Ep 038 - First-Time Homebuyers: The 4 Phases to Get it Right

Welcome to Be a Smarter Homeowner Podcast, where you'll discover strategies to save money, save time, and be better organized in managing your largest financial asset and biggest expense, your home. Your hosts, John Bodrozic and Beth Dodson, who are co-founders of HomeZada, have been supporting homeowners for over 20 years. They are here to share with you their tips and suggestions, as well as interviews with industry experts. With the goal of helping you become a smarter homeowner. Now here's your hosts, John and Beth.

Hi everyone! Welcome to Be a Smarter Homeowner Podcast. I am Beth Dodson. Here with me is John Bedrosik. We are the co-founders of HomeZada, and we'd like to talk to you today about your first-time homeowner. And you're trying to buy your first house. John and I have both been there. It was some crazy experiences. I was very fortunate. I had a lot of help from my parents in a unique capacity. John, I'd like to talk a little bit about our experiences first, and then we can go into other things. Sure. Absolutely. Because I know we have 4 steps we want to talk about. But before we go there, so I was very fortunate. My stepfather was a realtor at the time. He was working his full-time job, so it was kind of a side hustle. And, um, he was able to help me in a lot of ways because he was my acting real estate agent. So he was, um, my agent who took me around.

You got free advice.

I did. I got free advice. Plus, I'd known about real estate for so long because he'd been a real estate agent for so long, and I knew a lot of my friends and family in the area had been contractors who were building new homes and what have you. So I was very aware of all the different processes, and that was a positive for me. And I was also positive because I did have my stepfather helping me out. And I'm the type of person that needs to feel a home. And yes, I say that, feel it. Like, I need to be around it, be in the neighborhood, feel it. Does it suit me? And And is it working for me? And coincidentally, I'm also the kind of person that when I walk into a home, I can see through everyone else's furniture and see what I can envision for it. And in fact, my first home that I bought, which most people do not like to do, was not staged. No such thing as staging existed like 20-some-odd years ago. Yes, people.

Staging essentially means there was no furniture in it.

It was completely empty.

Oh, none.

And by the way, that is the one I bought because I could absolutely envision my life there. And I could also picture exactly what type of furniture I was going to put in there, the whole thing. And I was super, super excited. Not everybody can operate in that manner, and not everybody is given those resources to help them. But it was a really easier process for me than probably most. And I also didn't have to look at a lot of homes. I knew exactly what I wanted.

Prior to buying the house, where were you living? Were you renting? And what were your sort of expenses, big picture, like prior?

Great question.

Yeah. And then moving in.

Great question. My mom and dad said I could move back home and save money to buy a house. And I wasn't stupid. I took them on that opportunity. As long as I kept saving and as long as I was working a full-time job, Then they were willing to allow that to happen. They weren't willing to allow me to stay at home, sit on the couch, do nothing, whatever. And coincidentally, at the time, I was not only working a full-time job, I was also getting my MBA and I was saving money. Like, I was focused. And getting my MBA during the time I was working full-time allowed me to save money because I wasn't going out as much. It was like a brilliant perfect storm that came together in a good way.

And prior to that, were you ever a renter where you were paying rent checks?

Totally. Yeah, totally. In college, stuff like that.

Yeah.

And then I just saw it just go— it was just a waste.

Yeah.

And you're on— and to, to have rent be cheaper, you're like on top of each other because you're rooming with like 4 different girls.

What would you say was the biggest driver for why you wanted to buy a house?

Uh, I wanted something of my own, that was for sure. I was tired of push— putting out money for rent that wasn't really accruing anything for me. I mean, that's just a reality check. I knew if I'd gotten in early into real estate, then I could then continue to grow my portfolio of whatever that is, and that's what I wanted.

Yep.

And for me, it was also an accomplishment. Like, I'm very goal-driven and I like seeing those accomplishments. And it was a target for me, especially after college. Like, I like goals and I like targets, probably why I like sales. And, um, it was really good for me to use that as a goal to achieve. And I was very fortunate that I— the stars aligned and I had the help of other people. I knew what I was talking about. I had friends and family that I had been experiencing this. I was staying at home. And I also knew what type of home I wanted because of my lifestyle. And I wanted a, um, I wanted a townhouse. And so a townhouse in Maryland where I'm from is, uh, like a row home. For people who aren't familiar with that, you basically have a group of homes, probably about anywhere between 6 and 12, that are linked to each other with 2 ones that are on the end. I was kind of like in the middle, it was like 3rd from the the left if I look at the house from the front. And then it's got kind of a small backyard, it has tiny front yard, but not a lot of maintenance. Not a lot at all.

