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6 Things I've Learned as a Clueless House Hunter Looking to Buy a Home

Oh my gosh... the housing market right now is INSANE! When my husband and I decided maybe it was time to start looking, we had no idea what we were getting into. Mind you, I've owned 2 homes in the past, so I thought, "I've got this." Nope!

Due diligence - What the heck is that?

All these addendums - I mean, what?!

I figured, I can't be the only one, so that's why I'm writing this blog post. Like I said, I'm clueless, so this isn't all-encompassing, it's just to maybe try to help those looking to buy a home untangle all the craziness and feel prepared to take the next step. Grab a coffee because this is going to be long! Here's what I've learned:

1. Make a house hunting checklist

Know what you want in your home before you get started. This will help you and your realtor narrow down your options so that no one is wasting time. Here are some questions that came up between my husband and me when we were making ours:

  • How many bedrooms?

  • What kind of acreage are you looking for?

  • Can you live without a garage?

  • Do you want the master on the main floor?

  • Are you looking for new construction or can you handle a home that needs a little TLC?

  • Do you want to be within walking distance from shops and restaurants?

  • Would you prefer a more rural setting?

  • How far are you willing to commute to work each day?

  • Do you want septic or sewer?

There are going to be things you may compromise on if you really love the house or the location, but having a good solid foundation to start will help.

2. Find an experienced realtor who knows your market

We're still very new to the Raleigh, North Carolina area. Being that the market is so crazy, we knew we'd probably have to look in suburbs outside of Raleigh. It was nice to be able to ask someone familiar with the area their thoughts. Our realtor is closing on homes day in and day out. She's been so helpful when it comes to what kind of an offer to put in, what's coming to an area, and what our commute would be like.

Having full access to the MLS through our realtor too is huge. It allows us to put in search terms and see what houses are coming soon or active. It's updated regularly so that we can always see the latest.

3. Get Pre-Approved!

This part is time-consuming. You've got to send over taxes, bank account information, paystubs, and basically everything but the kitchen sink. It's important though because this will give you an idea of how much house you can afford. You'll be able to see what your interest rates look like and monthly payments.

One thing that was recommended to me during this process was to shop around. Get pre-approved by a few mortgage lenders. I am SO glad I did this for a couple of reasons. One is because each lender had a different mortgage rate, monthly mortgage estimate, and amount needed for cash to close and we were able to see our options.

The other reason was that with a market so competitive, timing is everything. You need someone who's going to be there on a Sunday afternoon when you have an hour to get your offer in. It doesn't matter that they're eating dinner at their grandparent's house, they've got their laptop out and are ready to go. Within minutes you have your letter in your inbox. <- True story by the way :)

4. Know What You Are Comfortable Paying and Stick to it

What you get approved for and what you are comfortable paying every month for the next 30 years are two different things. We learned that on the second house we wanted to put an offer on. It was higher than the first house we put an offer in. Much higher and would've brought our mortgage payment up about $500 a month. Immediately we said to each other, "Well, I guess we won't be going to Italy anytime soon." But did we want that? Did we want all of our hard work to go towards our house and not be able to travel and explore?

Some people may say yes. Others would say, "heck no!" The choice is totally of preference, but it's worth noting that it's okay if you don't want to spend every dollar you're approved for.

5. Gather Your Cash to Close Amount and Be Able to Get it Quickly

The first time I saw the amount we needed in cash to be able to close on our home, I think my eyes rolled back in my head. I think it's going to differ everywhere, so I won't get into specifics, but here's what we learned about money upfront.

Due Diligence: This absolutely boggles my mind. I don't get it and I don't like it, but it seems here like there's no choice here in North Carolina. Due diligence is the amount of money you are willing to give to the buyer prior to closing. From what I understand it's basically saying, "this is my word that I'm going to buy this home from you no matter what." I say be sure you can get to your cash quickly because you'll need to get a check to the buyer pretty quickly.

Whatever amount you offer be okay with losing it IF worst-case scenario happens and you have to pull out because you don't get it back.

The good news is that if all goes well and you close, your due diligence goes towards the downpayment. So if you were going to put down 20% of a $300,000 home ($60,000) and your due diligence is $10,000, then you only owe $50,000 as closing.

Downpayment: This is the amount of the home's purchase price you're going to put down on the house. The good thing is, there are plenty of loans out there that don't require you to put down a whopping 20%. The trade-off is PMI (private mortgage insurance). It's a monthly fee added to your mortgage that you'll pay because you put less than 20%. The explanation should probably be left to an expert, but I thought it was important to at least let you know you have options. I had PMI when I owned my last house. It's not the end of the world and allows those who don't have $60,000 lying around to be able to purchase a home.

Closing Costs: Again, this is something for an expert to fully explain, but closing costs are separate from your downpayment. They are going to cover fees associated with buying a home. Things like appraisals, title searches, surveys, deeds, etc. A quick Google search says that closing costs are typically 3-6% off your loan.

Difference in Appraisal Value: This one TERRIFIES me, but that is why I made sure I have a great realtor by my side!! Basically in this market homes are selling for WAY over asking price and that may also mean that you can purchase your home for more than what the home is appraised at. If that's the case, you will pay the difference between the offer you made and what the home appraises for and that also has to be brought to closing. Our realtor has been amazing at doing the research and letting us know where the home may appraise at so we can make an educated offer.

Escrow: This is a "good faith" deposit to the seller and is held by a third party until closing. This (I am 99.9% sure) also goes towards your closing costs.

PHEW! I know that was a long one, but this is where I was most confused.

6. Start Early and Don't Settle!!

I'm a part of a few home-buying groups on Facebook and I've seen people post about how they ended up in an area they don't love with a house they were okay with. This makes me sad! A house is a HUGE investment. For every one that gets sold another will come on the market. It may take some time, but with a commitment like this, don't settle! Yes, you can compromise, but don't settle. This all goes back to the house hunting checklist. Know the difference between your MUST-HAVES and your WANTS.

That is all I have for you today! I hope this blog about buying a house in 2021 was helpful to you! If so, be sure to leave a comment below! And, if you are one of the lucky ones (like me) buying a home in this market, let me hear your experience and tips.


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