For the young professional who is ready to buy well – not just buy something
Buying your first home is weird.
You can be completely competent in your career. You manage deadlines, make important decisions, have a good income, contribute to your retirement account, and generally function like a responsible adult.
And then someone starts talking about earnest money, appraisal gaps, contingencies, title work and escrow, and suddenly you’re wondering if there was a class everyone else took that you somehow missed.
There wasn’t.
Most people learn how to buy a house while they’re actually buying their first house.
And having a larger budget doesn’t automatically make the process easier. In some ways, it gives you more decisions to make. You’re not necessarily asking, “What can I afford?”
You may be asking, “How much do I actually want to spend?”
Those are two very different questions.
This guide walks you through the process from that first conversation with a lender all the way to getting the keys.
STEP 1: Get Pre-Approved Before You Start Shopping
I know. Looking at houses is considerably more fun than talking about mortgage documents.
Do this part first anyway.
A mortgage pre-approval gives you an idea of what a lender is actually willing to lend you based on things like your income, credit, debts, assets and employment.
But here’s the part I think gets overlooked:
Your maximum approval amount does not have to become your shopping budget.
A lender might tell you that you can afford a $550,000 house. Great. That doesn’t necessarily mean you want a $550,000 mortgage payment.
Think about the life you want outside of your house. Travel. Restaurants. Retirement contributions. Cars. Concerts. Kids someday. Whatever matters to you.
Being able to qualify for the payment and being comfortable making the payment every month are not necessarily the same thing.
Before we start looking at homes, I want you to understand the whole monthly number – principal, interest, property taxes, homeowners insurance, HOA fees if applicable, and anything else that comes with owning that particular property.
Your pre-approval also matters when it’s time to write an offer. A seller wants to know that the person offering to buy their house has the financial ability to actually complete the purchase.
Get the financing conversation out of the way early. Then we can shop with actual numbers instead of guessing.
STEP 2: The Buyer Agency Agreement
Before we get very far into touring homes, we need to talk about representation.
This is where the Buyer Agency Agreement comes in.
It establishes our working relationship and spells out things like what I am responsible for as your agent, what you are agreeing to as my client, how long the agreement lasts, and how compensation will be handled.
This deserves an actual conversation – not me sliding a document across the table and saying, “Sign here.”
My job isn’t simply to unlock doors.
I’m helping you evaluate properties, research information, understand the market, structure an offer, negotiate terms, navigate inspections and appraisal, communicate with the lender and title company, watch deadlines, troubleshoot problems and protect your interests through closing.
And yes, we will talk about compensation.
Depending on the transaction, some or all of the buyer-agent compensation may be negotiated as part of the purchase. If there is a difference between what is negotiated from the seller and what we’ve agreed upon, we’ll discuss exactly how that works before you’re committed to anything.
You should understand what you’re signing.
Ask questions.
That’s what I’m here for.
STEP 3: Now We Get to Look at Houses
Finally, the fun part. But before I send you 147 listings, I want to know what you’re actually looking for.
Not just:
3 bedrooms.
2 bathrooms.
2-car garage.
I want to know how you live. Do you work from home? Do you entertain? Would you rather have a gorgeous kitchen or a huge primary suite? Do you want neighbors nearby or enough property that you can’t see them? Do you care about walkability? Would you rather have a beautifully renovated house or buy something dated in a neighborhood you love and change it yourself? Are schools important now, later, or not at all? How long do you realistically see yourself living there? We’ll separate your list into three categories:
Must have.
Would really like.
Would be cool, but I’m not paying another $75,000 for it.
That last category is important. Having a healthy budget means you may have a lot of choices. My job isn’t to convince you to spend every dollar you’re approved for. It’s to help you figure out which things are actually worth paying for.
STEP 4: You Found the House. Now What?
This is usually where the adrenaline kicks in. You walk into a house and suddenly you’re mentally placing furniture.
Before we start writing numbers on a purchase agreement, we’re going to slow down long enough to look at the actual property and the market around it. We’ll look at comparable sales, how long the home has been listed, price changes, current competition and anything else we know about the seller’s situation.
Then we’ll build an offer. And purchase price is only one part of an offer. We may be negotiating:
- Purchase price
- Closing date
- Seller occupancy after closing
- Earnest money
- Inspection terms
- Appraisal terms
- Seller concessions
- Buyer-agent compensation
- Personal property or appliances
- Other terms specific to the property
Sometimes the strongest offer isn’t the highest offer. The goal is to understand what matters to the seller while protecting what matters to you. Once your offer is submitted, the seller can accept it, reject it or counter it. If we reach an agreement and everyone signs, congratulations.
You are officially under contract. And no, the house isn’t quite yours yet.
We still have some work to do.
STEP 5: Earnest Money
Shortly after your offer is accepted, you’ll typically submit an Earnest Money Deposit, often called EMD.