Yeah.

And mine was 3 stories and it had family rooms, game rooms, laundry rooms, small kitchens, little dining room, 3 bedrooms. It was perfect for me and The price was right in my price range. And I was like, yeah, let's do it. And it was in the community I wanted to be in. I didn't want to live in the community I grew up in because it was a little far out from all the activities.

So you had a targeted location.

Totally. I totally did. And I also didn't want to be where, for me, For whatever reason, I like green grass and I like trees. So there had to be some like foliage around. If it was pure city, it doesn't work for me. That's why I didn't move to Baltimore City. I was in Baltimore County. And, um, Baltimore City didn't have enough trees for me where I wanted to be. So I was like, okay. So that's what happened. What about you? Your experience?

Yeah, mine—

Yours is a little different.

It's different, but somewhat similar. So, prior to buying my first home, I was also living at home with mom and dad.

Mm-hmm.

But I was also living at home. The reason I was living at home with mom and dad, I think I was like 26 years old. And the reason was I had started a software company prior to Ramzada.

Correct.

So it was construction project management software, and I was a startup and couldn't afford rent because I was investing all of my savings into building this company. So that's why I essentially moved home with mom and dad. Now, prior to that, I was a renter. So post-college, I lived in Los Angeles for 4 or 5 years and paid rent the entire time I was there. So I understood—

So expensive.

Yes, it was. Yeah.

So yeah, markets are just more expensive than others.

Fully, fully aware over spending that monthly rent check going to a place to rent. Don't get me wrong, it was great. I had, you know, lived with a buddy from high school, uh, had some other roommates. I lived near the beach, uh, had my first set of jobs there that I sort of did. But at the end of the day, I quickly realized, even though I was a mechanical engineer by degree, that I'm just writing a check to somebody else, it's a pure expense. I'm not really building a financial asset. And I had seen my parents, who were immigrants to this country, who became U.S. citizens, um, they bought a house when I was like 3 or 4 years old. It was their first house. And I understood at that time, by the time I was 26, that the value of that house had gone up. And everybody around me was homeowners, and it was the way to sort of, you know, not only not having to deal with the close proximity of other renters, right? People having loud parties, and maybe I was the one having a loud party, pissing my neighbors off or whatever, all those sort of things. Um, but it was the, the dream of essentially, yeah, being a homeowner, of having my own thing, uh, being on my own, uh, gaining independence, um, uh, building a financial asset. And yeah, uh, I, I'd grown up and lived in at the time with my parents in a section of Sacramento called East Sacramento. I knew I couldn't really afford East Sacramento, so I had some few, 2 or 3 targeted locations that I was thinking about.

Mm-hmm.

And, but yeah, I had, I knew nobody in the real estate space. So I remember hiring a real estate agent, can't remember her name, but she was great. But she kind of coached me through the whole process. Candidly, don't even remember how many homes I looked at, but I was, Somewhat fortunate that my first home was a single-family home that I bought. I think it was a rancher that was built in like 1972, but it had been remodeled because I think— I can't even remember. I probably bought it in 1997-ish, maybe, maybe '96. And it had been remodeled. And I bought it at a time where I was fortunate, where the risk at the software company was still risky. It's still a startup, but I was at least—

Right.

At least capable of collecting a salary for myself, and I had saved up some money, paid off a lot of debt at the startup, and that's how I got into my first house.

That's awesome. So we have 2 very different experiences, but we both got guidance from real estate-related individuals. My dad was a real estate agent. Your real estate professional came in and guided you through the process. So with that said, Let's talk about part of that process. I mean, part of that process is, um, let's just say it, to buy a house is like one of the most biggest expenditures you're probably ever gonna buy. Even when you upgrade, buy a different house, buy a different house, you're just going— it's just a big expense no matter how much the price is, no matter where you are.

Yes.

