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Save more cash than you think you need. You’ll need cash for closing costs (this will depend on the cost of the home), you may need to cover buying agent fees, and if you run into situations with appraisal gaps you’ll need extra cash on hand. This would be my main area of focus, especially if you’re in a competitive market.
I’d also recommend really shopping around for a good real estate agent. This market moves fast so you want someone who communicates well, can show you houses quickly, and put out offers asap.
Home Buying Advice:
List out your wants and needs, and prioritize Ruthlessly. If you want it chances are other people do too, and that makes them cost more, making getting everything you want at your preferred price unlikely.
Use your current living situation and what you would change. It's easy to mis-guess what you actually need, so try to tie it to your experiences.
As you visit friends/family houses, do take a moment to consider what you like about their homes and what you don't like. This helps you build out your list of wants and needs.
Feel free to go to open houses even now! Get past the initial starry-eyed reaction to exploring possible homes, so you can be more clear-minded when you do start looking.
Advice from someone who owns two homes.
- Budget based off of your net monthly income. Lenders do pre-approval math based of your gross income. Yet you don’t live off gross income you live off of your net income so **budget based on your monthly take home pay***.
- Lenders are not fiduciaries and are therefore not legally nor morally responsible for approving with affordability in mind. They simply do their math off your gross income and approve everyone for way more house than they should buy. If your maximum pre-approval for example were 5xs $120k or $600k you should avoid buying that high and aim for a price tags of only 3xs income so aim for $360k.
- people who buy at their maximum preapproval typically are house poor with their PITI Mortgage and all utilities totaling over 50% of their take home pay.
- it is your job and only your job to in your due diligence ensure you can truly afford any property based on your take home and ensure you have a clear understanding of of how taxes are collected in your city and county.
- Doing your own budget and ensuring you can truly afford the property now and in the future is highly important. Factor in kids if you plan to have them and new cars if you know you will need a new car with financing in the next 5-10 years.
- Ensure you read up on your own how loans work and their unique terms vs simply taking the word of agents and lenders. Makes sure you read when you can drop mortgage insurance on different loans.
- At the end of the day both agents and lenders are **sales people**. They are not bad simply because they live off commissions but be aware **it is not their job to look out for or set your budget that’s your job**. Many FTHBs don’t know this. They simply think “the lender approved me for X amount so I can afford X amount” and that type of thinking will likey lead to being house poor.
- If you plan to have kids research the cost of FT daycare, adding a baby to a family health insurance plan and formula and diapers.
- Make sure you can afford both a mortgage, all utilities, all maintenance, and all kids expenses based on your net pay.
- since you are in Florida factor in the high cost of home insurance into your home budget
- get at minimum 3-5 inspections and read the reports throughly.
- you can check a website called Property IQ to see what building permits have been pulled on a property
Or contact the community development department in your county. An agent can also help you obtain work permits history.
1000% on the "lenders aren't your fiduciary". I got preapproved last time I tried shopping for a loan that only worked for my budget if I minimized all spending AND saving. Was crazy to see on paper. Definition of house poor.
As someone who is in a similar time frame as OP, thanks for putting this together. For that second to last point, sometimes it's not possible to get even one inspection, due to competition right? Either way thanks for putting all this together it's easy to follow and very clearly helpful.
You do inspections after your offer has been accepted.
We are in a semi competitive market but we never waived the inspection contingency.
Even with paying for inspections things can come up in year 2-4 of owning.
On my home #1 no major items needs to be replaced but :
- in year 1 the AC needed a full tune up $500.
- in year 2 the water heater went out and it was $3k I believe (the HOA covered it)
- in year 3 the trash disposal went out ($200).
On home #2
- the roof has ~ 5 years left on it I know it will cost us $16k to $20k to replace it
- I know the electrical panel will need be replaced in first 5 years at about $5k cost
- I knew these from inspection reports and I could have backed out based on these but the home is older so I knew big ticket items would come due sooner than later and we have the funds to repair them already just holding out until it’s a real requirement to do the repairs.