Think of earnest money as you putting some skin in the game. You’re telling the seller:
I’m serious about buying this house.
The amount and deadline are written into the purchase agreement. Your earnest money is generally held by the designated escrow holder rather than handed directly to the seller. Assuming the transaction proceeds normally, it is credited toward the money you owe at closing. If the transaction doesn’t close, what happens to that money depends on the purchase agreement and the circumstances surrounding the cancellation. This is one of the reasons deadlines and contingencies matter.
I’ll help you keep track of them.
STEP 6: The Inspection
Now we find out what you’re actually buying.
A home inspection isn’t about producing a 70-page report so you can panic over every loose outlet cover. And trust me – inspectors will find things. Even beautiful houses have things. The purpose is to better understand the condition of the property and identify issues that may affect your decision to purchase it.
Depending on the home, you may consider inspections or evaluations involving things such as:
Roof
Foundation
Electrical
Plumbing
HVAC
Radon
Sewer line
Well and septic systems
Pests
Mold or moisture concerns
What makes sense depends on the property. Once the inspection is complete, we’ll go through the findings. Then we’ll talk about what actually matters. A $75 repair and a $20,000 structural problem do not belong in the same category.
Depending on the contract and inspection results, we may accept the property as-is, request repairs, negotiate a credit or price adjustment, or potentially decide that this isn’t the house for you.
The goal isn’t to find a perfect house. Those don’t exist.
The goal is to understand what you’re buying before you buy it.
STEP 7: The Appraisal
If you’re financing the purchase, your lender will generally order an appraisal.
The appraisal is different from the inspection.
The inspector is looking at the condition of the house.
The appraiser is developing an opinion of its value for the lender.
Let’s say you agree to purchase a home for $500,000. The lender wants some assurance that the property supporting that mortgage is reasonably worth what you’re paying for it. If the appraisal supports the purchase price, great. We keep moving. If it comes in low, then we have another conversation.
Depending on the terms of your purchase agreement, options might include renegotiating the price, challenging the appraisal when there is legitimate supporting evidence, bringing additional cash to closing, or exercising an applicable appraisal contingency.
We’ll deal with the situation based on the contract we actually wrote – which is why we talk about these possibilities before submitting the offer.
STEP 8: The Quiet Part Where Everyone Else Is Working
There’s usually a period between inspection/appraisal and closing where buyers start wondering:
“Is anything happening?”
Yes. A lot. Your lender is finishing underwriting. The title company is working on title. Documents are being reviewed. Insurance is being arranged. Final numbers are being calculated. Outstanding conditions are being cleared.
Meanwhile, I am keeping track of the transaction and communicating with the people involved to make sure we’re still headed toward closing.
This is also a terrible time to celebrate your new house by financing a new BMW.
Please don’t.
Don’t open new credit cards. Don’t finance furniture. Don’t make unexplained large bank transfers. Don’t quit your job because you’ve suddenly decided corporate America is crushing your soul.
At least call your lender before making any significant financial change. Your loan isn’t completely finished until it’s completely finished.
STEP 9: The Final Walkthrough
Shortly before closing, we’ll walk through the house one more time.
This isn’t another inspection.
We’re checking to make sure the property is substantially in the condition we expect, agreed-upon items remain, required repairs have been addressed when applicable, and there hasn’t been some major change since you last saw it.
Basically:
We want to make sure the house you agreed to buy is still the house you’re about to buy.
STEP 10: Closing Day
This is it.
Before closing, you’ll receive information showing the final financial details of your transaction and how much money you’ll need to bring. Your lender and closing/title professionals will give you specific instructions.
Always independently verify wiring instructions before sending money.
Real estate wire fraud is very real. Never send a large amount of money because an email suddenly tells you the wiring instructions have changed.
At closing, you’ll sign documents. A lot of documents. You’ll sign your name enough times that it will stop looking like a real word.
Funds are transferred, documents are completed, and ownership is transferred according to the terms of the transaction. And then comes the part you’ve been waiting for.
The keys.
Congratulations!
You just bought your first house.
One Last Thing
Your first home doesn’t have to be your starter home.
If you’ve built a strong career early, saved money and have the income to purchase something you can realistically grow into, there may be good reasons to do that. But a bigger budget also makes it very easy to buy more house simply because you can.
I don’t want to sell you the most expensive house you qualify for.
Actually, I don’t want to sell you a house at all.
I want you to find a home.
One that makes sense financially. One that fits the way you actually live. And one that you’re still happy you bought after the excitement of closing day wears off. That’s the difference between buying something impressive and making a good real estate decision.
Jennifer Rowden, REALTOR®
Keller Williams Realty-Lansing
Greater Lansing & Mid-Michigan
3490 Belle Chase Way Lansing, MI
Ready to start looking? Let’s start with a conversation about what you want, what you can comfortably spend, and what your first home could actually look like.
Jennifer Rowden 