It's just a big expense. It's generally, for the most part, more than a car. And so, even though some cars today are way more than my first house, whole different story. But it's generally a big expense. And so you have to figure out a way how you're going to afford this. And most people do not save up, you know, $1 million, $500,000, $200,000, $100,000 immediately and just pay for a house in cash. Now, don't get me wrong, some people do. Some people absolutely do, but not everybody does, and not everybody has been given the gift by their families to— for them to buy them a house, because that is also prevalent in today's day and age. But for those people who are not in those positions, you need to find a way to get credit in order to buy a house, and you need to understand what your loan capacity is and how you can finance this property.

Yeah, absolutely. I mean, financing is like almost step one. I think a lot of first-time homeowners will instantly jump to like start shopping for homes and looking for homes. And don't get me wrong, you can do them in parallel, but the financial reality over what you can afford versus what you want is going to hit you pretty hard. So you might as well figure out what you can afford sooner rather than later.

In fact, to your point, just to interrupt you and apologize, to your point, I would actually do the financing first.

Yes.

Because when you start looking at houses, and you know, the rumor on the street is some people call it house porn because it's like so much fun, you literally will go love all these houses and then find out you can't afford them. And it's almost like we call it the depths of despair. In our previous industry, you, you get upset and you have to check it at the door of what you really can afford. So in my personal opinion, I think you would agree, find out what you can afford first.

Yes, it's what I call the emotional expectation versus the financial capability are not always in line. And don't set yourself up for emotional despair by doing the finance first. And then you can sort of figure out how much to shop for, right? And I don't have a problem sharing candidly. I think I'm going off of memory. I think the first house that I bought was, I think I bought it for like $260 grand. And I did manage to save up the typical 20%. So what is that?

That's pretty good for a first-time homeowner.

Yeah. And well, again, I was fortunate that I had lived, well, I had lived at home with mom and dad for like 2 or 3, almost 4 years maybe. And so I saved up a lot of money, and I think I ended up putting like, uh, whatever, $30,000, $40,000 down. But guess what? I remember my first— and I bought a 30-year mortgage, fixed rate, and my interest rate I thought was a steal at 6.15%.

Man, you remember your interest rate. I don't remember all that, but I got deals because I worked for the bank. At the time, as an employee of the bank, I also got deals.

Exactly.

The stars aligned for me really well.

So think about the market dynamics today of people stressed out about the current market rates of— I don't even know, they're probably at the same range, 5, 6. I haven't looked. 6, even 7. But at that time, that was considered a great rate.

Well, just FYI for anyone out there, 6, 6.5% has been the overall average for like, I don't know, 30, 40 years. Just FYI, so it's not the end of the world. And John bought his house in California. I bought my house in Maryland. In Maryland at the time, it was $103,000 for a townhome. I remember that, $103,000. I was like so excited, but at the same time so nervous. But going back to financing, really understanding your financing is really important. And so you can run credit checks online. You can do that 'cause some banks do look at credit checks, some do not. It depends on the bank. 2, you also want to, go visit or go online and check for rates. Tons of companies nowadays run details online where you can check to see whether you qualify or not. They may require conversations because it's not as simple as, oh, I can fill out this form and then I qualify. They need to understand truly, you know, do you have a job or do you have the money in the bank or how are you How are you making income? Because you may be a 1099 employee, you may be a contractor of some sort, but you need to show proof that you're making this money.

Absolutely.

Because what the finance company's looking for is, can you repay back what they lent you? So that's a big important thing.

Correct, yeah. There's the concept I think called getting pre-approved for a certain amount of mortgage. And you're correct, it's going to be the, What are you capable of putting down, which is essentially what your savings or cash position is. And the other one is, show me your income history, i.e., tax returns, W-2 statements, whatever, to gauge what income level you are. Because banks often do what's called a debt-to-income ratio, like how much other debt do you currently have? Do you have student loan debt, personal credit card debt?

Did you buy a car?

Did you buy a car? And that's also on debt. So they know that if you already have all this existing debt and your income is X and your debt is Y, then a lot of your current income is already going to pay for that debt. So your debt-to-income level is pretty high. If your debt-to-income level is low, you're more likely to be prequalified for a larger loan amount.

