12 Things I Wish I Knew Before Buying My First House
By: Dr. Ming
Tags: Real Estate Investments, Investment, Housing, Real Estate, Money

Growing up without a stable home, being a house-owner has been a dream for me since childhood. I lived at 25 different addresses within the first 30 years of my life. Having to move from one apartment to another almost every year was exhausting, even as a child.

To me, owning a home means more than just a real estate property. It means having stability in my life.

This dream recently came true. At the beginning of 2020, my husband and I put money down for our first house together.

It turned out that buying a house is not as simple as I expected. It was a long process of paperwork, decision-making, designing, construction, inspection, repairs, furnishing, packing, unpacking, and many other hiccups and headaches.

The entire process was complicated and stressful, even with help and advice from experienced family members. There are many financial decisions to make and design ideas to choose from.

Here are the things I wish I had known before becoming a millennial first-time homebuyer.

1. Affordability vs. Qualification: Qualified for a Loan Does NOT Mean You Can Afford It

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As much as I hate to be in debt, we simply could not afford to pay for a house in cash. The first step of home buying is to qualify for a loan, even before shopping for houses.

It does not hurt to shop around for a low-interest loan. Generally, how much loan you can qualify for is based on your credit history and scores, income and assets, and current liabilities.

All of these factors taken together; you will get a number that you are qualified for borrowing. This is the maximum mortgage loan you can qualify for. However, it does not mean you should take out a loan for that exact amount. As a matter of fact, you should almost never borrow that number.

A mortgage is a type of debt, liability, and risk. Ever since we bought a house, a big percentage of our checks go to the mortgage payment each month. That is not even the only payment we have to make when owning a property. There are also payments towards property tax, house insurance, homeowner associations, etc. I am, literally, “house poor.”

Shockingly, we only took out 60% of the amount we qualified for. But I am definitely feeling the pressure of either bringing additional income for maintaining my lifestyle or changing the lifestyle to maintain my investment flow.

The general rule of thumb is to have a monthly mortgage less than 25% of the take-home pay. Ideally, I would have the total amount of the house-related payments less than 30% of the take-home pay.

2. How Much Money Should I Put down?

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Shockingly, you do not need to put down a lot of cash to buy a house. Literally, you can put down 15%, 10%, sometimes even only 5%!

Sounds like a dream, right?

Everything comes with a cost, literally.

Generally, if you make a down payment of less than 20% of the home cost, your lender may require you to buy private mortgage insurance (PMI) to protects the lenders from the risk of default and foreclosure.

In plain words, if you do not pay enough money ahead, your lender may worry that you cannot afford to pay on time later. As a result, they require you to pay insurance for the lender. Literally, you are paying money to insure others.

There are different ways to avoid PMI. One of the ways is to pay down 20% of the house cost. As a result, we were on the “rice and beans” for a year to increase our cash savings for this down payment.

3. 15-Year vs. 30-Year Loan

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There are many different mortgage plans to choose from. A big question we had was whether to choose a 15-year fixed-rate mortgage or a 30-year fixed-rate mortgage.

There are benefits of choosing a 15-year mortgage. This type of loan usually has a slightly lower interest rate and fewer years to combine the interest. However, the monthly payment is high, as you pay up the loan within a period of 15 years.

For a 30-year fixed-rate mortgage, the principal balance does not decline as fast as it does for a 15-year loan. You do pay way more in interest for this type of loan, but the monthly payment is lower than the 15-year loan.

Many of my friends had different opinions. After all, it really depends on your own case. My friends with more stable jobs tend to prefer the 15-year mortgage. But my husband is self-employed. It is hard to predict his monthly earnings, as there are some good months and not-so-ideal months.

In the end, we chose not to burden ourselves with an extremely high monthly payment. We want to pay off our debt as quickly as possible, but we also want to live our life comfortably. So, a 30-year fixed-rate mortgage worked the best for our scenarios. But we do contribute extra money to our mortgage payment each month, hoping to pay it up within 20 years.

4. There is a Fee Associated with Almost Everything

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Buying a house has many tag-along fees — the closing cost, the inspection fees, the upgrades, etc.

Other than the down payment, the first month of mortgage, homeowner association (HOA) fees, and home insurance, there are a series of fees such as application fee, appraisal fee, credit check fee, title insurance, inspection costs, etc. There are also repairs, utilities, installation fees, and many incoming costs of the house.

Budget 1–2% of the house value to cover these fees. Trust me; small fees add up.

When it comes to money, it is always good to be overprepared than underprepared.

5. Always Consider the Resell Value, Even for Your “Forever Home”

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After a lifetime of savings, I am finally ready to buy my own home. Of course, I would try to buy my dream house, assuming that this would be my “forever home.”

Is this going to be the forever home?

It is hard to say. We do not know where the future holds, right?

According to the 2020 data, the average U.S. homeownership duration is around eight years.

This means, even though you may think that you will live in this house forever, chances are, you won’t.

If that is the case, before making any investment decisions, you may want to consider how much this investment can affect the potential resell value in the future.

There are many factors to consider, such as the development of the area, transportation, the floor plan, any additional interior and exterior upgrades, etc.

6. Visualize Your Daily Routine in the New Space

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With so many choices in the market, it was hard for us to make a decision. There are many different opinions, suggestions, and ideas from multiple families and friends on how to choose a neighborhood, a floor plan, or even a color theme.

It turned out to be easier than I expected.

All you need to do is to visualize your daily routines in the new space.

