Real Estate Questions (part 7): What's the First Step to Buy a House?

Welcome to the research stage of buying a home! Maybe you’ve been scrolling Zillow, or randomly Googled this question. Whatever brought you to this page - we’re glad you’re here. 

Context & credentials: this articles was written by Tiffany Holden, a 2023 solo first-time homebuyer and licensed managing broker at Muljat Group Realtors. I’ll share a bit of my own story along the way, but everyone’s scenario is going to look different.

The first step for your first home purchase is to figure out these two financials:

1. What cost to prepare for

2. Where the money is going to come from (both the down payment and the ongoing monthly payments)

What to prepare for

When I first started home shopping back in 2018, Whatcom County’s median home price was $376,000. I was looking at an Everson condo listed at $175,000, and a 5% down payment of around $9,000. 

Of course, this was five years ago now. 

The median price for a condo in Whatcom County right now is $459,000, and for single family homes, it’s up to $705,000 (data per the Northwest MLS), which has made entering the real estate market much more challenging for local renters. 

What we suggest: meet with a trusted real estate broker to make a list of your most critical needs in a home - how long of a commute / distance to your regular spots can you handle? What number of bedrooms is your real minimum? What condition does the home need to be in to fit your lifestyle? Based on your answers, we can research a realistic price range that those needs will cost. 

Where the money is going to come from

80% of recent buyers financed their home, and the average first-time homebuyers put down around 8% (NAR 2023 Home Buyer & Sellers Profile). 

Saving up the down payment and closing costs is the least-sexy part of the whole process - even less than the 40 hours of paint-stained oversize overalls followed by moving day.  

It took me 7.5 years.  For the first three years out of college, I saved up by living in a rental with 2-5 roommates at a time, eating cheap pasta and Costo frozen burritos, avoiding discretionary spending (literally my primary fun for part of that time was giving speeches at a Toastmasters club). Over the 7.5 years of preparing to buy a home, I also pivoted jobs twice, coordinated 7 weddings on the side, and continued to keep my lifestyle fairly minimal even as my income rose. 

What we suggest: meet with a trusted local loan officer to determine where you land on the income-credit-asset scale. What most people don’t realize about these professionals is that they don’t just tell you what you can do now, they can help you determine what changes to your financial picture will have the most impact on your loan preapproval. 

Perhaps you need to focus on consolidating or paying off debt, or maybe you’re solid there but need to work on changing your income over the next 6-12 months. (In my case, I had been too conservative with credit usage and needed to open a second credit card to expand my credit history). If you’re buying with a partner, it’s doubly important to be on the same page about what each of you might need to do to boost your preapproval. If you’re being gifted your down payment - congratulations! - you’ll need to focus on income and credit to ensure your salary can sustain the ongoing monthly mortgage payments. 

And there you have it! The first steps on your home buying journey. We’d be honored to answer any of your next questions - reach out at team@cohengroupnw.com! (if you already have an agency relationship with another broker, this is not intended as a solicitation).