Correct. And that's just risk assessments by all finance companies. Just for anyone to know out there, they just, they have to run their assessments as much as anybody else does. And, um, so if you are considering buying a house and you do not need to buy a new car, don't. First rule of thumb, don't take big trips, don't buy a new car. Literally hunker down and save for a short period of time so that you can show that you're not overspending as well. Because they can check your credit card statements and everything else. And if you've got credit card debt, do whatever you can to pay that off. It also goes a long way.

And it's also your credit score nowadays, right?

Correct.

And they score your financial history over whether you paid your bills on time, whether you've fallen behind, whether you haven't paid certain bills and you're in a worse financial situation, your debt, your credit score goes lower. If you have a higher credit score, you can qualify typically for a mortgage with better rates because the banks will consider you lower risk.

Correct.

If you are, have a lower credit score, the bank, you still might qualify, but you may end up paying a higher mortgage rate or have to pay mortgage insurance or all these other kinds of things because the banks consider you a higher risk.

And/or as another option, you have to justify why you have a low credit score. Credit score. And a good example of that is I know people who don't have a lot of credit cards and they don't use them.

Mm-hmm.

And so when you have non-existing credit or you pay for your cars in cash or this or the other, when you have non-existing credit, your banks go, you have non-existing credit. And like, yeah, because I pay for everything in cash. So it's upon you to justify and to explain that to a mortgage loan officer in order to do that. So it's not the end of the world if you don't have a lot of credit. It's just you need to take on this responsibility of explaining it. Furthermore, I want to talk about briefly, you talked about putting 20% down. There's a lot of people that put significant money down on a house. For a first-time homeowner, that's not always necessary.

Hmm.

And the reason why I say that is because there are FHA loans, there are other loan programs, sometimes offered by banks that nobody's familiar with, that you can actually access this information and find out what works for you to get the best loan that suits you. Oftentimes it takes a detailed discussion with a loan officer. Sometimes there are, there's tools or solutions online where you can look up loan tools or loan programs. There are some organizations online. I'll put the— I'll get the name of the company that I know of and put it in the show notes, but I forgot it off the top of my head right now. It's a really great company that pulls together all of these different programs so that you can determine which program works for you. So you may not need a huge down payment because you may have programs that are available to you to help you with that. But pay attention to What is happening. And then each state and each county and city, by the way, also are very different. So we're giving you the high level to be prepared for, but note that everything is very different.

Yep. So in summary, right, phase 1, try to assess your financial condition, which is your income, your debt, your credit score, and how much you're going to be able to put down. Maybe it's only, you know, 5 or 10% of some value of your home. Talk to mortgage professionals to see if you're going to get pre-approved. And then at the end of the day, what you end up with is, okay, based on your financial conditions, you might be— the bank will say, we'll loan you money for a house, pick a number, $200 grand, $300 grand, $400 grand, whatever it is kind of mentality.

Right.

Now you know that, okay, you're leaving this phase of, okay, I've got, pick a number, $20,000 I can put down, I can get a loan for $450 grand. Guess what? The price point of the home you're looking at is probably $470,000 or less. Now you could start transitioning to the other 3 or 4 phases of being a first-time home buyer because you've got sort of that financial sort of foundation set to know what to go shop for.

Yeah, and so now that we're moving into shopping, I want to talk about one last thing as it relates to finances.

Sure, yeah.

About houses. Just because you qualify, let's just say for a $450,000 house. I'm just putting that out there. I don't know if people qualify or not, but if you do, $450,000, $250,000, whatever your top max is, understand that you're going to have a mortgage payment of Y. That mortgage payment will be coming in every month, and your loan officer can can work walk through that with you. You may be uncomfortable. with a payment that high. And you may say, okay, I either have to save more money to get my payment lower and I'll delay the process a little bit longer, or I'm going to take a lesser payment each month, which means I'm going to buy and look for a house of a lower rate. Meaning if you can qualify for a $450,000, maybe you start looking at a house no higher than $375,000 or $350,000.

Absolutely.

I mean, just take that into consideration because Your monthly income, your mortgages are one of your biggest things that you're going to be paying for in your monthly income. And it will prohibit you from doing other things if you want to have a balanced life.

100% agreed. Yes.

Now we're shopping.

