11 Things Your Realtor Might Not Have Told You About Buying Your First Home

Kimani Lovan is a member of the California.com Recommended Business Program, which highlights only the best businesses in the Golden State. To be featured, each business must be highly regarded, have a unique California story, and make a positive impact in their community. 

When I work with buyers, they often have stories about real estate agents or lenders they’ve spoken to in the past. As I dive deeper, I find that there’s a lot they don’t know or have never been advised on by these professionals. I don’t expect anyone to retain every bit of information that someone tells them about the homebuying process, however, there are a few important things they need to know before buying their first home.

These things can determine whether they get into a good loan or a bad one—and if they get a good home or not. These are some of the most important points my first-time—and even experienced—homebuyers are typically unaware of, but that you should consider when buying your first home. 

11 Things You Should Know Before buying your first house

1. Especially when purchasing your first home, buy in the path of development

As nice as it is to buy in an established neighborhood or city, your home is more likely to appreciate when you purchase where you know development is happening. I cannot stress this enough.

Development can refer to a variety of different construction projects, but purchasing a home in any upgraded area is crucial. From getting into pre-construction or buying into an early phase of a new housing development to finding areas that are building a new shopping center, grocery store, hospital, or other community staple, looking toward the path of development can help your home gain value quickly. They often appreciate much faster than established areas, which can allow you to upgrade your home within a couple of years instead of waiting 5 to 10 years.

2. You do not have to put 20-percent down to avoid PMI

If you’re still wondering how to purchase your first home, this fact should ease your stress. Multiple lenders offer programs that allow buyers to make lower down payments without penalty. Typically, certain lenders can help you avoid paying PMI (private mortgage insurance) with only 10- to 15-percent down.

3. Take various dwelling types into consideration

Understand that generally, condos and townhomes are great first homes. They’re budget-wise, but don’t appreciate as much as single family residences (SFR’s). Also, in the eyes of an insurance company, a condo and a townhome are the same because they both have “party” walls. Insurance is usually higher on these types of properties than SFR’s. However, buying a townhome or condo can allow buyers to live in desirable areas and help first time buyers get into an affordable property. 

4. Think about purchasing a multi-family residence

For your first home, if you’re able to, target multi-family units where you can “house hack” (live in one unit and rent out the others). If that doesn’t work, opt for a large lot where you can add an ADU (Accessory Dwelling Unit) for added income.

5. Do your research before committing to an investment property

If you don’t plan on occupying your home, lenders will have different guidelines as far as mortgage rates and minimum down payments go. Make sure you understand this if your first home is more of an investment rather than your primary residence.

6. Opt for a starter home

Unless you have a significant budget, don’t worry about getting your dream home when buying your first house. Instead, get something that you can either add sweat equity to, or is in a good area where your home will continue to appreciate in value. Getting in the game is more important than waiting for something perfect on your first try.

7. Get the biggest home you can afford in the best area

The reason why this is important is because families grow, markets change, and so does your income. The only people I’ve ever met that wanted to downsize were either retired or empty nesters. On the other hand, if your family grows, you don’t want to be cramped. Also, if the market shifts into a downturn, you know that you will be comfortable in your current place and won’t feel trapped. 

If the first home is a financial stretch, consider your future income growth. A home should become more affordable over time, not less. If you can barely afford it today, it shouldn't be such a stretch in a year or two.

8. Know the property tax on a home before putting in an offer

The last thing you want to do is find out that you’re purchasing in an area with a Mello Roos after your inspection contingency has been released. A Mello Roos is a special tax assessment that certain cities place on certain regions within the city. This can cost you anywhere from a couple hundred dollars to several thousand every year. This can ultimately have a huge impact on your budget, resale of the property, and appreciation.

9. Think about the practicality of each space

When you tour homes—especially the staged ones—try to think practically in terms of the layout and how your furniture would be arranged. Most often, home staging pros will put the majority of the furniture up against walls and take the TV down in the living room. This gives the appearance that the room is larger than it actually is. Stagers will also put queen size beds in certain rooms instead of kings, again, to make sure that rooms aren’t cramped while you’re touring. Consider the size of your current furniture, or the furniture that you want, and how you would arrange it.

10. Plan ahead and don’t settle 

If you plan to have children, or need a certain number of bedrooms and bathrooms, make sure those things are checked off on every home before you go look at them. As long as your budget allows, don’t feel like you have to compromise on your most important things. Even though this may not be your forever home, it’s somewhere you want to enjoy being. You should look forward to moving in.

11. Consider pre-underwriting, especially in a seller’s market

Some lenders have the ability to fully underwrite your loan before you even put an offer in on a house. Doing this will make you a stronger buyer to any seller—especially in a competitive market. Essentially, when you place an offer and you’re already fully underwritten, you can be non-contingent (meaning there are no inspection, appraisal, or loan contingencies) because you’re pretty much guaranteed to close on the loan no matter what. 

Sellers love this! It’s like you’re presenting a cash offer. This gives you the ability to bid a little lower than you normally would and can save you thousands. If your current realtor doesn’t have a lender that can do this, reach out to a realtor who knows the right people.

If any of this is going over your head, don’t feel bad. It’s your first home—or your second or third—and you aren’t expected to know everything. It’s a learning process that takes years to master. Your realtor should be guiding you and making sure that you’re making informed decisions. Remember, everything may not be perfect, but as long as you’re aware of your options and can make the best decision for you and your future, you should be satisfied with your first-time home buying experience.