By Barbara Marquand
Shopping for your first house is stressful enough, but when you’re finally ready to be a homeowner and the pickings are slim, the process can become a roller-coaster ride of hope and fear.
“Buyers walk in a home and say, ‘This is it!’ Then, they see all the business cards [from other agents] on the table and start panicking,” says Georgia Stevens, president of the Seattle King County Realtors and managing broker of the Compass Washington agency.
Today’s housing market is red hot, with homes getting multiple offers and selling above list price in many cities. Sixty-eight percent of U.S. homes sold in July were on the market for less than a month, and the median existing-home price was up 8.5% from July 2019, according to the National Realtors Association.
In conditions like these, it’s natural to worry about losing out to other buyers. But the bigger danger is letting a scarcity mentality hijack the process, luring you to overspend or settle on a house that you’ll regret buying later. Here’s how to keep a cool head as a first-time home buyer.
Start With an Authentic Budget
Get on solid financial ground from the beginning. Figure out how much home you can afford, and get preapproved for a mortgage before looking at homes. A mortgage preapproval is an offer from a lender to loan you a certain amount under specific terms. Without one, real estate agents and sellers won’t take you seriously, and offers from preapproved buyers will likely be accepted over yours.
Decide on a price range based on both how much you can borrow and your budget, making sure to give yourself room to breathe.
“I always caution borrowers not to stretch for a home, and to establish a realistic budget that will afford a financial cushion for the future,” Scott Lindner, national sales director for mortgage lending at TD Bank, said in an email. “This is even more important in the current uncertain environment.”
Learn What to Expect Before You Shop
“It’s all about preparation,” says Alicia Holdaway, president of the Salt Lake Board of Realtors in Utah and an agent with Summit Sotheby’s International Realty.
Before she shows buyers any homes, Holdaway walks them through a real estate contract and explains all the terms and what may be negotiated. Together, they discuss the risks of making specific concessions, so the buyers can decide the terms they feel comfortable with.