We're shopping.

Yeah. Now let's go to the fun part.

I don't know. Sometimes it's fun, sometimes it's not.

Correct. It's— but I mean, for me, category 2 is kind of location. Which in our own 2 stories, we kind of had some targeted locations.

Yes.

But I think in today's world, location is so different than when I bought my first house in 1996-ish.

Yes.

Because the world has gotten smaller, right? We've got people that live in different places after, after, you know, high school or college. They've moved away from where they grew up. And they may be in a different location, or they're about to get transferred to a new city, but they finally have saved up enough money. So the location is, um, you know, it's kind of a mix over what, what you're, what you're knowledgeable about, what you're comfortable about, and where are you in the rest of your lifestyle.

Correct.

Right. And, and does it need to be close to your job? And that's kind of the other dynamic, which is today there are so many people that can work for either big or small companies and they can basically be almost full-time remote or enough remote that, that they can work, that they can work anywhere, which makes location even a broader choice of like, well, what state do I want to live in and what city?

Right.

Versus back— I'll date myself— when I bought my first home, location was pretty much close to where your job was, was the biggest criteria because you had to get up every morning and drive to the office. Maybe that's still prevalent in many work situations, right? You may be working at a manufacturing plant, you got to go there. But there's a lot of other sort of desk jobs that allow you to work remotely.

Yeah, no. And location, I think, is key too. And one of the things I tell people as well, location, be creative with location. So you can look at places that you had your heart set on. But there may be like areas in other parts of your state or around your job or what have you that you hadn't really thought of. But you go start exploring, and all of a sudden you're like, "Hmm, this actually isn't that bad," and the cost may be a little bit more affordable. I know where I come from in Maryland, a lot of people started looking at that. And what I mean by that is, as people start moving out from Baltimore. and DC into other parts of Maryland, those— the rise in the, um, the house prices started going up. So a lot of my friends that I grew up with, they either stayed in the area, a lot of people moved around the country based on their job, but some people actually moved to like Harrisburg, Pennsylvania because it was a little bit more affordable, or they moved to, um, a different county in Maryland that was kind of similar, and that was, uh, I want to say like the Perry Hall area versus, uh, the Carroll County area. They moved to different areas. I'm probably divulging too much where I come from. Um, they moved to different areas of, um, the state that was kind of like-minded, meaning they had similar type style houses and stuff and still bigger properties but lower cost. And so, because those were new growth areas. And so what happened was, pay attention to some of the areas around you, you might get surprised. And find areas that may also be up and coming but not quite there yet. I remember the whole Brooklyn thing in New York years and years ago. Like Brooklyn is hip now and cool. I remember when Brooklyn was not, it was not the same thing it is today. And it was people like, I'd say, I'm just going to throw a name out there, like Heath Ledger that started moving over there and some other people that really started putting some visibility on that area and it started making some changes over there. And so pay attention to what's going on in your community and do some research. You may actually find that there's already planned improvements that you haven't read about, but they're on the dockets of a lot of communities. And so pay attention to all that and you might actually be early on, early into those communities and maybe your rate of your home may go up higher sooner than you think.

Yeah, location is such a dynamic. As you were talking, I was thinking about, right, there's each location, let's just say, has an average price. So you have to be starting to pick enough where going back to what you could qualify for, then you've got sort of the lifestyle factors of, does it need to be close to a job? You have other lifestyle factors. Are you buying this as a single person or are you buying it with a partner or a spouse? Or, you know, now you've— now, and And now you're dealing with multiple criteria.

Oh.

Then there's the where you grew up on, you either love it or hate it or somewhere in between. Some people are like, oh, I love where my parents live, but you can't afford where your parents live.

Correct.

Because their income is up here. And you come to that harsh reality of you're like, oh, I wanna live, you know, 2 blocks from where I grew up. Well, you need to move farther out kind of mentality.

Sure.

And sort of your, your, your situation. So it's kind of like, All these factors of close to job, are you doing it by yourself? Do you have other people that have to inject their criteria? What's the price point? And also sort of lifestyle. There's people that love the outdoors. They want to be close to, you know, arts and sporting venues and all these other sort of kinds of lifestyle factors. All that determines, sort of gets mixed into sort of trying to determine a location. And my advice is don't get— don't set your mind on only one location. Yeah, keep— give yourself 2 to 3 locations, perhaps in a city that you're thinking of, which is going to give you a wider diversity when we start getting into the next phase, which is looking for specific homes.