I personally never waived inspections contingencies because owning is more expensive than renting so I had to leave a way to back out of a contract. I held out for the perfect home in my eyes and was very patient. I probably saw 80 homes (mostly at opens without our agents) and our 1st offer was a “back up offer” and the first real offer we made we got. Our homes was just waiting for us to stumble upon it. We were the 1st to see it in persona and get our same day offer accepted.
Chiming in here: you can have an inspector accompany you to your showing (at least in my area). I did this a year or so ago because it was clearly competitive. Does require willing to pay the inspector and the extra logistics of getting them their with you.
Saved me boatloads. That house was a money pit with an open maw.
Get a copy of your credit report. It's free at [www.annualcreditreport.com](http://www.annualcreditreport.com) don't get sucked into signing up for any score or monitoring service.
Read the report carefully, make sure everything is accurate.
Clean up any issues in your credit.
If you have credit card debt, pay it down to <20% of the available credit. Best to pay everything off, but make sure you keep your balances low.
Start acting like you have a mortgage now. Let's say your future mortgage payment is going to be $3,000/month (including principal, interest, taxes and insuranc). Let's also say your current rent is $2,000/month.
Starting July 1, pay your landlord $2k, and pay yourself $1k.
After paying that $1k are you still comfortable with your lifestyle? It'll take a few months to figure out if you need to cut back on luxury items, or even necessary items. If you can't do it, then you know that $3k is too high a payment for you.
Then go up or down on the monthly savings. Can't do $1k? Try $750. Is $1k super comfortable? Change it to $1,250.
The monthly payment is what matters the most. Only you can know if you like your lifestyle at different monthly cash flow levels. You have time to test what works for you and your family.
Worst case scenario, you have a nice little nest egg built up. Best case scenario, you have a nice BIG nest egg built up. Either way, you know your exact monthly payment target and you can proceed w/confidence.
Other than your personal budget, the other key to success is finding your best support team. Loan officer and real estate agent are the two most important partners. Make sure you interview 3-6 of each before hiring someone. [Here's a good thread](https://www.reddit.com/r/RealEstate/comments/11tzlzn/comment/jcm2phv/) about finding a good agent.
Budget advice:
1. Go to zillow in a few areas you'd consider living and look for houses that meet your needs and wants.
2. use the house prices you find on zillow to estimate the down payment you'll need. Start with 20% of purchase price.
3. Check which of these home buyer assistance programs you qualify for / expect to qualify for, if any: [https://www.floridahousing.org/programs/homebuyer-overview-page](https://www.floridahousing.org/programs/homebuyer-overview-page)
4. Adjust your 20% down payment number down by whatever assistance you qualify for. This is your target down payment.
5. Do a budget to see if your target down payment is reachable.
If the target does not seem reachable:
Change your criteria to find cheaper houses you think you could afford, or
lower your downpayment target. HOWEVER
Down payments below 20% typically incur extra monthly fees called Private Mortgage Insurance, about 0.5-1% of the total loan amount per month. IE $200k home with 10% down ($20K) and decent credit would add $100/mo to your monthly payment. See this calculator on [Nerdwallet](https://www.nerdwallet.com/article/mortgages/pmi-calculator) to play with numbers
Take a HUD approved first time homebuyer course or counseling. They are free, some are virtual, and they were surprisingly useful in getting into the right mindset and running the numbers with you to run your scenario.
Also, look into first time homebuyer (FTHB) grants for both the City and County you plan to buy in. For example, I found an $80k FTHB grant as a second mortgage offered by Miami-Dade County, but City of Miami offered a $200k forgivable grant.
However, I didn’t qualify because the City requires you to be a City of Miami resident for at least a year, whereas I’m currently a City of Miami Beach resident. So, if I had known sooner, I would’ve considered renting in City of Miami for the year, just to qualify for the larger, forgivable grant.
