Being a first-time home buyer in one of the hottest housing markets in the country can be overwhelming. It may take months or more to find a house that matches your specifications, and once you find it, you may have to escalate your bid to ensure that you get a foot in the door.
But buying a home in the Austin area does not have to be painful. This guide will help you make the proper preparations so that you are ready to make an offer when the right home opens up.
How Much Should I Budget for My First Home?
The biggest question that you will face as you begin the process of buying a home is how much you can afford to spend. First-time home buyers may be tempted to compare what they spend on rent and assume that a similar mortgage payment is affordable. However, your mortgage payment is just the beginning of the costs of homeownership.
First off, in order to secure a loan for a home, you may need to make a down payment. This typically ranges from 3.5% to 20% of the total cost of the home, depending on factors like the type of loan you’re applying for and your credit history. It’s important to know how much of a down payment you can make before you begin your home search in earnest.
Closing costs are another sum that home buyers should consider as they total up the price of their new home. The costs of closing could add an additional 2% to 5% to your home costs.
Finally, it’s important to research and factor in the additional costs of home ownership, like property tax, homeowners insurance, home warranty plans, potential maintenance needs and homeowner association fees. The better you plan now, the less likely you are to run into challenges when you find your home.
What’s the Best Loan for a First-Time Home Buyer?
Once you have an idea of how much you can spend on your home, the next step is to determine how you will pay for it. For many buyers, this means finding the right loan. There are many types of lenders, from online bank options to local credit unions. The best lender for you is one that will help you determine whether you qualify for state and local programs so that you can get the best interest rate.
A little research can go a long way, like finding out whether each lender will cover your part of the closing costs and how much flexibility you would have to refinance your mortgage if your situation changes down the road.
When you decide on your lender, you will want to make sure that you have a mortgage pre-approval from them. Not only will this information confirm your budget amounts, but a letter of pre-approval is almost always necessary in order for you to make an offer on a home.
How Do I Determine the Right House for Me?
Now that the financials are out of the way, it’s time to get to the fun part of buying a home! But before you give in to the urge to check out every open house around town, you may want to figure out what you want and need in a home first.
The following items can help you decide how much house you need, as well as your deal-breakers:
- Square footage. While some folks may believe bigger is better, that is not always the case. What is important is whether the floor plan fits your household needs and gives you room to grow or downsize as your household changes.
- Number of bathrooms. Turning a bedroom into an office or vice versa does not take much shifting. But adding a bathroom—whether it’s full, half or somewhere in between—can be costly and time consuming.
- Layout. Consider the living spaces where you and household members spend the most time in your current home. Does the flow of the house you are considering fit with how you use space? Also note whether there are elements like stairs or narrow doorways that raise accessibility and safety issues for your household members.
- Energy efficiency. Keeping a home at a steady temperature can be a feat in Austin. Be sure to ask about typically utility costs, the state of the roof and the type of insulation in the house.
- Outdoor environment. Does the yard have ample space for pets and the outdoor activities you enjoy? Are you near a busy roadway? These questions will help you assess whether the outdoor aspects of the house are a good fit for your needs.
Where Should I Look for a Home in Austin?
Austin has many thriving neighborhoods that offer a variety of amenities. The right spot for you will be the one that checks your unique boxes. Consider your lifestyle and what brings the most value to your current location, and what causes tension. Do you love spending time with your pup at the dog park? Is it important to be close to community schools or daycare? How much of a work commute is manageable?
It’s also important to determine the type of investment you want to make with this property. If it is a place where you want to set down roots and raise your kids, you may want a family-centered neighborhood with a strong sense of community, like Austin’s Rosedale neighborhood. If your plan is to buy a starter home to build equity, then you may want to look in an up-and-coming area like Barton Creek, where property values are likely to increase.
How Do I Find the Right Realtor?
With a clear picture of what you are looking for in a home, you are ready to bring in a professional to help. A realtor who listens to your needs and follows your lead will make the home search both more productive and more pleasant. That’s why it’s important to meet with a few potential prospects so you can ensure that you have a realtor who understands your unique vision and is responsive to you.
If you have friends or coworkers with a similar communication style to yours, ask them if they have recommendations for realtors. By starting with personal references, you can avoid getting overwhelmed by the large field of realtors in Austin.
What Comes Next?
After you begin your home search, you may notice how the momentum can go from zero to 60 quite suddenly. You may lose a few bids, or you may look for weeks without finding anything that you want to make an offer on. But if you’ve gone to the trouble of getting your ducks in a row, it’s likely that you’ll find the right home eventually.
In some cases, however, you may realize that you’re not finding your dream home because you need to build it yourself! If this is the case, don’t be afraid to explore the possibility of building an Austin custom home. With nearly 70 years of combined experience as custom home builders in Austin, our team at Mangum Builders can help make your dream home a reality. Contact us today to hear how we’ve helped many first-time home buyers like you build their dream homes.