Yes. And then I think too, um, the other thing that, um, you bring up is location, but you're also starting to bring up criteria, criteria of a house. And I think, is that the third, third aspect you wanted to bring up?

Yeah. I mean, they're, they're very closely related, which is the third, third area is the actual specific house that you're looking for. Right. And it goes back into starting at the top. It could be, okay, I'm okay living in a condominium or I want to live in a townhome or I want to live in a duplex. I can, I can deal with that. Or I want a single-family home. Right. So there's the type of home, that's number one. Then there's the size of home, right? And if you're buying it as an individual, maybe it doesn't need to be that big a size. But oftentimes people will get renters and that's a way to offset— you generate additional income to help pay for that mortgage.

Correct.

Then you've got, are you buying the first-time home and you're, you're married or with a partner or you've already got kids? Then you need perhaps a bigger house. So all of these sort of factors get into the criteria of the home in terms of type of home, size of home, and then you get into bedrooms and bathrooms and then all the sort of amenities that people are looking for.

Yeah. And I think as part of that, when we talk about townhomes, single-family homes, condos, it's important to understand that in some communities, especially townhome communities, Or even condominium communities, the common areas are taken care of by someone else, by your homeowners association. If you have a homeowners association, usually they're taken care of, and sometimes that's also the front yards. In my case, that was not the case. I had to still mow my front yard, my little tiny front yard and my little bushes, and then I had to do the same thing in my little backyard. But all the common areas were taken care of by somebody else, my homeowners association. With a condominium, it's the same thing. You are generally taking care of the inside of your walls. You're not taking care of the external hallways, elevators to get somewhere, outside steps, stairs. If you've got pool areas or something else, you're not taking care of all that. Someone else is. Even the structure of the building on the outside is usually an HOA. However, and it's important to know, when you do have these smaller properties, That doesn't take a lot of work for you because maybe you don't have a lot of time. So for instance, when I bought my townhome, part of the reason I did is because I knew prior to doing that I was going to get my MBA, I was working, I was doing all these things. I knew I needed less maintenance on a property, which is why I also bought a 2-year-old property as well. So that was also really important, the, the age of the property. So I didn't want to repair a lot of things and I needed to get going in my home where I didn't have to spend all weekend taking care of a property as well. However, when you have properties like that, there's a, there's a pro and a con to that. There's conveniences that make it easy and it doesn't take up a lot of your time, but your HOA fees are generally much higher, especially in some condos. In some condos, they are extremely expensive and they are part of your qualification process as well from the financing side. So just keep all of that in mind. when you are reviewing the types of properties that you want.

Yep. I think for me, the other— that's good advice. For me, the other thing on specific type of home, right? So we got type of home, size, bedrooms and bathrooms. The last criteria that I always try to think about is what's the condition of the home? Yes, there's, there's homes that are what for lack of a better term, turnkey and in almost near-perfect condition, move-in ready.

Mm-hmm.

And you don't have to do anything. Those tend to be a higher price point.

Yes.

And same location, same age, same size. But perhaps there's some cosmetic things that need to get taken care of, or perhaps the home is 15, 20 years old and they never remodeled the kitchen or a bathroom or, you know, carpets. And you want sort of hardwood floors kind of mentality, whatever that kind of thing. So you got sort of what I call the condition of the home.

Yes.

And understanding that, yeah, we— there's 2, 2 schools of thought. Big picture, right? I want to move into a brand new, not well-conditioned home. Doesn't have to be brand new from a builder, but that's clearly another choice, which is a brand new home from a home builder versus a home that's, you know, in great condition that's maybe 20 years old that was well kept and may have been remodeled. Versus a home that needs some degree of fixing up.

Yes.

And that gets back to your point of you might qualify for that $450,000 home with a mortgage of X, but if you buy a home that's in great perfect conditions, you may max out that number. But if you find a home in a location that meets your criteria that maybe is a little bit of a fixer-upper, maybe it's not something super major, but it's cosmetic issues that might annoy you But you're willing to live in it for 6 months to a year and you're willing to passionately sort of start to learn your— some of your DIY skills and sort of do these things on your own may allow you to get into the location of a home at a size that's only, you know, like you said, $380 grand and you're saving that money to potentially invest it for you to be the one that fixes it up.

