If I Was a First Time Home Buyer in Nashville.
Every month Cathy and I talk or work with first time home buyers here in Nashville. These young people are often stressed out by the enormity of their goals. Add to that they have often received well intentioned but mis-guided advice from friends and family as well as Intentionally mis-leading advice from Real Estate Sales people and Mortgage providers!
So we decided to write down how we, with 20 years experience and over 500 Home Sales behind us, would go about purchasing a first home in the Nashville Market. Here is our step by step plan:
First, as a First Time Home Buyer we would figure out how much we could afford for a Downpayment. I know many of you have been led to believe that you need 20% down. But that is rarely the case. In fact, last year 61% of home buyers put down less than 6% in Down Payment funds. Government programs such as FHA, VA and USDA are available and here in Nashville the Tennessee Housing Development (THDA ), provide both Zero Down and 3% Down loans.
Don’t forget to ask your family members if they can help you with this. These government programs allow you to use monies gifted to you by family or friends as down payment Funds too. By all means save and gather whatever funds for a down you can. The stronger your down payment the better your offer will look. Cathy and I have worked with many first time buyers who had 5% down and a good credit report.
Secondly we would find out how much we afford for a Mortgage? Not how much we could qualify for! There is a big difference. Because of 4% Mortgage loans we might qualify for $400,000. But do we really want to be House Poor? A young family starting out will have many other expenses and it’s important to contribute to a 401K or IRA at an early age if we want to enjoy Compounded Interest in our retirement accounts.
So just as important is what we can pay each month. Any qualified Mortgage person can quickly give you a range of Mortgage $ available to you and how much your monthly payment for that would be. We typically use Local Providers like Acopia Mortgage for this.
What kind of House Would I buy?
Unless I was working and living downtown I would opt for the conventional 3 Bedroom, 2 Bathroom home with at least some yard and a two car garage. A two bedroom Townhome might work for a single person or some Double Income couples but the 3+2 w/ garage is still the mainstay of the market. Also, in the event of a downturn, Townhomes and Condos tend to lag in sales.
New or Existing? There are lots of pressures on first time buyers to buy new homes. Many younger people are intimidated by the upkeep and possible expense of existing homes. That’s understandable. I’ve sold many of both and often the quality of existing homes is higher than new construction.
Also, older homes, especially those using quality materials like Brick, tend to be less expensive to Heat, Cool and Maintain then newer homes built with Brick Facades, Vinyl and Stucco.
Existing homes often offer you the homeowner a chance to explore your own ability at creating your home space. Upgrading older homes with Hardwoods, Granite and Outdoor living spaces provides great personal satisfaction and also enhances the value of your first home.
Here in Mount Juliet the average price for a New Construction Home with 3 bedrooms, 2 Baths and a two car garage is Over $170 a sq.ft. But, an existing home with the same amenities is just $151.
On a 2400 sq.Ft. First Home that could mean $50,000 in savings!
Lastly, you may find that Existing Homes may be closer to your workplace, good schools and services than New Construction homes. Which leads to our next point.
Happiness in your new Home is not about the House but all about the Neighborhood!
We get a great feeling when one of clients says “I love my neighborhood”. The worst is “I love my house but I hate my neighbors!”.
Here are 4 things you need in you new home location :
1. Commute to work.
2. Proximity to Services you need, schools, shops, walking.
3. Neighborhood stability.
4. Neighborhood appreciation.
The most important question about your First Time Buying Neighborhood is What things do you like to do? If you love walking and bicycling, you should look for nearby parks and Bike Paths. If Nashville’s music scene is your thing, make sure you can easily Uber to and from places like 3rd & Lindsley or The Bluebird.
Make sure your new neighborhood works for You.
Find a Great Realtor
This is harder than it sounds. Not all Realtors have the Experience, Negotiation Skills and Team behind them that a First Time Buyer needs to maneuver through Nashville’s Sellers Market.
A good Realtor for a Buyer has:
1. Access to New Listings of homes before they hit the market.
2. An outstanding Reputation that puts your offer at the top in Multiple offer situations.
3. A team of Home Inspectors and Contractors that can fully evaluate your chosen home to find issues
4. Negotiation Skills that demand the Seller provides a Repair Free Home at a Fair Price whether the home is New or Existing.
Making an Offer
When I found a home in a neighborhood I liked I would consult with my Realtor to validate the price and condition of the home. Then I would make an offer. I would make a Fair Price offer with a pre-approval letter from my Mortgage person. Our Seller’s Market makes it difficult to bargain for Closing Costs and givebacks, but I would consult with my Realtor about these things anyway. Every Dollar saved in Closing Costs is another Dollar towards your Down payment. Recent sales in Nashville suggest slightly longer Times on Market for homes and Builders are already starting to make concessions. Home sellers may be in a mood to negotiate more this year.
Regardlless of Getting any help for Closing money I would of course ask for the Seller to pay for my Title Insurance policy. This is customary here in Middle Tennessee and the Seller often gets a rebate on this item.
Assuming I and my Realtor had done our diligence I’ll assume we would clear Inspection and Appraisal contingencies. Which brings us to the Closing. Here I would take my Realtor’s suggestion for Closing Attorney, I might try to close mid month which would give me 6 weeks before my first payment. Also, if money was tight I would ask my Mortgage Company to forego Prepaying the Home Owners Insurance as well.
Lastly I would immediately change all the locks in the House.
There you have it, If I was a First time Buyer in Nashville this is what I would do and then I would enjoy all the benefits of Home Ownership.
Cathy and Jim Wood are Nashville Realtors with 20 Years experience. Rated the #3 Team in Nashville among over 600 Realtors they are also Hobby Farmers, Grand Parents and Love to talk about Real Estate. Give them a Call. 615-481-7609.