I believe buying real estate in Johnson County, KS is a fantastic way to build long-term wealth. It’s an especially great place for first-time home buyers, because of how relatively affordable it is to buy a house here. You can usually depend on home appreciation in Johnson County to stay just above inflation. Plus, the Midwest generally doesn’t see the same up-and-down price swings as seen on the coasts. Just slow, safe, and steady (i.e. boring).
Buying your first home can often be a challenging process. It can be tempting to just continue renting or living with family. However, if you can make the move, I’m confident you will be really glad you did. To help guide you through the process, here is “First-Time Home Buyer 101: The Basics”
Things to Consider Before Buying Your First Home
Often, the desire to own a first home begins with thinking of all that money you’re “wasting” on rent. Others desire the freedom and independence that home ownership can provide, a.k.a. living The American Dream. Before buying a home, you need to define your long-term goals and evaluate how home ownership fits within those goals. Start focusing your efforts by first answering these questions:
What is the best type of property for my situation?
Single-family Home
This is what most people think of when they consider buying a home. A detached home, likely with a backyard, garage, and basement. White picket fences. Waving to your neighbor as you walk down the driveway to grab the newspaper (do people still get the newspaper?). Most first-time home buyers in our market buy a single-family home.
Townhouse or Condominium
This options is somewhat of a hybrid feel between an apartment and a house. There are often common areas and amenities like you’d expect from an apartment. In these communities, the HOA handles most/all of exterior maintenance. Those looking for maintenance-provided communities find value in this type of property. This often includes people who travel a lot, or dislike yard work and maintenance.
Multi-Family Property (Duplex, Triplex, or Fourplex)
A duplex was my choice of first home. I lived in one unit and rented out the other. For the right person, the benefits are HUGE. Having a tenant help pay your mortgage is great, but there are trade-offs. Being a landlord isn’t for everyone. If the thought of being a landlord doesn’t scare you, you should consider a multi-family property as your first home!
What condition of property should I choose?
New Construction or Remodeled
For those wanting a custom home without the hassle of living through a remodel, this could be an option. Building a custom home can require an overwhelming amount of choices about materials, colors, and designs. Another option is buying a new home that’s already built (often called a “spec home”). There are many hidden costs to building new such as change orders, exceeding builder allowances, and unexpected excavation costs. Though you are paying a little more for new construction, also consider your short-term savings on maintenance/repair expenses.
Move-In Ready
A “move-in ready” home is an existing home in generally good or great condition. These homes are a common choice for a first-time home buyer. While they may require some repairs or upgrades, the overall condition is good enough to move in right away. This is the perfect option for the buyer who doesn’t want to pay top dollar for a remodeled home, but also doesn’t want to worry about repair or remodeling expenses right away. You can handle upgrades eventually as your schedule and budget will allow.
Fixer-Upper
Are you handy? Do you want the flexibility to make your home just the way you want it? Maybe you’re having trouble finding an affordable house in a particular neighborhood. This is a great option for you. The most important thing to consider when buying fixer-uppers is that you don’t want to overpay for the property.
Sometimes people unknowingly overpay for a “deal” just because the price is low while not fully understanding the long-term costs that are involved. The price of a fixer-upper should reflect the amount of work needed (sweat equity) and/or the amount of time and effort needed to hire professional tradesmen to do the work (time = money). A good real estate agent can let you know whether or not you’re getting a deal, given the amount of work a property needs.
What specific features would my ideal home have?
Please keep in mind your first home might not be “as nice” as your parents’, aunt’s, uncle’s, grandma’s, etc. These people have likely spent 20, 30, or 40 years building equity. They will likely have upgraded homes multiple times since buying their first homes. Believe it or not, it’s very unlikely you’ll live in your first home for the rest of your life. I suggest thinking in terms of living in your first home for the next 5-7 years.
Having a realistic idea of your needs, wants, and budget is very important. Focus first on things like neighborhood & size. Then, think about smaller details like bathroom and kitchen layout, style, size of the yard, or other special wants that you may have (game room, home office, media room, etc).
