In such a competitive marketplace, finding the right home for your family in Seattle is difficult enough – let alone actually making a purchase. And with the increasingly warm and beautiful summer months bringing even more interest in the real estate market, things are bound to get very interesting in the Emerald City.
Whether you’re house hunting or simply taking a look at the current listings on the market, there are a lot of hurdles to jump as a first-time homebuyer in Seattle. There is no shortage of aggressive realtors in the area waiting to take advantage of young couples interested in buying their first homes, but the realities of your financial and life situations should dictate your decision – not incentives and opportunistic real estate experts. If you’re considering making Seattle your home and you’re not sure where to begin, consider this guide your new best friend.
(This section will be the entirety of the financial advice given in this post – we promise!)
Okay, so Seattle is expensive. If you moved here in the last 5 years, you’ve made peace with that fact. It’s very rare that first-time homebuyers find a place for less than $400,000, especially now that Zillow’s average home value index has topped $500,000 as of February 2016. http://www.zillow.com/seattle-wa/home-values/ No matter what you’re looking for, it’s likely you’ll be able to sell the property for an even higher value down the road.
First off, you’ll want to set your budget and consider your financial situation very seriously. Buying a home is a big, big purchase. If you’re not ready, you’re just not ready – it’s as simple as that. As a general rule, you should be saving for the down payment at least a year before applying for a mortgage loan. Almost 32% of home sales in Seattle during November 2015 were paid for with cash, making the market even more competitive for first-timers on a limited budget. Anything you can do to increase your credit score before applying is highly recommended, as is avoiding applying for financing, credit cards, or other loans for a full year before exploring your home buying options.
Once your financial ducks are in a row, you have some additional hoops to jump through. Lenders require several documents before pre-approving a person or couple for a home mortgage loan, including:
– Proof of income (with W-2 statements from the past two years, recent pay stubs, and proof of any other avenues of income over the last two years).
– Proof of assets (bank statements, investment account details, and any gift loans you receive from a friend or relative). You’ll need to have at least 3.5% of the total value of an FHA loan to use as a down payment; conventional loans may require 10-20% down depending on the terms of the loan.
– Good credit. This is a big one, especially for first-time buyers. Most lenders won’t offer the best interest rates to customers with a credit score below 740, meaning you may have to pay higher interest rates or pay discount points to lower the rate upfront. FHA terms have recently changed, requiring borrowers with credit ratings below 580 to make larger down payments.
– Verification of employment. Each person on the loan agreement will need to provide proof of employment to their lenders, who will likely to call your employer and verify your salary. If you’re self-employed, you’ll need to provide more paperwork regarding the business income.
– Copy of driver’s licenses, Social Security numbers, and a signature allowing the lender to request credit reports. The more supplemental documentation you provide, the smoother the process will be.
Set Your Expectations Accordingly
Because many consider their first homes to be “starter homes,” it’s important to keep that in mind while shopping around. Many homes in your price range will likely be less than ideal than your envisioned “dream home,” with home improvement projects and upgrades in the way of achieving perfection on that front.
As you begin your house hunting adventure, sit down with your significant other and plot out the must-haves and nice-to-haves on your list. What’s a deal breaker for you? What could a home provide that would allow you to overlook significant flaws or drawbacks? How long do you plan to live in that home and will that home allow you to grow your family over time? These discussions can be contentious, so it’s best not to rush them or have the conversation about each person’s wants and desires in a home while you’re visiting one.
Explore Each Neighborhood
“Moving to Seattle” is an awfully vague phrase to use around locals or long-time residents. The city is teeming with beautiful, fascinating neighborhoods that are small cities all to themselves. Most Seattleites avoid the downtown corridor after business hours, preferring to stick to their tried-and-true neighborhood restaurants, bars, parks, trails, beaches, and shops. The diversity and culture of each neighborhood is stark and demarcated, leaving many a confused tourist wondering how to get back to Pike Place.
Thankfully, you can get the vibe of each neighborhood down pretty easily with a trip to each respective farmer’s market, park, or commercial corridor on a beautiful summer day. West Seattle and Ballard are growing faster than any other residential neighborhood in the city, but areas to the north and south of downtown are quickly becoming destinations for first-timers to Seattle.
(For more information on each distinct, wild, and weird Seattle neighborhood, check out our in-depth guide to each neighborhood in Seattle!)
Find a Hidden Gem
Not only are fixer-uppers a great project for those who want to tinker and truly make yours a unique and personal home, they can bring tremendous value on the resale market – even compared to new constructions. This is where a professional home inspector can be a huge advantage when negotiating costs for a so-called “fixer-upper.”
By identifying potential hidden expenses like cracked foundations, broken water heaters, or mold infestations, a home inspection can provide potential buyers a realistic picture of the work they have ahead of them if they intend to proceed with the sale. Most importantly, you should attend the home inspection and shadow the inspector. They’ll give you a detailed breakdown of the home’s problems at the end, but if you’re on-site and active, you’ll have the opportunity to ask questions and get clarification in-person on a variety of issues.
The true reward of homeownership comes with taking pride in your home and caring for it as it ages. Unfortunately, despite the grave importance of correcting structural issues like roofing, foundations, and mold infestations, these improvements simply won’t yield the kind of return on investment that a new kitchen or master bathroom remodel would.
The bottom line: if there are simply too many problems for you to fix on your own or with a minor amount of contractor assistance, it’s probably not worth the time and investment for your first home.
Keep Emotion Out of It
The intangible aspects of a home are important, yes, but emotion shouldn’t get in the way of a rational decision. Moreover, it’s important to keep a good poker face while looking at potential homes. Realtors may extend that feedback to the sellers, meaning they could stay firm on their asking price. Approach each home you visit as neutrally as possible, keeping an open mind and reassessing in private once the trip is complete. After all, you can gush about your new home once the ink has dried.
Partner with a Local Ally
House hunting on your own is highly unadvisable, but even more so if you’re not familiar with the area. Every city has its perks and shortcomings, but knowing what makes a city tick is something that can only be learned through experience and spending a lot of time getting to know the residents. As a long-time Seattleite, I’m always happy to help newcomers and first-time homebuyers alike learn more about Seattle and its various neighborhoods. If you’re considering making a permanent move to Seattle or want to upgrade from your current lease to a home of your very own, give me a call and let’s discuss how to make your dreams of homeownership a reality!