financial readiness to closing the deal. We'll also share some insider tips for finding the right home.
Whether you're feeling overwhelmed or just looking to brush up on your home-buying skills, this video is packed with valuable information that every first-time homebuyer should know.
More of a reader? Catch the video transcript below!
Today, I want to talk with my first-time homebuyers.
You’re looking at the current landscape of the housing market and you’re seeing these headlines about inflation, falling housing prices, low inventory, and steep interest rates.
Look, it can be really hard to buy a home in San Diego. It’s a really high-cost-of-living area, homes are expensive, and rates are high. It’s a challenging place to be.
So what are some things that we need to think about as a first-time homebuyer in order to get prepared?
Take a look at your personal budget.
How much of your personal budget do you have available for housing?
You’re going to want to look at:
Your current income
Your current amount of debt
Your savings amount
What you’re comfortable spending on housing
Housing is typically the largest expense in your budget. When I bought my first place in 2014, I was renting a two-bedroom apartment in North Park for $1,400 and I was buying my first house with a $2,100 mortgage payment. That $700 jump was a lot, and it’s hard to jump from rent to mortgage when the price is going up that much.
So, the first step for a first-time homebuyer is understanding what line items in your budget can be manipulated to free up more budget for housing.
If you can’t free up enough money to cover the extra expense, you may want to consider ways you can increase your income.
Aside from your mortgage payment, you’ll also want to consider extras like property taxes, HOA fees, PMI, closing costs, down payment, and other additional fees.
You’ll need to take your entire financial picture into consideration to figure out what you’re willing to pay per month and what types of properties that amount can get you.
Manage your expectations for the types of homes you can afford.
One of the best pieces of advice I can give to first-time homebuyers is to only buy a house when it makes sense for your personal budget and there’s something out there that meets your needs.
I think many first-time homebuyers get caught up trying to find the perfect house that checks every single box. The fact of the matter is that most people don’t buy that perfect forever home on the first go. In fact, for most people I know, it takes them until their second or third purchase before they buy the house that they’re going to be in long-term.
So, buy a home that works for you today, and if it’s something that you can envision yourself in long-term, that’s great! But if not, that’s totally okay, too.
I’ll give you a personal example. I was renting a two-bedroom apartment in a really chic part of town. Although I would’ve loved to have stayed there, there was no way I was going to afford a house in North Park for my first home. So, I ended up buying a home in a less-desirable neighborhood with a plan to stay put for five years and then upgrade to a bigger home in a better neighborhood.
If I’d stayed renting in that chic neighborhood I loved, I would’ve paid close to $100,000 in rent during that five-year period that I never would’ve got back. Instead, I ended up making $130,000 in mortgage payments during that time and walked away with $180,000 in equity when I sold.
I took that equity and bought a fixer-upper for a low price and fixed it up. Eventually, I was lucky enough to catch an upswing in the market and decided to sell that house. Now, I’m on my third home in Pacific Beach, a beautiful area I’ve always dreamed of living in.
But there was no way I would’ve been able to afford my current home without the equity I gained from my first and second homes!
If it makes sense for your personal finances right now, just jump into the market.
If it makes sense for your financial situation to buy soon, my best advice to you would be to just jump into the market. You may not be able to buy your forever home in your dream neighborhood on the first try, but the equity gains you make from owning that first home will set you up for success to upgrade in the future.
Thinking back to my personal history, there is no way I would’ve been able to save $180,000 of my income if I kept renting my place in North Beach. The only reason I was able to buy my second home is because I was able to ride the wave of appreciation and build up $180,000 in equity from my first home.
Building up equity in a home that appreciates in value is what’s going to springboard you closer to your dream home!
I hope you’ve found this information helpful as you think about getting into the real estate market. If you have the financial means, don’t wait to invest in real estate — it’s what’s going to help you build wealth and get you closer to that forever home you’ve been dreaming of.
That’s it for me today, guys — catch you in my next one!
Brent Edwards (aka Brent the Broker) is a residential real estate agent and Realtor in San Diego, CA who helps clients buy and sell homes in San Diego, California and all surrounding areas. Brent is a highly-recommended Realtor in San Diego by family, friends and past clients. Call Brent today at 619-550-8070 if you have any questions about real estate in San Diego or you'd like to buy or sell a home.