How much mortgage can I afford?
Before you start shopping for a home, it’s very important to get an idea of how much a bank will loan you. The easiest way to do that is by getting pre-approved by a reputable bank or lender. You may have your heart set on a $400,000 home, but only qualify for a $300,000 mortgage. Unless you have a $100,000 down payment, your $400,000 dream home is not realistic. Factors determining what you can afford are: interest rate, current debt, current income, and available funds for a down payment.
Regardless of what a bank or lender will lend you, knowing what payment you’re comfortable with is important. Just because you can qualify for a large mortgage, doesn’t mean you want to spend that much each month. Unlike when you rent, being a homeowner means you’ll need to budget for maintenance and repairs.
There are sometimes special loans and assistance programs available for a first-time home buyer. Often the interest rates are a little higher than loans where you bring your own down payment, but buying a home you can afford is the goal. If down payment assistance is necessary, it’s often still a great option. Ask your mortgage lender and real estate agent about these types of opportunities.
Why should I use a real estate agent to buy a home?
A home buyer should always consider using an agent to assist with them with their purchase. I don’t say that just because I’m a Realtor®…I got my real estate license specifically because I believe there is a shortage of great agents out there. When I bought my first property (before getting my license), I had no idea what was involved in the process of buying a home. Knowing what I know now, I’m glad I did use an agent. There is so much to know. I’m sure you can try to do most of the leg work yourself….because you’re smart, right? You can certainly Google the answers to all of your question. Something to consider: it’s the answers to the questions you never knew to ask that come back to haunt you.
Another huge bonus for buyers is the seller typically pays commission to both agents. So, as a buyer, you don’t need to pay out-of-pocket for an using a buyer’s agent. This is good because you’re already paying for your down payment, inspections and closing costs. Why not have a buyer’s agent working on your behalf!?
The Home Buying Process
Please expect a little chaos to unfold somewhere during this process, especially if you’re a first-time home buyer. Just know that you are working with a qualified agent who will get you to the finish line in one piece…and you’ll be very happy!
Getting Pre-Approved
This is a crucial first step. It allows you to know exactly what you can afford. Plus, sellers want to know you’re pre-approved before you tour their house, and likely won’t even consider your offer if you’re not. Real estate can often move very fast. Don’t miss out on a great home just because you waited to get pre-approved.
Ask your agent for recommendations on mortgage banks and lenders. There are many big banks and online lenders who advertise low rates, special rebates, or credits, but who end up charging hefty fees (ultimately, costing your more). The service levels at those institutions can often be an issue (delayed closings, last-minute loan denials, etc).
Finding A Home
Most buyers find their home with the use of the internet. However, I recommend using all available methods for finding a home, including using your agent’s automatic notifications from the Multiple Listing Service (aka MLS…it’s a shared database for local real estate agents), and driving around your favorite neighborhoods looking out for For Sale By Owner (FSBO) signs. Spreading the word among your family, friends, and co-workers is also a good idea. You never know who may be looking to sell. Your agent will also work to find houses that may not already be listed for sale.
Making An Offer
Your agent will help you decide how much to offer as well as what other terms you want such as closing date, asking the seller to purchase your home warranty, or pay some of your of closing costs. Your agent will present your offer to the seller or their agent. Assuming your offer is the only offer on the table, the seller will usually either accept your offer or counter it. You can accept their counter-offer or continue to negotiate back and forth until a deal is reached.
It’s extremely common in a low inventory market for a seller to receive multiple offers on their house. Buyers may end up being outbid, or having to write offers of multiple properties before getting an accepted offer. Try to remain as unemotional as possible during these negotiations and rely on your agent to help you make the right choices. Also, be careful not to talk too much about the details of your negotiations with friend and co-workers. Word travels fast and that can cost you money.