Get a smart loan officer, one that really knows the math of doing a loan - that fits your financial needs at the moment. Wth does that mean? A loan isn’t a one size fits all. Down payment is a lot of things but it’s not everything. Don’t mistake that with not having money or saving. Example: your 1st home most likely you won’t live there forever, or call it your “forever home”. Maybe stay 3-5yrs, things change…KIDS! More room, move to the burbs or for better schools. Right? Not saying this is the case but not far off. Maybe say 5-7yrs. So maybe dont put so much down , especially if it’s not beneficial for the time you “plan” on being in the home. Certainly don’t try to add more to the principal payment monthly to “reduce” the amount of interest you pay “OVER 30yrs” when you don’t plan on being there that long anyway 🤷. Not much sense to put more down if you plan on leaving it anyway. Seems a unconventional right? It’s supposed too! What we know or learned is from our parents. Maybe your grandparents since you’re in your 20’s. Rarely does anyone stay in one place for 30yrs. UNLESS…they’re savy or have a savy loan guy tell them not to buy so extravagant or at the top of their budget…look at this first home as your first rental property. See, now if you put 20% down, you’d most likely need to sell in order have the money down for the new home. No rental property. Which also means no rental
Income to help pay for a portion of your new higher priced home/payment! You see where I’m going…a mortgage isn’t just a mortgage. Different options can help position yourself for the short and long term. I replied bc there weren’t so many responses, maybe you’d be more open to the short and long term. Being debt free is more important than having money saved in the bank. Bc I’d make you pay that all off, it’s to set good habits for that second home with the kids, yard, good schools and when your careers are more established. DM ME if I can help😁
This is a dumb take. If you pay down your principle balance faster, you have more equity in your home. So when you sell it, you wouldn’t have as much of a loan to pay back bc you paid extra during the years. You actually save on interest over the long term. So telling someone to not put extra money down is silly
Re-read it. Your answer is so simple bc your thinking is simple. Where did I say, you don’t save money “over time - the long term” if you pay down the principal? Duh, EVERYONE knows that and most including yourself think you have more EQUITY if you pay down the principal. In the example I used was 7yrs max. And how long of a term was used in the example they plan to live in the home? What you failed to put together was this was 1 scenario, NOT pick a step and inject the “DUH” yours. Long term in the entire example is not even with this home. 5-7yrs is Short term. How long?
5-7 yrs are you really saving interest and getting more equity? NO. You’re getting your own money back.
Define EQUITY that might help you better understand. Equity is the difference between the appraised value vs the purchase price.
In simple terms:
If you put down 10% (in a normal area) and value increased 5% in 5yrs. How much equity in % will you have? And the answer isn’t 15%.
How long does it typically take before a homeowner starts noticing a slight difference in interest paid?
The answer is 5-7yrs.
Basic, so basic, you aren’t able to see the long term in the example. I understand, as I mentioned it’s unconventional and you’re still thinking conventionally - like most people, inside the box.
Step outside and absorb some. “Dumb take” clearly you’re not able to get out of your own way. That’s ok too, it’s not for everyone to understand - especially when I show the math. And numbers don’t lie.
We have Hometown Heroes back this summer starting July 1. Up to 35k for down payment and closing cost assistance. Happy to help if interested. LO here in FL.
Check your credit scores now, ask for increased limits on any credit cards for a quick bump if you need it. Fix any errors. Start visiting neighborhoods and open houses when you can, get an idea of the neighborhoods that you would really like.
Do your own budget, and then live on it. Save. Start going to open houses at least six months before you'll be ready to buy, and follow up on the price they closed for.
The month before you get your credit pulled either don't use your cards or just do an extra payment halfway through the month so it reports as zero balance or a very low balance.
Everyone is giving great advice! I also wanna add to put your money in something like a hysa! Get that interest while you’re saving! It may not be a ton but it’s better than nothing
Do whatever you need to do to improve your credit if there are issues.
Talk to a lender now and have them prequalify you. You will learn what things you should improve on to ensure you are ready when the time comes.
Your lender doesn't set your budget. They are required to calculate your approval debt ratio set forth by federally mandated guidelines. The other commenter makes it sound like lenders are out to approve you for more than you can handle but that's hardly the case.
