What is the first thing to do before buying a home?


What is the first thing I should do before buying a home?

Asked by: BO – Kansas

There are two “first things” that require your attention:  

  1. decide on how much you can afford, and 
  2. decide on how long you intend to live in the home.  

My book 12 Steps Homeownership: A Guide for First Time Homeowners is the best advice I can provide in terms of a step-by-step reference.  The book addresses the nuts and bolts of the process and action steps along the way. The book also references a few things Realtors can’t say – but I can – as a non-Realtor. 

Purchasing a home equal to 2X your annual income makes for comfortable living.  Historically, the general rule of thumb was that buying a home at 4X your yearly household income was a real stretch. Well, can you say 6X?  Norm-busters are the norm in significant metropolitan’s, where housing prices continue to outpace reasonableness. 

When a “mid-century” home with 3-bedrooms and one bath and a 2-car garage in Irvine, California, has an asking price of $1,000,000 – it’s hard for me to compute that in real-life terms.  Excluding a gift from your rich auntie, unless you are selling one real estate asset to purchase another, most people are just flat out locked out of the housing market in big cities. 

Your intended term of residence lends itself to make you think about more than just this purchase.  There are plenty of couples that still live in their “starter home” 30 years later.  It’s a conscious choice, but I’m asking you to think about this before you buy. 

Covid-19 has changed everything, including home buying.  In the fourth quarter of 2020, there are less than 500,000 homes for sale in the entire United States (average is 1.30 million).  Whereas mortgage interest rates are at historic lows, qualifying requires a little more effort than normal as lenders check all the boxes (and a few more) in these uncertain times. 

A few things haven’t changed; having a long-term view, recognizing that a “home” purchase is not a “real estate” purchase, so it requires a different lens.  Mortgage financing is part of the process, and just know it’s going to be more paperwork than getting a significant organ replaced.  


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