We are about a year and a half removed from our first home buying experience. Reflecting on the purchasing process through the clarity of hindsight, I’ve compiled a bit of amassed wisdom I’d share with other first-time buyers:

Slow Down. There will always be great houses, with great yards, in great neighborhoods on the market. And there will always be good deals. Abandon the scarcity mentality, especially in the present market that is, and will continue to be, plump with anxious sellers. Wait not just for a good opportunity, but for the right opportunity.

Don’t fall for the “rent = throwing away your money” myth. Renting is not throwing away your money — it is exchanging your money for a roof over your head. And, depending on your circumstance, the flexibility that comes with renting can be extremely valuable. Also remember that much of the money that is lumped into the term “mortgage payment” is essentially rent. Consider how much goes to taxes, interest and insurance, and you’ll realize that there is, in fact, just a small portion of what you send away each month that translates into actual equity.

Keep an intensely accurate budget for several months preceding the purchase of your home (especially your first home.) Be familiar with utility rates, maintenance/repair fees, and fixed expenses so that you know exactly how much you can comfortably afford to allocate for a mortgage payment each month. In addition, carefully consider the increased expenses that often come with ownership (new appliances, yard maintenance and equipment, higher utility bills if you’re moving to a larger residence, increased fuel costs if you’re moving farther from work, etc.) Familiarize yourself with all the financial implications of ownership and make sure you still have a cushion to absorb the shock of unanticipated home maintenance or just the rising cost of daily living that so often takes us by surprise. The flood of foreclosures on the market at present is evidence of the fact that many recent buyers were overly optimistic about what they could afford.

Don’t get emotionally attached. I know. Easier said than done, right? But if there is one thing that will help you make a more astute financial decision with regards to the purchase of your home, it is this principle. Be willing to walk away from a seller who won’t negotiate into your price range. Understand your “Best Alternative to no Agreement,” (that you will be able to find another suitable residence,) and be willing to walk away from a deal that is not right. Don’t make emotional concessions (i.e. I love this house SO much that I’d be willing to spend a little less on food every month and buy less clothing to be able to live here,) that will stretch you beyond your predetermined price range. A house will not sate your desires and fill your happiness quotient like you might imagine. The granite and stainless will lose their luster remarkably quickly if you’re stretched to (or beyond) your financial limits month after month to afford them.

Buy with your values in mind. Be thorough and thoughtful in establishing your criteria for a home before you start looking. Consider things like commute distance, yard size, proximity to shopping, schools, parks, etc., and let your predetermined values guide your search and ultimately your purchase.

Finally, when trying to nail down the right mortgage, remember these things:

Money is a commodity. You are trying to find the lending establishment that will get you the most affordable money (i.e. money with the lowest interest rate and closing costs.) Approach the process with that kind of objectivity in mind.

Get five ballpark estimates from mortgage brokers based on a set of realistic assumptions about your financial situation.

Go back to the most competitive three ballpark estimates and ask for a “good faith estimate” based on your credit score and down payment capacity. It’s generally poor policy to come in much over a good-faith estimate, so these figures should give you fairly accurate ideas about rates and closing costs on a mortgage.

Take the best of the three good faith estimates to the other two bidders and see if they’ll come down from their original quotes. Let the mortgage establishments bid each other down; find out how badly they want your business.

Avoid interest only and adjustable rate mortgages. Beware of prepayment penalties and other fine print that often accompanies sub-prime loans. It is generally best to wait until you can afford a fixed rate, traditional mortgage.

We received almost all of this advice in some form or another prior to our home purchase; we gave strict heed to some suggestions and not so much to others. We’re happy in our home and comfortable in our mortgage and still, in hindsight, I wish we’d let all of these principles guide all of the decisions that affected such a substantial budget and life-altering commitment.

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Tags: first-time home buyer, home buying, homeowner, lender, mortgage