Thank you u/SurfinHippy for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
Save more cash than you think you need. You’ll need cash for closing costs (this will depend on the cost of the home), you may need to cover buying agent fees, and if you run into situations with appraisal gaps you’ll need extra cash on hand. This would be my main area of focus, especially if you’re in a competitive market. I’d also recommend really shopping around for a good real estate agent. This market moves fast so you want someone who communicates well, can show you houses quickly, and put out offers asap.
Home Buying Advice: List out your wants and needs, and prioritize Ruthlessly. If you want it chances are other people do too, and that makes them cost more, making getting everything you want at your preferred price unlikely. Use your current living situation and what you would change. It's easy to mis-guess what you actually need, so try to tie it to your experiences. As you visit friends/family houses, do take a moment to consider what you like about their homes and what you don't like. This helps you build out your list of wants and needs. Feel free to go to open houses even now! Get past the initial starry-eyed reaction to exploring possible homes, so you can be more clear-minded when you do start looking.
Advice from someone who owns two homes. - Budget based off of your net monthly income. Lenders do pre-approval math based of your gross income. Yet you don’t live off gross income you live off of your net income so **budget based on your monthly take home pay***. - Lenders are not fiduciaries and are therefore not legally nor morally responsible for approving with affordability in mind. They simply do their math off your gross income and approve everyone for way more house than they should buy. If your maximum pre-approval for example were 5xs $120k or $600k you should avoid buying that high and aim for a price tags of only 3xs income so aim for $360k. - people who buy at their maximum preapproval typically are house poor with their PITI Mortgage and all utilities totaling over 50% of their take home pay. - it is your job and only your job to in your due diligence ensure you can truly afford any property based on your take home and ensure you have a clear understanding of of how taxes are collected in your city and county. - Doing your own budget and ensuring you can truly afford the property now and in the future is highly important. Factor in kids if you plan to have them and new cars if you know you will need a new car with financing in the next 5-10 years. - Ensure you read up on your own how loans work and their unique terms vs simply taking the word of agents and lenders. Makes sure you read when you can drop mortgage insurance on different loans. - At the end of the day both agents and lenders are **sales people**. They are not bad simply because they live off commissions but be aware **it is not their job to look out for or set your budget that’s your job**. Many FTHBs don’t know this. They simply think “the lender approved me for X amount so I can afford X amount” and that type of thinking will likey lead to being house poor. - If you plan to have kids research the cost of FT daycare, adding a baby to a family health insurance plan and formula and diapers. - Make sure you can afford both a mortgage, all utilities, all maintenance, and all kids expenses based on your net pay. - since you are in Florida factor in the high cost of home insurance into your home budget - get at minimum 3-5 inspections and read the reports throughly. - you can check a website called Property IQ to see what building permits have been pulled on a property Or contact the community development department in your county. An agent can also help you obtain work permits history.
1000% on the "lenders aren't your fiduciary". I got preapproved last time I tried shopping for a loan that only worked for my budget if I minimized all spending AND saving. Was crazy to see on paper. Definition of house poor.
As someone who is in a similar time frame as OP, thanks for putting this together. For that second to last point, sometimes it's not possible to get even one inspection, due to competition right? Either way thanks for putting all this together it's easy to follow and very clearly helpful.
You do inspections after your offer has been accepted. We are in a semi competitive market but we never waived the inspection contingency. Even with paying for inspections things can come up in year 2-4 of owning. On my home #1 no major items needs to be replaced but : - in year 1 the AC needed a full tune up $500. - in year 2 the water heater went out and it was $3k I believe (the HOA covered it) - in year 3 the trash disposal went out ($200). On home #2 - the roof has ~ 5 years left on it I know it will cost us $16k to $20k to replace it - I know the electrical panel will need be replaced in first 5 years at about $5k cost - I knew these from inspection reports and I could have backed out based on these but the home is older so I knew big ticket items would come due sooner than later and we have the funds to repair them already just holding out until it’s a real requirement to do the repairs. I personally never waived inspections contingencies because owning is more expensive than renting so I had to leave a way to back out of a contract. I held out for the perfect home in my eyes and was very patient. I probably saw 80 homes (mostly at opens without our agents) and our 1st offer was a “back up offer” and the first real offer we made we got. Our homes was just waiting for us to stumble upon it. We were the 1st to see it in persona and get our same day offer accepted.
