As a Realtor myself, it’s amazing to see how many people want to buy more house than they can comfortably afford. It’s my job to prevent them from doing that, and that’s where we butt heads a lot.
Making a budget is a huge first step. Not only determine how much you can afford in the mortgage itself, but you also have to account for utilities (some areas you pay a flat fee for water, some you pay on consumption, for example), property taxes (are you going to escrow them into your mortage or are you going to keep the money in your own account and pay them twice a year), HOA fees, AND have a healthy savings cushion for WHEN things go wrong, not IF they go wrong – things always fall apart in a house.
Then research areas. Since you said this is your first home, determine how long you want to stay there (ideally) and if/when you plan on moving. Will you move before your (future) kids start school?….school district is a big deal where I live. You can change anything about a house except the location. Do you want a cul-de-sac? (you usually pay more for homes on one) Do you want a corner house? (sometimes they are harder to sell) Is it on a busy street? Are there high power lines nearby? There is a brand new subdivision near me and it backs right up to freight train tracks. I looked at a potential home there for a client and noticed how loud the train was when it came through, even though there is a brick retaining wall. I took it off my list.
If you’re looking in a neighborhood or subdivision, you’re much better off buying the smallest house in that kind of area vs the largest. Look at the comps in that area. If you want to buy a fixer upper for example, see what other people are doing. This unfortuantely, is where keeping up with the Jones’s can come into play, but at the same time, you don’t want to outprice your house when you do go to sell. For example, I showed a house last weekend in a subdivision that’s about 20 years old. The neighbors are updating their kitchens with granite. The couple instead wants really expensive quartz countertops. I warned them if they’re only looking at resale, they most likely won’t get that investment back because everyone else has granite and doesn’t want to pay for quartz. In other words, you don’t want to be the most expensive house in the area.
I also cannot stress enough that just because the bank approves you for a certain amount does it mean you have to spend that much. My husband and I were approved for much more than we actually spent. Again, it goes with how much can you afford on a month to month basis. You will never regret spending below your means.
Also realize that you will most likely never get every single thing on your wish list unless you have a really large budget. You’re going to have to compromise and only you and your SO can decide on what that is. For us, my husband at first wanted something completely move in ready. He didn’t want to have to do anything (except paint) before we moved in. In order to get a house like that, in the area we wanted, we would have had to spend a lot more than I wanted. Instead, we bought a house that needed updating and did that before we moved in. We were able to put our own stamp on it and every single day, my husband comments on how happy he is that we went the route he did.
Last thing – don’t fall in love with a house. It is a big emotional decision, but if that house that you love has major issues that you don’t want to deal with, you may overlook that because you’re afraid that you won’t find another. Trust me, there will be one that you like even more. I see it all the time.
Sorry for the long post. Good luck on your search!