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10 Tips on How to Purchase Your First Homestead the Right Way

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We started the grueling process at the beginning of the year.

Yep, the process of searching for our future homestead. This is a big deal for us because it’s the first property we’ve ever looked at with the intent of it being a homestead.

See, when we moved onto our current homestead, we were just looking for a house. Over time (and need to save money) we slowly transformed into a fully functioning homestead.

But we didn’t move here with that intent. However, I’ve learned a lot through this experience that I’d love to share with those of you that are looking to find and buy your first homestead.

Here are my tips:

1. Save Your Moola

I always try to tell you all to stay as debt-free as possible. When buying a home I realize that it isn’t always possible.

So regardless, you’ll need to save your money because if you could pay cash for a place you’ll not only save your wallet, but also yourself a ton of stress in the home buying process.

However, if you are going to have to go with a mortgage, then you’ll need to make sure that you have 3.5% down for an FHA loan, 5% down for a conventional loan with mortgage insurance, or 20% down for a conventional loan without mortgage insurance.

(Note: This is what I’ve found in my process of home shopping. I’m not a mortgage consultant or a financial advisor of any sort. So you’ll need to do your own research and talk with an actual bank about your exact circumstances. Plus, things change with mortgages all of the time.)

Either way, you’ll need to make sure you have access to cash or cash saved up in order to get very far in the home buying process. You’ll need a down payment, money for closing costs (which are quite expensive in my experience), and also money for your prepaid items like insurance and taxes.

2. Figure Out What You Really Need

After you’ve got all of your money lined up, you need to sit down and make a list of what you actually need. Don’t confuse this with wants.

So you might include items like:

  • How much acreage you actually need to do what you want to do.
  • Garden space with plenty of sunlight.
  • Flat land for some animals or hills might be okay if you have animals like goats.
  • Room for a chicken coop.
  • How many bedrooms and bathrooms you really need.
  • Location that you have to stick to because of responsibilities like a town job.

I recommend doing this because during our home buying process I had items I really wanted, but when I took a serious look at those items, what I actually needed was very little.

So my list included that I wanted at least 5 acres of land that was flat so I could have plenty of room to have a garden, orchard, chicken coop, and pasture for my goats.

Though there are 5 of us in our home, I realized we could get away with 3 bedrooms as my younger two share a room now though we have a 4 bedroom home.

Plus, we only actually needed 1 bathroom so I could go with an older home that would usually be less expensive in my area.

So just be sure to know exactly what you need and make a list. This helped me so when we looked at a house I could just pull out my paper and run down the list to see if every need was actually covered or not.

3. Measure Your Needs Against Your Wants

Next is the fun part. You get to make a separate list for what you want. It could include items like:

  • More than 1 bathroom.
  • Maybe a few extra bedrooms.
  • A basement.
  • Road frontage or maybe you’re like me and want to be a ways off of the road.
  • A garage or carport.
  • A barn already on the property.

And the list could go on and on. It is important to know what you want as well because after you’ve gone over the list of needs on a property, you’ll want to see how many of your wants are already readily available as well. It helps to keep you from being overwhelmed when looking at a new property.

Because often you’ll find that a home is gorgeous, but it doesn’t really suit you. If you don’t keep your mind on your list, you could purchase a home on a whim that won’t work for you at all.

4. Think Outside of the Box

After you’ve got your lists ready, it is important to make up your mind to think outside of the box. What I mean by this, is to think if you can do any handy work on a home.

For instance, we looked at a home a while back that wasn’t exactly what we wanted, but because of the price we could’ve completely remodeled it and made it include everything we needed and wanted.

So be sure to keep an open mind when searching for homes because if you can get the price low enough (and if you can remodel a home) then you could potentially have your dream house with a little work.

But you also need to consider if that is something you’d be okay with doing. For us, it didn’t bother us. We lived in our current home while we remodeled the whole thing. It was tough at times, but we love our current home.

So going through that again wasn’t ideal, but we knew for the right house we could do it.

5. Shop for a Mortgage (If Needed)

If you need a mortgage, before you even start looking for your home, go ahead and get the bank situation underway.

Now, I hadn’t had a mortgage in over 10 years. My how things have changed! So let me give you a little advice from the lessons we learned through this process.

First, don’t shop with a lot of banks. Our realtor suggested you let no more than 2 banks actually pull your hard credit report because it can cause your credit score to tank.

So it’s okay to talk to different banks and find out their process, their guidelines, etc. Then compare that roughly to your situation. After you’ve found a couple of banks that you think you could get approved by, be allowed to purchase the home you desire, and that they’d be good to work with, then allow them to pull your credit.

Otherwise, don’t give them any of your information. Also, make sure the banks that you decide to give an opportunity, be sure to tell them that they can only pull your credit once. We didn’t know any of this. Thankfully, we only talked to 3 banks.

However, one of the banks pulled my husband’s credit report 3 times in a week for no apparent reason. We never got a straight answer as to why this happened and it didn’t matter at that point because his credit score had already taken the hit.

Thankfully, it all worked out, but I was not a happy camper.

Second, realize that some banks will preapprove you and other banks will actually completely finish out your loan before allowing you to shop. You need to decide what you like best.

The preapproval is nice because you can go find the house you like and pull it off the market while you are finalizing your loan. The downside is that things fall through with mortgages all of the time. So realistically you could still lose the house.

But if you go through the entire loan approval process, you at least know what the stipulations are for the loan you’ve been approved for and have that in mind while you are looking for a home.

For example, let’s say you’d like to purchase a foreclosure that needs renovations. Well, a bank most likely won’t allow you to buy the house and renovate it as you go. They aren’t very well protected in this instance.

So they might try to approve you for a renovation loan. These loans are a little tougher to get approved for because the bank is investing in future equity not equity that actually already exists in the home. If you couldn’t get approved for a renovation loan, then you would’ve just lost he house.