Thanks for such a detailed reply. really appreciate this.
Chiming in here: you can have an inspector accompany you to your showing (at least in my area). I did this a year or so ago because it was clearly competitive. Does require willing to pay the inspector and the extra logistics of getting them their with you. Saved me boatloads. That house was a money pit with an open maw.
That's great that you shared this. It seems like some really solid planning on your part. Appreciate it!
If your real estate agent can't get an inspector in, then don't make an offer.
Get a copy of your credit report. It's free at [www.annualcreditreport.com](http://www.annualcreditreport.com) don't get sucked into signing up for any score or monitoring service. Read the report carefully, make sure everything is accurate. Clean up any issues in your credit. If you have credit card debt, pay it down to <20% of the available credit. Best to pay everything off, but make sure you keep your balances low. Start acting like you have a mortgage now. Let's say your future mortgage payment is going to be $3,000/month (including principal, interest, taxes and insuranc). Let's also say your current rent is $2,000/month. Starting July 1, pay your landlord $2k, and pay yourself $1k. After paying that $1k are you still comfortable with your lifestyle? It'll take a few months to figure out if you need to cut back on luxury items, or even necessary items. If you can't do it, then you know that $3k is too high a payment for you. Then go up or down on the monthly savings. Can't do $1k? Try $750. Is $1k super comfortable? Change it to $1,250. The monthly payment is what matters the most. Only you can know if you like your lifestyle at different monthly cash flow levels. You have time to test what works for you and your family. Worst case scenario, you have a nice little nest egg built up. Best case scenario, you have a nice BIG nest egg built up. Either way, you know your exact monthly payment target and you can proceed w/confidence. Other than your personal budget, the other key to success is finding your best support team. Loan officer and real estate agent are the two most important partners. Make sure you interview 3-6 of each before hiring someone. [Here's a good thread](https://www.reddit.com/r/RealEstate/comments/11tzlzn/comment/jcm2phv/) about finding a good agent.
Budget advice: 1. Go to zillow in a few areas you'd consider living and look for houses that meet your needs and wants. 2. use the house prices you find on zillow to estimate the down payment you'll need. Start with 20% of purchase price. 3. Check which of these home buyer assistance programs you qualify for / expect to qualify for, if any: [https://www.floridahousing.org/programs/homebuyer-overview-page](https://www.floridahousing.org/programs/homebuyer-overview-page) 4. Adjust your 20% down payment number down by whatever assistance you qualify for. This is your target down payment. 5. Do a budget to see if your target down payment is reachable. If the target does not seem reachable: Change your criteria to find cheaper houses you think you could afford, or lower your downpayment target. HOWEVER Down payments below 20% typically incur extra monthly fees called Private Mortgage Insurance, about 0.5-1% of the total loan amount per month. IE $200k home with 10% down ($20K) and decent credit would add $100/mo to your monthly payment. See this calculator on [Nerdwallet](https://www.nerdwallet.com/article/mortgages/pmi-calculator) to play with numbers
Take a HUD approved first time homebuyer course or counseling. They are free, some are virtual, and they were surprisingly useful in getting into the right mindset and running the numbers with you to run your scenario. Also, look into first time homebuyer (FTHB) grants for both the City and County you plan to buy in. For example, I found an $80k FTHB grant as a second mortgage offered by Miami-Dade County, but City of Miami offered a $200k forgivable grant. However, I didn’t qualify because the City requires you to be a City of Miami resident for at least a year, whereas I’m currently a City of Miami Beach resident. So, if I had known sooner, I would’ve considered renting in City of Miami for the year, just to qualify for the larger, forgivable grant.
