My husband and I started shopping for a home in February 2022, which was a tough time to be a first-time homebuyer.
Early on, we found ourselves eating up nuggets of wisdom from others. Our parents had advice, but even though they were experienced homeowners, they hadn’t bought homes in about 30 years. Even our friends, who had bought homes in the last five years or less, didn’t seem to understand what kind of position we were in as homebuyers right now.
Everyone had the best intentions in giving us advice, but we quickly realized that we were going to have to figure out some things on our own. Here are three common home-buying tips that didn’t work for us.
1. Negotiate with the seller
My favorite thing was when I would tell people that I was interested in a house, but it would need some repairs. Their response was usually along the lines of, “You can probably negotiate with the seller for them to make some of the repairs before you move in.”
It’s like when I tell someone I have
, and they say, “Oh, have you tried yoga?” Your heart might be in the right place, but you have no idea what’s going on.
The US is a seller’s market right now, which means that there are more people buying homes than there are homes for sale. Advice about negotiating with the seller assumes you have leverage as the buyer. And in a seller’s market, you lose a lot of your leverage because you’re usually competing with a lot of other people who might have higher offers, earlier closing dates, or fewer contingencies than you.
My friends and family may have had success negotiating their house prices or repairs, but we didn’t have that option.
2. Never buy without an inspection
Normally, I would say this is a solid piece of advice. If you skip a home inspection, you might find out after it’s too late that the house has major problems that will be expensive to fix — and you may not have bought the house had you known about those issues. An inspection protects the buyer.
But in many housing markets in the US (including the one where I live), having an inspection contingency in your offer all but guarantees the seller won’t choose you.
When a seller accepts an offer with an inspection contingency, you as the buyer can legally back out of the sale if the inspection shows serious problems, such as a crumbling foundation. You would also get your earnest money deposit back, which is a percentage of your
you make upfront.
If your offer is exactly the same as another person’s but theirs waives the inspection contingency, their offer is a safer bet for the buyer. It means there’s less of a chance that the buyer will cancel the contract.
Thankfully, my husband and I were able to get pre-offer inspections on homes we considered. These are similar to regular inspections, but they take place before you make an offer and help you decide whether you want to buy a home. But because homes are flying off of the market, there isn’t always time for a pre-offer inspection. You might view a house on a Friday and have to make an offer by Saturday, and there’s no time to schedule one.
That said, I have two friends in other parts of the US who were able to schedule regular inspections — it all depends on where you are buying.
If skipping an inspection or pre-inspection is a deal breaker for you, that’s OK. A year ago, I would have silently judged someone who told me they bought a home without getting an inspection. Today, I would nod empathetically and give them a pat on the back.
3. Make a large down payment
This is a piece of advice I’ve just kind of heard “around” over the years, rather than specifically from my family and friends. Especially because I grew up in a community that loved Dave Ramsey, a personal finance personality who insists on putting at least 20% down. (But of course, paying in all cash is preferable, Ramsey says.)
But home prices have skyrocketed over the last year, so having a 20% down payment was simply unrealistic for us. We would have had to save for years, and by then, home prices would probably be even higher — and we’d just have to save some more.
Besides having more equity in your home, the main perk of a 20% down payment is that you don’t have to pay for private mortgage insurance when you buy. But because my husband and I both had strong credit scores, our PMI only costs a little over $100 per month. I’d rather pay around $100 per month than save another 10 years for a house and not build any equity in that time.
I also always assumed a large down payment would majorly lower my monthly payments — but that wasn’t necessarily the case. To put down, say, 7% instead of 6%, we would have to put down an extra $4,000. But it would have only saved us around $30 on principal and interest each month.
In the end, we made the minimum down payment of 3%. If we had put down 5%, our interest rate and PMI would have decreased a little bit, making for a slightly lower monthly payment. But we agreed that we’d rather keep money in our emergency fund and retirement accounts than withdraw it for a slightly larger down payment. I have zero regrets about making such a small down payment.