First-time Homebuyer Series: Advice for A Calmer Homebuying Experience

Congratulations, you are thinking about buying your first house! There will be a lot of anxiety and emotions given that this is usually the biggest purchase one makes in a lifetime. As a tech professional working in a high cost of living city and a dad, I’ve compiled some advice I would give to my kids. My goal here is to help you mentally prepare for your first home purchase because it can be a very stressful event.

1. Three types of homebuyers. First-time homebuyers usually look for starter homes, which are smaller, more affordable homes that fit their budget and perhaps enough room to start growing a family. Second-time homebuyers who outgrow their starter home usually look to upsize and move up to a larger, more permanent home, commonly referred to as a “forever home”. Lastly, as individuals grow older and their children move out, homebuyers may downsize to smaller homes. Given that home affordability is at an all-time low, the idea of settling down in a large single family home may be declining. In many ways the “forever home” is a marketing term promoted by lobbyists and real estate associations and places unnecessary pressure on consumers. As a tech worker around other high-income earners, don’t fall for the socio-economic trap of keeping up with the Joneses. Follow your own timeframe and desires when finding the right home.
2. Your home as a financial investment. Yes, in many ways a house can be an investment as homes tend to appreciate over time and become vital wealth building tools. However, there are usually phantom costs, unforeseen costs like closing costs, utilities, insurance, and repairs (don’t forget the gas and time you take going to the hardware store), that will eat away at the profits. The mortgage you pay is the bare minimum you will pay for a home, while the rent you pay is the maximum you will pay for a home. The biggest financial investment you can make as a young adult is to focus on building your career and increasing take home pay to allow for compound interest to do its magic. After doing that, real estate can become an effective wealth building tool to give you the life you want and provide generational wealth.
3. Your home as a lifestyle and quality-of-life investment. If you determine that the costs of homeownership are sustainable with your budget, you should view your home purchase as an investment in improving your well-being and lifestyle. You can do whatever you want with your property (subject to HOA and CC&Rs) and optimize it for your family’s social and emotional well-being. For example, the single homes in our area were usually over 100 years old with asbestos and lead paint, and we didn’t want those potential stressors as new parents with a newborn. We wanted to 100% focus on the kid so we decided on a townhome built in 2008 in a family-friendly neighborhood and walking distance to parks. Townhomes may not appreciate as much as detached single homes, but the reduced time, money, and stress offset the difference for us.
4. Take it slow. Although agents have fiduciary duties to their clients when buying a house, at the end of the day they need you to buy a house to get paid their commission. So don’t rush into offering too much and waiving all contingencies for a home. Unfortunately this is common in many tech hubs as housing supply is low and competition tends to be high. You’ll usually find a similar or better home, often at a better price if you look long enough. With the growing availability of remote work, it is becoming easier to find more affordable housing in other cities.
5. Get ready to go fast. Once you are under contract, things move very fast (i.e., stressful)–for example, e-signing documents, getting paystubs, verifying employment, notaries, appraisals, credit card payments all within a span of a few weeks. Usually, a good title and escrow company will guide you through most of the steps and correct any mistakes. A good real estate agent will walk with you through and answer any questions, but some may fall off and check in occasionally. For extra protection, consider hiring a real estate attorney, especially if you are in a state that doesn’t require an attorney during real estate transactions. If you are a worrier, mentally prepare yourself for this stage and know that you’ve done the best you can.

There will be a lot of psychological factors in play when purchasing your first home. The process can trigger strong positive and negative emotions. Having a partner, family member or friend who has been through the homebuying process can help manage any concerns and feelings that develop. However, you can give yourself a higher chance of a positive outcome by practicing the tips I discussed above. To further assist you, other articles in our First-time Homebuyer Series dive into particular aspects of buying a house such as real estate agents, mortgages, and owning vs. renting.