Most people are aware that the Long Island real estate market has been extremely competitive in the last few years. Home prices will continue to rise and inventory levels are expected to remain stagnant. This can be a frustrating situation, especially for first-time homebuyers. As the weather warms up, Spring typically brings a fresh supply of homes to the market making it a great time to buy.

The current market presents unique challenges that buyers need to navigate. In this article, we’re going to cover the top 7 tips that new homebuyers should keep in mind to improve their ability to find and close on their new home.

1. Evaluate Your Finances

Before you start touring houses, you need to sit down and carefully evaluate your finances. First, you should decide what price range you can afford. With prices rising across Long Island, this may restrict your search to specific areas. A common mistake that first-time buyers make is letting the bank drive their budget based on their mortgage pre-approval. Just because the bank approves you for $750,000 doesn’t mean that’s what you can afford. Every buyer's situation is different, so you need to decide for yourself.

Also, you want to make sure that you have enough money saved to cover the down payment, fees, and closing costs. Emergencies and unexpected costs can appear during the home buying process, so it’s a good idea to have a financial cushion to also cover these items.

Finally, don’t just look at the direct cost of the home. There are other expenses that can increase with homeownership including longer commutes from the suburbs, landscaping costs, and higher utility bills.

2. Check Your Credit Score

Having a strong credit score can greatly improve your ability to secure a mortgage at a favorable interest rate. Many first-time homebuyers make the mistake of assuming that their credit score is in good shape only to find out their credit report contains an error or unexpected complication that drives their score down.

To avoid any surprises, homebuyers should get a copy of their credit report ahead of applying for a mortgage. This will ensure that you have the opportunity to fix any issues in advance.

3. Get Pre-Approval for Your Mortgage

In today’s hot real estate market, getting pre-approved for a mortgage is a must. This helps homebuyers demonstrate that they are a serious player and allows them to move quickly when making an offer. Speed is critical. Prior to the boom, homes in the Long Island area would stay on the market for an average of 5 months. Now, this timeframe is a short 1.7 months. If you don’t have pre-approval and find a home you absolutely love, it will likely be sold before you can secure financing. Who you decide to work with as a lender is crucial in helping you close a deal. We recommend homebuyers on Long Island work with our partner Silver Bay Lending.

4. Create Your Home Wishlist

Another mistake that first-time homebuyers make is having unreasonable expectations about securing their ideal dream home. They spend months and months waiting for the perfect house, only to feel disappointed because nothing “checks all the boxes”. It’s highly unlikely that buyers will find the perfect home, no matter the price point.

Instead, take time to understand your wants vs. your needs. A home with a pool may be nice to have, but not a need. On the other hand, having a home office might be a requirement for your family. Make a list of non-negotiable items and remain flexible on other things. Being upfront with your realtor about your wish list can help them narrow the list of potential listings.

5. Be Prepared to Move Quickly

Buyers who move too slowly in this market will miss out on beating other buyers to the punch. There are two critical times when you need to move quickly — when the listing hits the market and when you like a home.  

First, you need to be able to schedule tours to look at new listings as quickly as possible. Delaying this step by even a day or two can leave you competing with dozens of other buyers who are also interested in the home, or worse, not being to even have the opportunity to bid. Be prepared to adjust your schedule on a dime to make time for tours. Having prescheduled times blocked on your calendar each week can help avoid making last-minute schedule changes.

Second, because the market is so competitive, you need to make an offer quickly if you find a home that you like. While purchasing a home is a huge decision, you won’t have a lot of time to evaluate if the home is the right one. This is where the wish list comes in handy. If the house meets all your top criteria, it’s time to make an offer.

6. Making Offers That Are Too Low

We’re currently experiencing a seller's market where the prices can quickly spiral out of control. Buyers who try to make extremely low offers will immediately be dismissed. The seller likely has several other competing offers. This is where first-time buyers can leverage the expertise of their real estate agent who can make recommendations based on the home’s condition and local comps (comparable properties).

7. Understanding the Appraisal Gap

Buyers who are tired of getting outbid might be eager to put their best foot forward. While throwing money at the seller may seem like an easy win, overinflated offers can create problems when finalizing the mortgage. Most lenders require homes to be appraised to ensure that the offer is fair (at or below the estimated value). If the offer price significantly exceeds the appraised value, the lender could refuse to provide approval.

This situation is what’s known as an “appraisal gap”. In this scenario, the buyer has a few options including disputing the appraisal, renegotiating the price, or paying cash to cover the difference. Again, this is where working with a seasoned professional can help avoid making offers that don’t make sense.

Let the Long Island Real Estate Experts Guide You

Being a first-time homebuyer can feel daunting. Fortunately, having an expert in your corner can provide you with the guidance and confidence you need to navigate the current market. Servicing the Suffolk, Nassau, or Queens areas, The Lenard Team is here to partner with you to make the process of finding and buying a new home easy.