The thrill of buying your first home is hard to describe.
State of play: My partner and I bought our first home this summer. We struck gold, going under contract during our second weekend of hunting. After seeing nine homes in a single day, we found the one. But the market in Charlotte has been no friend to buyers.
By the numbers: The average sales price in Mecklenburg County rose from $530,728 in May to $555,025 in June, per Canopy, and houses were flying off the market when we started looking.
- Of note: The average home in Charlotte is selling for about 55% more than its expected amount, per recent data from Florida Atlantic University, as Axios’ Alexis Clinton reported.
- Thankfully we did not check any of those boxes.
Why it matters: You’ve probably heard the saying, “it’s better to own than to rent.” This isn’t feasible for everyone. My parents, for instance, didn’t buy their first home until they were in their 50s. Everyone’s journey is different.
- Investing in real estate is a pretty safe bet for building wealth — particularly generational wealth.
The bottom line: While our experience isn’t typical for the Charlotte market, we learned a lot about the home-buying process. If you’re in the middle of house hunting or about to embark on the adventure, hopefully this will help you.
- (Of note: My partner and I did not work with Clay or Warren during our home-buying process.)
1. Set your budget
The list price probably isn’t the price you’ll end up paying. Even if it is, closing costs, attorney fees and an inspection are all out-of-pocket expenses.
- Plus, your home may not appraise for your agreed-upon sale price, which could mean you’ll have to come up with more money out of pocket.
- Clay advises clients to work backward when it comes to their budget: Figure out what you want your monthly payment to be, and then work with your lender to determine your purchase price. You should also consider the total amount of cash you have available, and how much you will need at closing.
2. Don’t hesitate and be confident in your choice
Move quickly when you find a home you can see yourself living in and more importantly, a home you want to live in. It’s competitive out there. We saw our home in the morning and were under contract in about 12 hours.
- But put in an offer you’re comfortable with.
- Our realtor asked us when we made our offer if we would be OK losing out on the home because someone outbid us by a close margin. We were, but it comes down to what you’re comfortable with spending and what you can afford. Never put yourself in a position to be house poor.
- “If you really like this place, someone else probably does too,” Clay said. He added we are entering a slower market, which may give buyers a little more time to consider their options.
- “Don’t hesitate once you know exactly what you want,” Warren said.
3. Get an inspection
Whatever you think you’re saving by skipping an inspection isn’t worth it. Get the inspection.
- Of note: Homes in North Carolina are sold as is. The seller isn’t required to fix anything, but what you learn from your inspection can help you negotiate with the seller to contribute a certain amount toward closing costs, for instance.
- Be willing to make repairs, especially on older homes, Warren said.
4. It doesn’t have to be perfect
We’ve all heard the cliche in relationships about someone not being perfect, but they’re perfect for you. The same goes for buying a home.
- Plus, if you’re willing to do a little work, those home improvements will help you build equity, Warren said.
- For instance, we replaced our toilets, because our inspector advised us to repair or replace them. But he advocated for replacing them, because the cost would roughly be the same. We also saved money on labor because we did the work.
- Keep in mind what your time and budget allow for when it comes to home improvements, however. If you don’t have time for a fixer-upper, don’t take that on. But if you can replace your toilets, or make other small improvements, it’s a good way to build equity.
5. Wire your down payment correctly
Make sure you are sending a wire (this will appear as a same-day wire) and not an automated clearing house (ACH) transfer calling itself a next-day wire.
- If you send an ACH, your closing attorney may tell you they can’t accept it. That’s because you can rescind the transfer, whereas a true wire transfer can’t be taken back.
- Clay recommends rather than trying to do this online, go to your bank in-person tell them the exact language from your attorney for the wire. He also said to be weary of wire fraud.
6. Research before locking yourself into a mortgage
Clay suggests speaking with multiple mortgage lenders, not just the types of mortgages available to you. He also said you probably won’t see a drastic difference in terms of interest rates between lenders, but you do want to work with someone who will work to determine the best strategy for your situation.
You have the traditional 15, 20 and 30-year fixed-rate mortgages.
- Of note: Mortgage rates surpassed 5% for the first time in a decade, as Axios’ Brianna Crane reported, and they keep going up.
You also have adjustable-rate mortgages (ARMs), which contributed to the housing crash in 2008, because adjustable rates led to borrowers not being able to make higher payments. And six million American homes experienced foreclosure, per NYU Law.
- Yes, but: ARMs are making a comeback, reaching a 14-year high in May, as Insider reported last month.
- The bottom line: ARMs are less predictable, but they aren’t the silver bullet they were in 2008 thanks to new underwriting standards.