You and your partner have been together for a while, and maybe you’ve even moved in together. The next step you may consider is buying your first home together — but where do you even begin? Purchasing a home, married or not, is an intimidating task when you consider the investment and all of the steps it takes to finally be a homeowner.
We talked with Bailey Beckman, Realtor at eXp Realty, about how to start the process and how great home buying experts like her will help you find your perfect home.
If you and your partner are considering taking this big step, Bailey says that open and honest communication will alleviate stress and make the process move faster. Along with that, “A few things you definitely want to discuss are your wants versus your needs. A hard, honest truth about buying a home is that the perfect house simply doesn’t exist,” she explains. “Every home will have a flaw, so you and your partner need to determine where you draw that hard line of what you NEED in a home versus what you WANT in a home. Remember, you will most often be purchasing a starter home. It’s ok to not have the perfect HGTV place until you are 5-7 years down the line.”
She also advises discussing how you plan to split the costs of living before you begin the process to ensure you’re on the same page i.e. how bills will be split, what each of you contributes to the mortgage, who will purchase furniture, etc.
Once you’ve nailed down your wants, needs, and have discussed finances, it’s time to find the person who will help you find your home. “Your very first step should be to connect with a realtor. I advise that you interview 2-3 agents to be sure you have a professional that will not only get the job done, but one that you and your partner get along with,” Bailey suggests. “Plus — buyers do not pay for agent representation in the state of Minnesota! The seller of a home pays the commission to both their own agent and the agent that brings a buyer in.” This step should be done 6-12 months before you are considering buying and just like weddings, the more time you have, the better!
Finding a great realtor that suits your needs and is a good fit is vital. They will help you with several steps, and it’s not just showing you homes, “We are on top of the current laws, understand the paperwork that is necessary, negotiate on your behalf, find off-market opportunities, give you access to see homes, and bring your transaction all the way to the closing table. There are hundreds of ways for a deal to fall through and it is much easier to tackle with a realtor by your side. You wouldn’t perform a root canal on yourself and I’d advise that you shouldn’t buy a home by yourself,” Bailey says.
Now that you have your realtor, you can start crunching numbers with a loan officer. You’ll want to lock in your lender in the same time frame as your agent (6-12 months) to help you prepare financially. Preapproval is quick at a 3-5 day process and is valid for 3-4 months. The down payment and closing costs will be a large chunk of money, but did you know you don’t necessarily need to pay 20% down? “You can purchase with as little as 3% down for a conventional loan! You will have to pay private monthly mortgage (PMI), however, until you reach 20% equity in the home,” says Bailey. She suggests checking out an online mortgage calculator to see some realistic amounts. You should also consider your closing costs which are usually 3-5% of the purchase price of the home.
Realtor ✔️ Preapproval from a lender ✔️ Now you can start looking at homes! But don’t skimp on getting preapproved before you start searching. Bailey says most sellers won’t even allow showings unless a buyer is proven to have sufficient funds. When getting to this step, she suggests thinking about it in stages.
- Stage 1: Actively searching for homes and submitting offers. Bailey says the market is very competitive so “plan ahead as this may take more time than you’d like”.
- Stage 2: Offer accepted. Yay! Now you have a pending offer. “During this stage you’ll have the inspection, your lender will schedule the appraisal, etc.” Bailey explains.
- Stage 3: Closing. This is when you get the keys to your home and happens typically 30-45 days after the offer is accepted.
If you aren’t quite yet married but looking at buying your first home together, what do you need to consider? “It is a growing trend for couples to purchase a home together before they are married for several reasons. One is that you and your partner can gain equity sooner and faster. Home prices have risen over the last few years and are projected to increase another 3-6% by the end of 2023,” Bailey says. She also explains that couples may purchase before they are married to take advantage of homeownership tax breaks.
“Another pro (to buying before you’re married) is that you have a little more flexibility with the financing. Say one of you has too much student debt to qualify for a competitive loan. The other partner can apply for financing as a single person. However, this also means that only one income will be used when qualifying for the financing. So it’s best to speak with a lender or personal financial advisor to see what would be the best set up.”
If you plan to buy your home after you get married, you can even add money towards a down payment on your registry! “I love this option on a registry! What better way for your friends and family to help you build your new lives together than by helping you buy a home,” says Bailey. “One thing to note though is that this is considered ‘gift money’ during the financing process. A lender will want any irregular money to be in your account for a minimum of 2 months before you have an accepted offer on a house. However, if it is a larger gift amount, you can have a ‘gift letter’ added. New as of 2022, any one individual is allowed to gift up to $16,000 to a home buyer.”
Ready to begin the process of buying your first home together? Bailey is sure to help you every step of the way! Check out her website for more info and follow her on Instagram for the latest trends in home buying and selling.