Yeah. And that's important too. If a home has been well maintained, And you have kind of a status on how old the equipment is or appliances, which are some of the most expensive things you've got to replace, then you understand where your next set of budget has to go. And so if you have a home that you're buying that wasn't really cared for, then— and you can afford it because you already have qualifications that allow you to use additional funds to invest in new HVAC equipment, new roofing, new hot water heaters, new appliances in, in the near future, then that makes it, um, almost like a project that you can have fun with if that's what you need or you're interested in doing.

Yeah.

I remember when I bought my place, it was completely— it was only 2 years old, so it's exactly what I wanted. But I wanted to personalize it. So I learned to hang wallpaper. I learned to paint my whole house. I did all kinds of things that were super fun. I laid pavers down for outdoor patio. Like, I had a blast. But it was the— it was a small house, so it was a smaller test trial.

Mm-hmm.

And it was pretty awesome that I got to do that. Wasn't easy, but it was a lot of fun doing those projects, and they were all cosmetic. But I didn't have to worry about the big items immediately because that was what I wanted at that time, at that place in time. So to your point, the condition of your house is really, really relevant into what you choose to do. And some people are just like, they can't wait to DIY all kinds of things, and they get excited, and they build a blog around it or a video Play or podcast around it, which is awesome. Or they're so busy with their jobs, they're so busy with their life, they're like, nope, I need move-in ready.

Yep.

And I'll buy a little bit of furniture. And by the way, for people out there, furniture is expensive.

Yep.

So you need to budget for that too when you're considering buying a house. You do not have to buy all your furniture at once. You can buy it little by little by little.

Yep.

But it's expensive. Yeah.

And so the last phase for me is, okay, we've talked about financial readiness, location. Now we're talking about the specific home that you may be looking for. A lot of this can be done with a lot of the online portals and driving around, and you could sort of see a lot of this stuff. But then at the end of the day, it's the, okay, you're going to have to make an offer on a house, you're going to have to negotiate, you're going to have to go through the closing process. A lot of people still want to deal with a real estate agent. You're going to need to get— you want to get into the home, you're probably going to need a real estate agent to help you get into the home. So see it. To see it. So that whole like, okay, I've got, I don't know, 10 homes that I would love to consider and, you know, hire a real estate agent. It starts the process over going from you've got all those 3 things ready to I actually want to make offers and actually buy these homes. And there is that whole process over Hiring the real estate agent, sitting down with them, getting into the home, determining what your offer strategy is, writing up a contract, dealing with the seller and what they're interested in, dealing with the other market conditions, right? We've had, you know, markets where you're competing with a bunch of other buyers.

Correct.

And your offer doesn't get accepted. That's clearly a seller's market. Right?

Yeah.

And there's the flip side of it could be a buyer's market where sellers have been, their homes have been on the market for 90, 120, 180 days.

Mm-hmm.

And you're the only offer that's coming in, much more likely to sort of close on that.

Sure.

That becomes a buyer's market. So all these sort of market conditions, most first-time homeowners really need to get coached through that process. And a great real estate agent will help you immensely. I think it was amazing for me in terms of my agent as well. And it was pretty awesome.

Yeah, and I will say this to a lot of people: the more you can get organized prior to seeing a real estate agent, the more efficient it's going to be.

Yeah.

Um, I'm a firm believer in time is extremely valuable to people, so how can you make their time as efficient as possible, and thus your time? Because driving around all the time is complicated. And also, they can't just walk into a house. They have to get permission to get in these houses.

Appointments.

So they have to have appointments. They have to have scheduled times. It's— sometimes people are showing their house and they're still living there, and they have to clean it up and get out. So all of that is really important, that you respect everyone's time, not just your own, but also the real estate agent and also the homeowners who are trying to sell their homes.