However, if you already knew what loans you qualified for, then you’d know what houses to look at and which houses were automatically off limits.

Finally, you’ll need to know how much house you can afford. I say this with caution. Don’t always go with what the banks says you can afford because often they’ll tell you that you can afford one thing in the preapproval process and then actually approve you for something totally different.

Or they might want to give you a lot more house than what your actual budget can realistically afford. So you’ll need to use discernment when house shopping and choosing banks.

6. Find a Good Realtor

This is another really important step. You need to find a great realtor. This person needs to be someone that you enjoy working with, that they will actually work for you, and that they are easy to reach.

First, you need to enjoy working with them because most likely you will spend days on end visiting houses with this person. Our realtor has worked with us for almost 4 months now trying to find us the perfect house. We’ve spent more days together than I can really count.

But I’ve enjoyed working with them because they’ve been patient, have an idea as to what I need and want, what I can afford, what my loan stipulations are (so they can look at a house and let me know if I’ll run into any issues prior to closing), and we’ve had a few good laughs along the way too.

Second, you need a realtor that will work for you. You need them to scour the internet. You need a realtor that will call you or email you as soon as a possible property hits the market because you don’t want to miss it. A lot of times properties will come on the market and be gone within a few days.

So they need to be on it so you don’t miss the opportunities as they come available.

Lastly, you need to be able to reach your realtor. It is so frustrating to be working with someone, and you’ve found a great property but it takes them a week to call you back. In the world of realty, a week can be the difference in you getting your dream home and you completely missing the boat.

So your realtor needs to be available. I’m not saying that have to be at your beck and call, but they do have to be able to return a phone call, email, or text within the same business day.

7. Shop for Your Home Online

After you’ve got your money saved, your bank loan lined up, your list of wants and needs laid out, and you’ve found a fantastic realtor it is time to begin shopping for your home online.

So you can use sites like Zillow.com and Realtor.com to scour your area. You can set different filters for the area you search, the amount of land, price, square footage in the home, amount of bedrooms and bathrooms, what type of home, and a lot more.

Then you can search until your heart is content. If you find a few you might be interested in, then jot down the addresses and send them to your realtor. They’ll work on getting you a showing so you can see them in person and if they will actually fit what you’ve been looking for.

However, I will say, that when you look it is okay to look a little out of your price range because most people include some wiggle room in their pricing.

But don’t go too far out of your range because it would be terrible to find your dream place, you place an offer, only to find out that the seller won’t drop the price enough for you to purchase it.

So you’re kind of setting yourself up for heartache if you go to high above your price range. Just keep that in mind. But your realtor will be able to fill you in more on how the market works in your area and all of the real estate rules and laws that go alone with purchasing a house.

Also, there is nothing wrong with purchasing a home for sale by owner. However, realize that it is only benefitting the seller in this instance. You don’t pay for the realtor when buying a home.

So I’ve always preferred working with one because they were there to walk me through each step and have gotten me some wonderful deals when purchasing homes simply because they knew the market and I didn’t.

8. Go On Foot

So after you’ve found homes online that you really like and have scheduled an appointment to view them, the fun begins. You get to go and see these homes in person.

Now, I’m going to forewarn you. Most realtors take pictures that show the homes in the best light possible. So don’t be alarmed when you go to houses, and they are nothing like what you had imagined.

For example, I can’t tell you how many houses I went to see when we first began house shopping, and I thought they were off the road in a quiet country setting.

Then I’d get there, and they’d be a stones throw from a busy main highway. So just prepare yourself that not every house is going to be in person what the internet showed it to be.

But then you’ll find others that will be more than you thought on the internet.

9. Place an Offer

After you’ve visited homes and found a home that works for what you need, fits in your budget, satisfies the bank’s requirements, and maybe includes a few of your wants, then you’re ready to put an offer on the house.

So you’ll just need to tell your realtor that you want to place an offer. They’ll draw up the paperwork stating what price you are offering and what stipulations you’d like to add to the contract.

An example of this would be that you could ask the seller to pay for part of your closing costs, you could ask for any repairs needed to be made in order to satisfy your bank for the loan that they make them, or you could even ask for things like part of a new roof to be paid for by them.

Now, this doesn’t mean that the seller will agree to all of this, but if your realtor feels like your price is appropriate and it’s appropriate to ask for such things, then it never hurts to try.

Again, your realtor can guide you on what a reasonable price for the property is and what else you should ask for on a case by case basis. That is why they are there.

10. Ride the Wave to Closing

After you and the seller agree upon a price and any other stipulations, then you just do everything the bank asks you to do prior to closing. This could include getting the home appraised or inspected. The banks will most likely want to see proof of your funds, or any other number of items.

So just ride the wave. Closing usually occurs within an average of 45 days, but sometimes it could be a little longer. And if things fall through with one home, you just get back out there and repeat the process.

I’ll be candid, in looking for our perfect homestead, we’ve placed offers on 3 different places. The first place, the sellers wouldn’t budge a penny on the price or make any repairs so we had to walk. The second, our bank couldn’t close fast enough for the seller which was going to cost us a lot of money in fees (according to the contract) if we closed late (and our bank really hated the house which was causing issues because it was a fixer upper) so we had to pull out of the deal.

Finally, we found a great place that was turn key (which wasn’t my cup of tea but satisfied the bank), and we are still in negotiation with them. Purchasing a new homestead is a lot of work, but it is all of our hopes that it will be worth every trial we face during the process.

So now that I’ve shared some of my story and the things I’ve learned on this journey, I’m curious if anyone else has any homestead buying tips for those that are in the thick of it, or someone considering the buying process?

We love hearing from you so please leave us your comments in the space provided below.

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