First Time Homebuyer Guide

Buying your first home can be an exciting experience. But be forewarned, you may need some burn ointment because this 2022 housing market continues to burn red hot!

Preliminary numbers show that the first part of the year has started off strong, with many experts claiming sales growth is set to eclipse those set in 2021.1 

Also, with mortgage interest rate hikes on the horizon coupled with a continued imbalance between current inventory and demand, competition may prove challenging.

Nevertheless, if you are feeling discouraged, it's important to note that nearly a third of all homebuyers are first-time homebuyers just like you.2 While the current buyer’s market may be a challenge, there are several things you can do to stack the deck in your favor.

There are a number of effective strategies that can help give you a leg up on your competition and help your offer win. In the end, a lot of it comes down to extensive preparation and leveraging the right tools and resources for the job.

First-Time Buyers Strategies for Winning Offers

Being a first-time homebuyer has its fair share of challenges. One of your biggest obstacles will be competing against other new or seasoned buyers. While bidding wars have tapered since the previous buying season, they can still occur.

Don’t get discouraged if you are trying to buy a home where the seller has received multiple offers. Here are a few strategies you can implement to make sure your offer comes out on top.

Include an Escalation Clause

An escalation clause is the perfect solution if you are facing rigid competition but don’t want to overpay for a home. By adding an escalation clause, you agree to pay a certain dollar amount above any competing offer up to a specific threshold.

By adding an escalation clause, you can still submit an offer with a reasonable purchase price with the comfort of knowing that if a competing offer happens to come in above yours, you can still outbid the competition.

Waive Contingencies 

If you really want to entice a seller with your offer, consider waiving specific buyer contingencies. Sellers often want to sell as quickly as possible, but contingencies often slow the purchase process because they must be satisfied before the deal can close.

By strategically removing key contingencies, you indicated to the seller you are a motivated buyer. For example, you might consider waiving your right to request a home inspection if the seller provides detailed records of how the house has been maintained or if you have a construction or trades background.

Keep in mind that waiving contingencies can be risky. They provide recourse should an issue come up with the deal. In the previous example, skipping a home inspection can be extremely persuasive, but it does have its risks. Major defects that go unnoticed could end up being costly to remedy. 

Draft a Personalized Letter

Taking a pathos approach to your purchase might just give it that extra kick to allow your offer to claim victory over others. Most sellers have an emotional connection to their home and would like to pass it on to a buyer they know will love and cherish it like they did. 

Drafting a personalized letter to accompany your offer can help tap into that emotional component to hopefully give you a leg-up on the competition. It's important that if you do include a note or letter, that it is genuine and sincere.

Things you will want to include in your letter should include a few details about yourself and your family. It should also highlight why the property is the perfect match for you, making sure to accentuate features that you resonate with. 

While you may be tempted to provide reasoning of why your offer might be lower than the competition, tread lightly. You don’t want the idea that your offer is inferior to be the impression that sticks in your seller’s head.

Tips to Navigate the Home Buying Process

Buying your first home can seem a bit complicated. To be fair, the home buying process can get a bit complex. That’s why it is important to utilize the right resources to ensure a smooth home buying experience. 

There are several steps you can take that will help you on your home buying journey. Having the right preparation and understanding facets of how a purchase unfolds will help make buying your first home even easier.

It's also important to partner with the right experts who can guide you along your path. Reviewmymortgage.com has helped thousands of new homebuyers achieve homeownership using three pivotal home buying tips. 

• Complete a Financial Check-Up

Identifying where you stand financially will help you understand how much home you can afford and create a budget for your first home purchase. 

Affordability continues to be a growing issue as the housing market continues to expand. It's important you know how a mortgage payment fits into your overall budget and what other costs are involved with owning a home.

Pulling your free annual credit report from one of the three main credit repositories, namely Experian, Equifax, and TransUnion, is a good start. 

It's also important to take inventory of how your assets and where your down payment is coming from. Consider playing around with any of the free affordability calculators you can find online. You may also want to research down payment assistance that might be available in your area.

Lastly, use ReviewMyMortgage.com’s Self-Diagnosis Tool to compare all the mortgage options available to you in your state. Educating yourself will make you fully equipped to tackle the home buying process head-on.

• Finesse the Financing

Once you understand your financial health, it's time to line up your financing. The National Association of Realtors notes that 87% of all buyers finance their home purchase.2 In fact, this number is a bit higher for first-time homebuyers.

Getting pre-approved for a new mortgage is a tactful approach and could make or break a deal when it comes time to submit your offer on a property. 

Reviewmymortgage.com will complete a free, complimentary review by preferred local lenders that have been thoroughly vetted to ensure you are only collaborating with the best experts in the industry.

Having a pre-approval letter will not only make you a more competitive buyer, but it will help you narrow in on your home buying budget. It also helps make sure your mortgage program aligns with your home ownership goals before you commit to a new purchase.

• Find the Perfect Home

With a general lack of inventory on the market, it may feel impossible to find your dream home. But with the right tools, you don’t have to settle for anything less than perfection. Sit back and relax knowing your mortgage team is doing the heavy lifting to get you approved and instead focus your time and effort on searching for your perfect home using ReviewMyMortgage.com’s proprietary home search tool. This feature allows you to find a home in any market across the entire country. Using real time data, you can see what homes are new to the market and which homes might already have pending offers. 

Weed out prospects by setting up daily alerts so that you are always aware of what properties fit your set parameters. It only takes a few minutes to find your perfect home that you can enjoy for a lifetime. 

Sources

1 Lerner, M. (2022, February 10). Report: 2022 housing market on pace to be hotter than last year. Washington Post. Retrieved March 10, 2022, from https://www.washingtonpost.com/business/2022/02/10/report-2022-housing-market-pace-be-hotter-than-last-year/

2 National Association of Realtors Research Group. (2021, March). 2021 Home Buyers and Sellers Generational Trends Report. NAR. https://www.nar.realtor/sites/default/files/documents/2021-home-buyers-and-sellers-generational-trends-03-16-2021.pdf