And so without a doubt, that's why I think what we've covered in order is why it's important, right? If you get your financial situation ready, you already know what you're pre-approved for, you've already assessed your 2 or 3 locations, you've already got an idea of the size and type of house, then that first call to which agent you're going to hire, they're going to be so much more happier with you because they're going to ask you, do you have all these things? And you're like, yeah, I already got all that stuff. Yeah, great. I could get you into homes, you know, in the next week or two kind of mentality.

Yes.

And, and you're being respectful of their time and you're hiring them for the actual process of— because you may end up having to make 5 offers, 10 offers to get into your home kind of mentality. And, and how are you going to deal with all that stuff? That's where a great agent can really help you through that process. Um, because, you know, there is a process, and eventually, even when your offer gets accepted, Then you're going to hire inspections and you're going to want to inspect the home to make sure it's done. An agent will coach you through that. There's the title, title reports. There's all these sort of legalese that you're going to end up learning and you're going to need to be coached through that. And eventually you're hopefully going to get to a closing date, which is the day that you actually— the seller transfer title and ownership to you as the buyer and money changes hands.

Correct. And all of that has to also be organized. It doesn't happen overnight.

It requires approvals. That's a whole separate episode in general.

I used to be in that business. You, you have to go through approvals and process and everything else and documentation in order to get there. So don't think that, oh my gosh, I'm gonna buy a house, I'm gonna buy it. And I mean, you can buy it in a week, but it's very rare.

Rare.

You got to get on people's schedules. And so it sometimes can— the Closing date can be set and it could be 45 days out.

Yeah.

So it's really important to understand what the— going back to what John said, the market conditions. But I think you clearly and succinctly said it, John. First, you want to start looking at your financial picture. Then you want to start looking at what locations are really beneficial to you. And then 3, you want to look at the type of home, condition of the home, any type of home-related activities, the requirements you need.

Mm-hmm.

Like the minimum requirements. Not— you've got a big giant wish list, but let's look at the minimum requirements in addition to your wish list and then see what can happen. And then from there, finding your real estate agent and making sure that you are clear with them and also clear with yourself so that you can go find the best property for you and your family. And if you are someone like me You may need to visit the property in order to say, yes, this is the one. Oh, that's just me.

I think—

well, that's a must. I don't think you always do that, John. I think you're like, yeah, whatever. Okay, it works. And John—

I've visited every home I've, I've ever bought before.

He's a little bit more pragmatic than I am. Me, I go in and like, no, this is the one that feels the best.

This is it.

Yes, that, that's why buying a home is both The largest asset, but there's 2 paths. There's the emotional lifestyle path, and then there's the financial reality, and both of them have to come together. So yeah, absolutely.

Correct. So anything else to close out with, John?

My closing comment, I was thinking about this 'cause you usually ask me what the closing comment is. It's for a first-time home buyer, There's so— it's the first time in your life that you're going to be faced with understanding the pros and cons over this many trade-offs.

Oh yes.

There in each one of these phases is a trade-off. There's the financial phase trade-off of, like you said, well, I might qualify for this, but do I really want to put myself under financial strain because then I can't go on vacation and my other discretionary income because I've maxed out, right? Then there's the location trade-off. Oh, I really like this because it's close to, you know, the hills and I can go out, but that's expensive. The location trade-off. Then there's the type of home trade-off, right? Move-in condition versus, ah, it's a fix-it-up-and-ready, right? And then there's also the trade-off over all of the negotiations that you end up with and understanding the market conditions and those things.

Mm-hmm.

And this is why buying your first home can be a challenge for a lot of people because you're dealing with the sum of all of these different trade-offs are kind of going through your head. So the more you can plan and prepare yourself and sort of thinking about all these things in phases, you're going to lay a foundation for your brain to be able to assess these different trade-offs, both short-term and long-term.

Yeah, no, that's a great one. That's a great one. Thanks for closing us out with that. So, um, if you have any questions, Please let us know. You can reach us at info@homesada.com, and we hope you enjoyed this podcast. We want to help people out who either have never bought a house or who haven't bought a house in a long time. You may have forgotten this process, and so this information helps you when you're trying to buy a house for the first time or you haven't bought one in a long time. And we want to thank you for being with us. We appreciate your time, and this is it for Be a Smarter Homeowner podcast for now. Join us again. When in our next episode, and by all means, share this with everyone who you think needs it. Have a great day.

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