Ask yourself these questions — would I mind driving on this highway every morning? Would I prefer extra lights or extra shades? Would I hang out more in the living area? Would I get irritated to see certain colors every single day?

The key is not only to visualize what you love to see and what you prefer to do but also what may potentially add inconvenience to your life.

7. Never Snooze at Checking and Inspection

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We worked with a builder to customize our new house. It was so exciting to choose everything ourselves, from the floor plan to the color of the tiles.

I liked our builder. They were helpful, thorough, and speedy with their work. However, it is still important to check the work yourself along the process, regardless if you are building or renovating.

For example, we added two additional windows in the main bedroom. But the construction worker missed this note in the contract during framing. Luckily, my mother-in-law noticed it while checking on our house and communicated with the builder in time to make the addition.

Another example, due to some extreme weather in Texas, some of the woods in framing were damaged. Luckily, we noticed it early on to replace them.

We found out more issues later, even after the inspection, such as a nail in the kitchen pipe that caused floor damage and leaking in our air conditioner unit. Luckily, the house is under a one-year warranty, so we were able to fix as much as we can with no additional cost to us.

The lesson from this experience is that never snooze at checking and inspection. You may get lucky. But chances are there are issues with the house. Find them earlier than later to avoid additional costs in repair.

8. Building and Renovating — Small Things Add up

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Whether you are upgrading the floor plans of a new building or renovating an old house, the cost is usually higher than your expectation.

Although it may be common sense that small things add up, the actual grand total is still larger than we initially estimated.

No, it did not cost that much to upgrade the floors, but the price per square foot quickly multiplied as we decided to upgrade larger areas.

Doubling up the patio did not seem to cost that much, initially, but after adding a fireplace and hardwood floor, the bill seemed significantly higher than before.

If you are renovating, the price may go up even more quickly, as the original estimated price may not take into consideration the condition of the house.

Prioritize what matters to you the most, what may add resell value to the house, and what increases the most happiness in your life. You can always make changes later after saving more money.

9. Budget the Move-in Costs

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I previously lived in many pre-furnished student apartments. Back then, moving simply means packing and transferring some personal belongings and small furniture.

I never knew the moving cost to a house is so pricy.

Not only did we have to pay thousands of dollars to the moving company, but we also spent a lot of money buying necessary utilities and additional furniture.

As we have more rooms and space to fill, more furniture is needed. It is smart to shop at “scratch and dent” places, but sometimes the delivery charges make it not worth the savings.

Alternatively, you may not need to fill every room quickly at once. After comparing prices, we decided to wait on deals and to buy the “unnecessary items” later. As a result, we still don’t have a coffee table.

Hey, it is ok.

Budget for the high-quality necessities and wait on deals for the rest.

10. Personal Style VS Societal Norms and Trends

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When I was choosing the interior and exterior items for the new home, there were different opinions in the family, such as what a kitchen should look like and what colors may look the best.

A golden rule in interior design is to use color to create contrast. However, people have different ideas on what colors to use and how much contrast is needed. While it is good to get inspired, it is also easy to get lost in the Pinterest trendy model rooms and forget about what we truly want.

At the end of the day, you are the one living in the house.

Make it your own style. Your personal styles may deviate from the social norms and current trends. Yes, it may be nice to add a little bit of something here and there for the resell value. But the bottom line is, you have to truly love the design as you will be staring at these colors and shapes for multiple hours every day.

This is YOUR home. Prioritize your own personal style over the current trends or social norms.

11. Consider Windows on Your Garage Doors

Photo at https://www.flickr.com/photos/43091453@N04/5169856056

One of my biggest regrets is not having windows on my garage door.

At first, I thought this addition is only for the exterior design — that it may add some accents on the door.

I prefer a minimal modern design for my home. Adding garage door windows may interfere with the intended simplicity of the house.

It turned out these windows actually have a real function — the function of normal windows, obviously. With windows, your garage can look much brighter during the day, even without any lights on.

This simple change can make a difference for you to work, work out, or organize items in the garage during the day without opening the garage door. Lights can help, but natural lighting is better, in my humble opinion. You can also open the garage door, but I do not always want to show my neighbors everything I am doing.

It may never be too late to change anything. But once the house is built, it would cost much more to make any modifications. So I guess I am stuck with a dark garage for a while.

12. The Pros and Cons of Narrow French Doors

Image from Pinterest https://www.pinterest.com/pin/116952921543920445/

I have always wanted one of these french doors for my house. They add so much elegance to my shabby home.

When designing this house, we chose to upgrade the home office door to a pair of narrow french doors. The office door opens to the entry hallway by our front door. So it is more welcoming to our guests and more pleasant to look at for whoever enters the house.

But issues started to come up as we began to use our home office. My husband is on the phone with his clients almost 24/7. It was not a problem in our old house, as I could just close his office door. But the issue with these narrow french doors is that even with closed doors, there is still a gap between the two sides (see below). As a result, I can hear phone calls and almost everything, all of the time.

It turned out this type of door is not so soundproof.

I did google “narrow french door designs” to see if it is a common issue for everyone. Not really. It depends on the door and design. Although it is common to have a gap in between the two sides, not all french doors have this problem. So check with your builder to see what type of double french door they use before adding it to your work order.

Image from Pinterest https://www.pinterest.com/pin/116952921543920445/

Final Thoughts

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Believe it or not, even with so many hard lessons and regrets, I did do my research before our house purchase.

No matter how much homework we do, surprises still come along the way.

All good things to those who wait, right? Embrace the challenges and enjoy this journey.

Thank you for reading my story.

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This article is for informational purposes only; it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions