4 Vital Factors to Consider for First-Time Homebuyers in 2023

Think, for a moment, just how much your life has changed from January 1st of this year to today. For some, 2020 brought completely new working conditions as offices closed down and employees relocated to their home offices. Others took the opportunity to move back in with their parents and save some extra cash. Regardless of your particular situation, there’s no question that 2020 has had its fair share of curveballs—and nothing could be closer to the truth for first-time home buyers.

Purchasing your first home is intimidating enough under normal circumstances, and the current state of the world only makes the home buying process that much more complicated. While the underlying process has stayed the same, those shopping for homes must also contend with social distancing measures and fluctuating markets before they can even think about signing on the dotted line.

Whether you’re looking for a cheaper alternative to renting your city apartment or are just ready to settle into a more permanent living situation, here are four of the most important changes in the home buying process that you should keep in mind.

Virtual Tours

House tours have always been one of the most important steps in the process of shopping for a new home. A well-staged house and persuasive realtor can help even the most skeptical viewer envision the space as their new home, and for many, home tours are one of the largest deciding factors alongside a trusted home inspection.

So what happens when you aren’t able to meet in person for a house to tour your potential dream home? To help replicate the in-person experience, many realtors have turned to virtual home tour technology.

3D virtual tours take the online home buying process to another level and provide a much more immersive glimpse into the houses you’re considering—especially when compared to a simple photograph. That’s because virtual tours allow viewers to see every angle of the space, such as how each room flows into the next. Virtual tours also allow first-time home buyers to buy homes on the market that would otherwise be too far away to visit in-person.

That being said, there are a few important factors that first-time homebuyers should consider when touring homes online. Asking your realtor to describe any distinct odors or loud sounds is a great idea, as these senses don’t translate well over a screen. And it’s always a good idea to tour the surrounding area to ensure the home is in a neighborhood suitable for your lifestyle needs.

Home Size

More likely than not, the events of the past year have changed not only how you looked for homes but also what you look for in a home. Thanks to shelter-in-place and social distancing restrictions, many new homeowners are looking for new types of amenities that will help them live comfortably during and after quarantine.

Remote work has made designated home office spaces a must-have in the search for new homes, and houses with ample outdoor living areas—from screened-in decks to lavish patios—are some of the most competitive on the market. In general, homes that feature rooms dedicated to a specific activity, such as a media room or wine cellar, have also become much more popular over the past few months.

This makes it even more important to look for a home that accommodates your needs today and well into the future. Investing in a more sizable home may come with a higher price tag, but it could save you time, money, and energy if you can avoid moving after only a few years of occupancy. To ensure you aren’t overstepping your financial boundaries, you should calculate in advance the amount of house you can afford in your current situation. These resources help you navigate the delicate balance between increasing your square footage and minimizing the hit to your savings.

Competitive Markets

If you’re already shopping for your first home, you might be all too familiar with the dread that comes with losing your first choice home to someone with a better offer. The most competitive housing markets in the country include major metropolitan areas like New York City and San Francisco, but even smaller suburban neighborhoods are facing unprecedented levels of new home buyer interest as people look to escape the high costs and cramped quarters of city life.

An uptick in real estate interest means that you’ll have to prepare for houses to sell more quickly and for a higher number of offers to be on the table. The key to navigating a hot housing market is to approach your search with an open, flexible mind. Looking into opportunities as they present themselves is a good mindset to ensure that you don’t get too discouraged should your search stretch into the foreseeable weeks or months.

In order to jump on new homes in your desired markets, you’ll consequently need to make sure that you have everything in order first. Being prepared is the key to moving through the homebuying process as quickly as possible, and first-time home shoppers who do not have their financial records, paycheck statements, and other personal information readily available are only lessening their chances.

Savings and Stability

Ask any financial advisor and they will tell you that savings are paramount within a personal finance portfolio. But a well-stocked savings account has only become more important when grappling with all of the challenges that 2020 has presented. Depending on the stability of your income, some experts recommend keeping as much as six month’s worth of expenses within grasp to keep you afloat during emergency situations.

Understanding how much you should have set aside in your savings is a critical step in vetting your personal finances before a first-home purchase in 2020. While a lack of established savings doesn’t inherently mean you should avoid shopping for your first house, it will make you much less prepared for any financial hiccups along the way—everything from closing costs to an unexpected HVAC replacement.

