Key Lessons from Buying My First Home

I bought my first home at 25 years old–without help from my family. Looking back, it was a huge risk that I am not sure that I would take on even now, 4 years later. I was encouraged by a friend, who was into real estate, to purchase a home to house-hack (see the How To House Hack post). While the risk wasn’t necessarily uncalculated, I wasn’t completely aware of everything that could go wrong with my transaction. Honestly, I didn’t really know much other than the basics. I had just started learning about personal finance and real estate happened to be a part of that journey. Nonetheless, it went smoothly, and whatever “inefficiencies” I didn’t catch beforehand were just the cost of learning. In my next deal, I will be less likely to make those mistakes! The purpose of this post is to go through my lessons learned as a young professional first-time home buyer.  I will be as transparent as possible with numbers without revealing too much information unnecessarily.

As with everything, the first time always involves mistakes. The most important thing is that you learn from those mistakes: “Smart people learn from their mistakes, wise people learn from the mistakes of others.” Let’s discuss from my perspective. Here, in no particular order, are some mistakes that I made that I (hopefully) won’t make again, in addition to some general tips that I discovered along the way:

• Be more diligent with home inspections: I hired a home inspector who was very good. He walked me through every step of his checklist and explained the reasons for what he was doing. He was indeed a good inspector and didn’t find any major issues, but I could have been more scrutinous in my personal inspection versus being blinded by the “I love this house” emotion. In hindsight, I still would have bought the home from a strictly mathematical standpoint, but I wish I had known about some issues sooner rather than later so I could have prepared for them.
• Do not buy points on the mortgage: Although the breakeven timeline was shorter than the period for which I plan to hold onto the house, the cash probably had greater utility elsewhere. The exception is if you know for sure that you will be keeping the house for a very long time, which I still might.
• Do not let a couple of small things deter you from buying a home. For example, if it doesn’t have a nice stove but the house overall is a good deal, don’t let that deter you from buying the home if it checks your other boxes. A nice stove is only a couple grand. However, there are small signs that you can use to steer away from a home, such as water damage in certain areas, an aging roof, etc.
• In a hot market, open houses are a cluster-f*ck and you will be fighting a ton of people. On the other hand, if nobody is at the open house, maybe the price point is too high and you have space to negotiate…
• Before touring a house, drive or walk around the neighborhood to get a sense of what it’s like. Be sure to drive by at night, too.
• Imagine all the things that can go wrong with the house and how much they’ll cost you. Double it. That’s how much you should keep in your emergency fund.
• Calling contractors out to your house is VERY expensive. Had I not done most of the work myself in the first year and had I not had a home warranty, I would have been out of pocket almost $15,000—and that’s on a 7-year-old home.
• Sleep in every one of the rooms for a couple nights when you first move in so you hear all the weird noises, drafts, temperature differences, etc.
• The utilities may/will have been shut off by the previous owners, so you have to get them turned back on before moving in.
• Change the locks when you move in: Smart locks these days are very secure, relatively inexpensive, and easy to install yourself with a small tool kit.
• Get multiple homeowners insurance quotes: They may vary greatly. Having a security camera system in your home will reduce your monthly insurance costs.
• Get multiple lender quotes for interest rates and closing costs.
• Do not become fixated on the monthly payment. First and foremost, make sure the financials fundamentally work and be sure to include contingency in case things don’t go the way you expect them to. If you are fretting over plus or minus $100/mo., you cannot afford to purchase a home.
• Utilities will be higher than you expect. My house is somewhat poorly insulated (or the Texas summer is way hotter than I thought it was), but that is not something you would catch during an inspection unless drywall was removed. This has caused my heating and cooling bill to be higher than expected.
• Home warranties are worth it only in the right scenario. I got a seller credit towards a home warranty, so I ended up using it a lot. I will not be renewing my warranty after my current contract expires. I received a $500 credit towards an $800 policy from a popular warranty company. They have been on and off with service—sometimes great, sometimes not.
• Do not become emotionally attached to a “deal”: There are lots of deals out there that check all your boxes. Don’t rush and don’t fudge the numbers just to falsely justify the economics to yourself. You may find yourself saying “meh the utilities are only going to be $200/mo.” when in reality they will be much higher.

Overall, make sure that you are thinking through all of the things that can go wrong when purchasing a house. The intention of this post is not to scare you. Home ownership is an amazing thing! It just needs to be approached methodically and with caution. For most, it will be the biggest purchase of their life thus far. Hopefully you have learned a bit from my mistakes! If you have purchased a home in the past and made some avoidable mistakes, comment below with your lessons learned!