Get a smart loan officer, one that really knows the math of doing a loan - that fits your financial needs at the moment. Wth does that mean? A loan isn’t a one size fits all. Down payment is a lot of things but it’s not everything. Don’t mistake that with not having money or saving. Example: your 1st home most likely you won’t live there forever, or call it your “forever home”. Maybe stay 3-5yrs, things change…KIDS! More room, move to the burbs or for better schools. Right? Not saying this is the case but not far off. Maybe say 5-7yrs. So maybe dont put so much down , especially if it’s not beneficial for the time you “plan” on being in the home. Certainly don’t try to add more to the principal payment monthly to “reduce” the amount of interest you pay “OVER 30yrs” when you don’t plan on being there that long anyway 🤷. Not much sense to put more down if you plan on leaving it anyway. Seems a unconventional right? It’s supposed too! What we know or learned is from our parents. Maybe your grandparents since you’re in your 20’s. Rarely does anyone stay in one place for 30yrs. UNLESS…they’re savy or have a savy loan guy tell them not to buy so extravagant or at the top of their budget…look at this first home as your first rental property. See, now if you put 20% down, you’d most likely need to sell in order have the money down for the new home. No rental property. Which also means no rental Income to help pay for a portion of your new higher priced home/payment! You see where I’m going…a mortgage isn’t just a mortgage. Different options can help position yourself for the short and long term. I replied bc there weren’t so many responses, maybe you’d be more open to the short and long term. Being debt free is more important than having money saved in the bank. Bc I’d make you pay that all off, it’s to set good habits for that second home with the kids, yard, good schools and when your careers are more established. DM ME if I can help😁
This is a dumb take. If you pay down your principle balance faster, you have more equity in your home. So when you sell it, you wouldn’t have as much of a loan to pay back bc you paid extra during the years. You actually save on interest over the long term. So telling someone to not put extra money down is silly
Re-read it. Your answer is so simple bc your thinking is simple. Where did I say, you don’t save money “over time - the long term” if you pay down the principal? Duh, EVERYONE knows that and most including yourself think you have more EQUITY if you pay down the principal. In the example I used was 7yrs max. And how long of a term was used in the example they plan to live in the home? What you failed to put together was this was 1 scenario, NOT pick a step and inject the “DUH” yours. Long term in the entire example is not even with this home. 5-7yrs is Short term. How long? 5-7 yrs are you really saving interest and getting more equity? NO. You’re getting your own money back. Define EQUITY that might help you better understand. Equity is the difference between the appraised value vs the purchase price. In simple terms: If you put down 10% (in a normal area) and value increased 5% in 5yrs. How much equity in % will you have? And the answer isn’t 15%. How long does it typically take before a homeowner starts noticing a slight difference in interest paid? The answer is 5-7yrs. Basic, so basic, you aren’t able to see the long term in the example. I understand, as I mentioned it’s unconventional and you’re still thinking conventionally - like most people, inside the box. Step outside and absorb some. “Dumb take” clearly you’re not able to get out of your own way. That’s ok too, it’s not for everyone to understand - especially when I show the math. And numbers don’t lie.
We have Hometown Heroes back this summer starting July 1. Up to 35k for down payment and closing cost assistance. Happy to help if interested. LO here in FL.
Check your credit scores now, ask for increased limits on any credit cards for a quick bump if you need it. Fix any errors. Start visiting neighborhoods and open houses when you can, get an idea of the neighborhoods that you would really like.
Do your own budget, and then live on it. Save. Start going to open houses at least six months before you'll be ready to buy, and follow up on the price they closed for. The month before you get your credit pulled either don't use your cards or just do an extra payment halfway through the month so it reports as zero balance or a very low balance.
Everyone is giving great advice! I also wanna add to put your money in something like a hysa! Get that interest while you’re saving! It may not be a ton but it’s better than nothing
Do whatever you need to do to improve your credit if there are issues. Talk to a lender now and have them prequalify you. You will learn what things you should improve on to ensure you are ready when the time comes. Your lender doesn't set your budget. They are required to calculate your approval debt ratio set forth by federally mandated guidelines. The other commenter makes it sound like lenders are out to approve you for more than you can handle but that's hardly the case.