The same concept applies to your income, where having a stable, regular paycheck will prove invaluable in balancing the financial constraints of quarantining with the purchase of your first home. Not only will a volatile employment history make it harder to manage your monthly mortgage installments, but it may also impact the size and rate of your mortgage. Keeping your income in check is a key financial indicator that you’re ready for your first home, and it’s a habit you should take with you long after 2020 is over.

Home Buying Tips for New U.S. Citizens

The home buying process is often daunting for many people, but for those who are new U.S. citizens, the task can be particularly difficult. However, having a house to oneself is a dream for many immigrants, and there are options available that can help make the process easier to navigate. 

In order to help get your footing on the home buying process as a new U.S. citizen, here are a few tips and resources you can utilize to make your journey as easy as possible.

Save Early

While there are first-time homeowners loans available that immigrants should certainly take advantage of, these loans still require a down payment of 3.5%. Therefore, saving money in advance is imperative to the process. 

Signing up for a bank account in the United States as a new citizen can be difficult, especially due to the potential lack of a U.S. credit score. However, there are now online banks that don’t require credit checks to sign up, allowing you to have a safe place to save your money during your home buying process.

Build Credit

As mentioned previously, credit scores play a major role in the home buying process; your credit history will impact the interest rates and loan amounts you have access to. This applies to most mortgage services, aside from a few agencies that perform underwriting for home buyers and don’t take credit score into account when applying.

However, there are options available for new citizens looking to build their credit. One option would be to use your international credit report to get credit in the United States. This means that you won’t need to spend time signing up for credit cards and building credit, if you have a solid credit score from your previous nation of residence.

Find Community Support

Remember that the home buying process isn’t something that you need to take on all by yourself. Through the support of your friends, family, and other members of your local community, you can find a great network of people who have been through the home buying process themselves. Many of them would be more than willing to provide insights and advice on how to navigate it in the best, most cost-effective way. 

Finally, look for real estate agents that have experience working with new citizens, as they can often point you in the direction of the best resources for you to utilize while searching for a home. They will also be more understanding of your current situation, and give you the time and advice you need, to avoid rushing into the process and overspending, or settling on a home you don’t enjoy. At the end of the day, being a homeowner is a wonderful experience, and the day you finally sign the final deal will be incredibly rewarding.

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What Is an Escalation Clause?

You’re a first-time home buyer and just found your dream house. You put in an offer. The seller goes with someone else.

That’s OK, because shortly after you find another beautiful home! You put in your offer. But once again, the seller goes with someone else.

Anyone would be bummed in this situation. Most would be thinking the same thing: How can I break the pattern?

The escalation clause is a potential solution. See how this real estate tip can keep your offer on the table!

What It Is

The escalation clause is this little-known addendum that you can add to your offer. If you hear that there are other offers on the table, you can submit an escalation clause to help give your offer a little boost.

Infographic explaining what an escalation clause is in real estate

How It Works

Oftentimes, interested home buyers will submit an offer on a house they really love, listing the max price they’d pay off the bat. Their offer still might not get accepted, but even if it does, they might end up paying more than they needed to.

Let’s say you put in your offer at $250k. You find out there are other offers. Here’s what you can do:

  • Determine what your maximum amount is
    • Ex: “I don’t want to pay more than $280k on a house.”
  • Decide the incremental amount you’ll extend your initial offer
    • Ex: “I’ll increase my offer by $1200 up to $280k.”

There’s a lot that goes into making an offer, and an escalation clause doesn’t guarantee success. However, it can keep your foot in the real estate door, and it’s handy for when you find a house that you really want.

Can an Escalation Clause Backfire?

Not really, except in the sense that you could end up paying your max when you didn’t need to. The best way to prevent this is by only submitting an escalation clause when you know there are other offers. Don’t submit if the sellers tell you “We’re expecting other offers” or something along those lines—only when there are actual, written offers on the table. Ask the seller’s agent to let you know when other written offers have been presented.

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Pre-Event Offers: An Escalation Clause Alternative

Placing a pre-event offer for a home auction is similar to an escalation clause. With RealtyHive, your pre-event offer could be accepted and then you wouldn’t even have to wait for the event itself! You can submit your offer and increase it in the same increments. We also sell traditional properties, so escalation clauses can help in competitive situations.

You might have been unsuccessful with offers in the past, but with your newfound escalation clause and pre-event offer knowledge, we think your future of home ownership is looking pretty bright. Check out some of the incredible properties on RealtyHive today!

Special thanks to @fixandflip_kdesigns for their business tips.