How to Buy Your First Home

   We are so thrilled to have our first guest post on La Petite Farmhouse about a topic near & dear to us, buying your first home!  Lauren & her friend Andrew went to school together and he runs an amazing personal finance blog, Dollar After Dollar. While we're excited to share more about the personal journey of our farmhouse project- Andrew is a financial analyst, investing pro, and all around awesome guy. We love how he breaks down complicated finance topics into easy-to- understand takeways.

   If you're looking to buy your first home, you'll definitely want to bookmark or pin this one! We're excited to bring these topics to our blog, that we hope will be helpful. Take it away, Andrew! 

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    Going through the process of buying a house can be one of the most rewarding, yet stressful, experiences of your adult life. Maybe you have been perusing through Pinterest fantasizing of your dream kitchen. Then scrolling through your Houzz app (if you don’t have it, you’re welcome) and marveling at the pristine bathroom design. Best of all, you have seen the La Petite Farmhouse inspirations and they motivated you to finally take the first steps!

  Then you start reading about all kinds of weird terminology and acronyms like Zestimate (whatever that is), PMI, and FHA. You raise your fist to the heavens wishing there was a better way. Well, don’t fret my friend, because I am here to help make the process easier.

I am going to give you seven simple steps to buy a house the RIGHT way. Let’s dig in, shall we?!
 

1. Don’t Become “House Poor”

As you go through the approval process for a mortgage, you are going to approved for way more than you think. If you max out the amount you are approved, you will have a house that P. Diddy would show on MTV cribs. While you may dream of having parties fitting for a rap music video, if you buy that house, you will have no money to buy a loaf of bread. Instead, know your limits from the beginning. This means understanding one of the financial golden rules.

Your mortgage should not be more that 25% of your net monthly income.

If you want to be safe, I would lean towards having a mortgage at 20% of your income. That means, if you make $5,000 a month after a taxes, your mortgage should be between $1,000 - $1,250 per month.

 You either have to save for a down payment large enough to make your mortgage reach this 20% - 25% range, or buy a house that fits this criteria. If you can go less than this, great! You will be way ahead of most. Bankrate.com has a great calculator that will help you figure this out.
 

2. Start Saving For a Down Payment

  Your down payment decision is a crucial one that you do not want to take lightly. If you are a first time homebuyer, you have options such as an FHA loan. This means that you can buy a house with a 3.5% down payment.  

  I prefer to have more skin in the game, so I would advise anyone who can, to put down 20% or more. When you do this, you eliminate a nagging expense known as Private Mortgage Insurance or PMI. This is basically a boring way of the loan company saying you didn’t put a lot down, so you have to pay insurance on your mortgage, in case you are the modern day Bonnie and Clyde and disappear to Mexico tomorrow.
 

3. Keep Out Emotions

  Don't buy the first place you see. As the saying goes, there are other fish in the sea. We have a tendency to let our emotions make decisions for us.

  You may walk into a house and it looks like Chip and Joanna collaborated with the Property  Brothers to remodel your dream home. Just for you.

  The shelves showcase all the books you like to read. The couch has not just one pillow, but 17, just how you like it. The wood floors are waxed and shiny. The paint colors are perfect. You can see yourself having some tea and reading a book on the back porch. The kitchen has a fruit bowl, and gosh darn. What do you know. You like all the fruits in that bowl!

This house was made for you.

 Fight this emotional rollercoaster you are feeling. Odds are, the houses that are remodeled to pristine, modern, condition are going to have a hefty price tag
 

Editor's note: Here's our dream home Pinterest board!

 

4. Buy A Fixer Upper

   Repeat after me: The worst houses in great neighborhoods are the best deals.

   Look at houses that need some cosmetic updating. When we bought our house, the structure was in fantastic shape. The kicker was that the inside needed a major overhaul.  

  The kitchen had purple and baby blue walls. A combo only fitting for a newborn Barney the dinosaur connoisseur. The carpets were nice and shaggy. They looked like they were installed right before the first showing of Saturday night fever. The guest bathroom had pale pink tiles (Seriously, who sees pink tiles and says: “Those are the perfect fit for our bathroom!”). Even through all of this, we saw potential. How?

  Like I said before, the structure, roof, and exterior, were all in great condition. This was a huge plus on my checklist. The interior had really high ceilings, which we liked. We realized, all we have to do is slap on some paint, lay new floors, and replace the tile. We saved well over $50,000 and instantly increase the value of the house.

   So here is the main point: Look for houses where you can add value. This is how you can directly impact the re-sale price of that home and increase your net worth. Plus you can have some fun designing and making it your own!
 

5. Make An Offer

   I want to start this off by reminding you to keep a calm and rational mind. You are not buying warm memories or flowery rainbows of emotions. This is a business transaction where you are buying land and building materials.  This will save you from a whirlwind of emotions you are going to feel. There will be plenty of time for warm memories after you buy the house. Go into this with a business mindset and you will get a great house for less.

   When you find a house that and are ready to make an offer, set a final number in your head. I am talking to you competitive people! If you don’t set a limit, you could enter a bidding war. These are dangerous waters to tread without having a plan in place.

   Depending on your market, you may have room to offer below asking price. Have your agent find out if there are any offers currently on the table. Check the length of time the property has been on the market. If it’s been on the market for some time, with no offers to speak of, then you can offer below asking price. But, if there are already multiple offers on the table, you will probably need to come with your best and final offer.
 

6. They Accepted Your Offer!

   Once your offer is accepted it is time to do some paperwork, schedule an inspection, and have the home appraised. Your lender and real estate agent will work together to get the details completed and guide you along the way to establishing a closing date.

   If your inspector finds something you didn’t know was there, don’t panic. Get some quotes on how much it will cost to repair. If it is within your budget, then buy on (But always try to negotiate the price of the repair off of the asking price). On closing day, you will most likely meet at your title company’s office and sign papers along with the seller.
 

7. You Have the Keys!

   You did it! You officially are a homeowner. It’s time to celebrate with some champagne. Invite Grandma over for a cupid shuffle session. Maybe you want to take your jacket off and spin it around your head like a helicopter! Who knows! It’s time to enjoy your hard work and make the place your own

   Buying a house can seem like a daunting challenge. If you buy right, you will be well on your way to building wealth. If you do 30 hours of research, and save $50,000, how much did you make an hour? It’s worth your time and effort. It’s worth the sweat and tears. In the end, you will have an amazing place that you call home.


ABOUT THE AUTHOR:

 Andrew Giancola is a financial analyst by day and a money blogging vigilante by night. He is the creator of the blog Dollar After Dollar where it’s all about the benjamins baby! He writes about personal finance, real estate, and keeping it 100.