Home Inspections
You should absolutely have a home inspection when buying a home. Skipping this step can cost you a fortune. Check out this guide on selecting a home inspector. A typical home inspection costs between $400-$600 (plus any additional inspections such as sewer, mold, radon, termite, etc). The purchase contract typically specifies how long a buyer has to conduct their inspections.
If your inspector finds any issues with the home, you have a choice of accepting the house as-is, renegotiating with the seller to correct the defects, or ask them to reduce their price accordingly. Buyers are free to ask for repairs or credits, but sellers generally aren’t obligated to make repairs or offer credits / price reductions. The purpose of the inspection is for the buyer’s knowledge. Anything beyond that will depend on market conditions and the seller’s motivation.
Homeowner’s Insurance
You’ll want to shop around for homeowner’s insurance, get quotes, and be sure the home is insurable before your inspection period expires. Unexpected things can come up such as the home being in a flood plain or past insurance claims that affect future buyer’s premiums. Consider bundling your home and auto insurance with the same company to save money.
The Appraisal
Just like how you, as an individual, were pre-approved by the bank, the house itself must also be “approved” as a safe investment for the bank. Before the bank will lend you the money to purchase a home, they will have the home appraised by an independent appraiser. The appraiser will determine the value of the property by referencing recent sales of similar properties. The fee for this is typically paid out-of-pocket by the buyer, and usually runs between $500-$750.
Final Underwriting
This is the final bank approval before closing “just to be sure” that they’ve correctly reviewed your financial information and the home appraisal. They also re-verify your income and credit. It’s very important not to make large purchase that reduce your savings or increase your debt before closing (please, read that again). You can easily throw off your debt-to-income ratio causing you to no longer qualify for the mortgage.
Utilities
At this point, go ahead and begin setting up service with the necessary the utility companies. Schedule them ahead of time transfer into your name the day of closing.
Final walk-through
This is a quick walk-through of the home (done by the buyer and their agent) just to be sure the condition of the home didn’t changed since inspections. You’re basically checking to be sure there hasn’t been theft, vandalism, damage, or some other major issue.
Closing
Congrats!! You’ve made it. Closing is the final step in purchasing your first home. This is when you will sign loan documents, and the other paperwork needed to finalize the purchase of the home. This is also typically when you get the keys to your new home! I still remember looking down at the keys in my hand when I bought my first home. It was such an amazing feeling.
Congratulations!! You’re A Homeowner! Now what?
You signed the papers, got your keys, and moved in…what’s next? Here are a few final things to keep in mind as you move from being prospective home buyer to a homeowner:
Emergency Fund
With homeownership comes the occasional big ticket repair. Things like replacing a furnace & A/C are expensive (again, this is why I recommend getting a home warranty which covers many of these potential budget-breakers). Having enough money available for these and other, smaller items keeps you from being caught off-guard.
Routine Maintenance
Once you own a home it’s important to keep up with the routine maintenance. Things like cleaning the gutters and painting are much cheaper to take care of before they get out of hand.
Don’t Worry About The Housing Market
After you own a home, it’s best not to worry about the daily headlines regarding the housing market. Most of that information is based on national trends and is often sensationalized to drive TV ratings and Internet clicks. Real estate in Johnson County is very stable, but that doesn’t mean there won’t be the occasional dip in real estate prices. The value of your home will be important when you actually decide to sell. In the meantime, there is no reason to worry about the short-term ups and downs.
Conclusion
Hopefully, this information has answered some questions you had about being a first-time home buyer. If you have other questions about buying your first home in Fairway, Bonner Springs, Roeland Park, Mission, Shawnee, Westwood Hills, Prairie Village, Overland Park, De Soto, Westwood, Lenexa, Leawood, or Merriam, please feel free to contact me below.
Any questions? Feel free to reach me below.
Justin Rollheiser – REALTOR®
Keller Williams Realty | Diamond Partners Inc
13671 S Mur-Len Rd | Olathe, KS 66062
Direct 913-800-7653
Office 913-322-5878
www.JustinRollheiser.com
Comments or Questions?