10 Things First-Time Homebuyers Won’t Learn from HGTV

Anyone who's actually traversed the complex and often lengthy home-buying process understands that HGTV shows tend to oversimplify just how much goes into buying a home. To be fair, HGTV's priority is not to highlight the boring loan approval and offer acceptance waiting games that accompany the home-buying process, but these are crucial steps in the home buying process that can’t be overlooked.

While HGTV can give you great ideas for interior design, and priceless entertainment value, there are certain things you won’t necessarily learn about regarding the home buying process:

    1. Buying a home takes time
    2. Shopping around for a mortgage lender is crucial
    3. There are mortgage qualifying factors beyond your income
    4. There are different types of mortgages
    5. You should lock in a mortgage rate
    6. There are additional costs for buying or building
    7. Luxe features require a higher budget
    8. Managing renovations can get messy
    9. Hiring a contractor isn’t cheap
    10. Knowledge and grit don’t guarantee success

1. Buying a home takes time

Lots of us are suckers for before and after pictures without regard to the time it took in between, whether it’s a dramatic fitness transformation or a home makeover that’s turned grungy into gorgeous. 

On average, the home buying process takes about four and a half months from shopping to closing but can range anywhere from 30 days to the greater part of a year. 

Debra Carpenter of Sandpoint, Idaho’s Nathan Oulman Realty has noticed that many first-time buyers are unaware of the time it can take to make offers and finalize an accepted offer. 

“Reality shows don’t portray how long it takes to close on a house once you’ve made the decision to buy,” Carpenter explains, but she admits that while the process definitely takes longer than it appears on TV, “the feeling of being in your new home is completely worth it.” 

When faced with TV-inspired unrealistic expectations from clients, top agent Lisa Larson of Warburg Realty in Manhattan wisely poses the question, “Would you take relationship advice from The Bachelor?” 

Larson continues:

If you watch reality shows, be aware that they are scripted and edited versions of reality. The irony, of course, is that the popular and entertaining shows on HGTV set up unrealistic expectations when it comes to renovation, its expense budgets, time constraints, and obstacles — as well as real estate in general.

Quickly flipping a home and expecting a huge return profit is not feasible in every market, especially for the inexperienced. Even if you’re buying a move-in ready home, the process could take a month or two — buying, building, or renovating a house isn’t an overnight experience.

2. Shopping around for a mortgage lender is crucial

Shopping around and choosing a good mortgage lender is crucial because it will affect your mortgage rates, fees, loan terms, and how quickly you’ll be able to close on your new house.

So, how do you choose a good mortgage lender? 

Here are some helpful tips:

    • Read real, verified customer reviews. Doing so will help you determine if a lending company provides good customer service and follows contractual agreements.
    • Determine whether or not a mortgage company is transparent in the mortgage process. You’ll want to know if a company is likely to charge you additional fees that you didn’t know of when you applied — you want to make sure that you can trust them.
    • Choose a loan type. The type of loan you seek for your purchase and/or remodel is important because not all lenders offer every loan product available.
    • Pre-qualify with multiple lenders to get the best rate. Interest rates may vary by lender, but get an interest rate estimate from multiple lenders to see how each lender’s rates compare to the national daily average. 

3. There are mortgage qualifying factors beyond your income

Two terms rarely mentioned on House Hunters are "credit score" and “debt-to-income (DTI) ratio”. But they are two of the most important factors in determining whether or not you’ll qualify for a mortgage.

Credit score

Your credit score is measured by a number of factors, including your credit history, the number of lines of credit under your name, and how prompt you are in making your monthly payments. Banks and other lenders pay close attention to your credit score to help them quantify your trustworthiness in paying back a home loan on time. 

Most lenders won't even make you an offer if your credit score is below 620. If your credit score is above 700, you are considered a low-risk borrower, and lenders have confidence they will get their money back. In addition, the higher your credit score, the more likely you are to secure a lower interest rate.

If your credit score is too low (below 600), you will be considered high-risk and likely may not qualify for a conventional loan. There are bad credit mortgage options available, but the lower your credit score, the higher your mortgage interest rates and monthly payments are likely to be. Sometimes a greater down payment is also required.

Debt-to-income (DTI) ratio

Simply put, your DTI ratio measures your housing, monthly, and other debt expenses against how much you earn. This number shows creditors how well you can manage your debt payments and, unlike your credit score, you want to keep this number as low as possible. 

Generally, lenders want to see a DTI ratio of 43 percent or less. Before applying for a mortgage it is a good idea to calculate your DTI ratio, and to determine ways you could lower it, if necessary.

Equation to calculate your debt-to-income ratio

You can typically improve your DTI ratio in two ways: increase your income or decrease your debt. 

Unfortunately, these methods tend to be easier said than done. While there's no magic bullet answer for increasing your income, some smart strategies can help you cut down debts and improve your personal finance management. 

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Highlight: Lenders pay particularly close attention to two types of DTI ratios.

  • Front-End DTI — Also known as the housing ratio, the front-end DTI shows the percentage of your income that goes exclusively to housing expenses, such as mortgage payments, mortgage insurance, etc. Usually, your front-end DTI needs to be around 28 percent or lower in order to qualify for a mortgage. The higher your front-end DTI, the more likely you are to default on your mortgage.
  • Back-End DTI — The back-end DTI measures what percentage of your income goes to paying off other debts, like credit card payments or car payments.

4. There are different types of mortgages

Whenever agents on TV tell clients something like, "Alright, now we just have to fill out some paperwork," they are most likely referring to the loan application. And somewhere on that application, the future homeowners will have to indicate which type of mortgage loan they are shopping for

Mortgage loan types include some of the following:

  • Conventional fixed rate loan
  • Adjustable rate mortgage (ARM) loan
  • FHA loan
  • VA loan
  • USDA loan
  • Jumbo loan 

Each type of loan has unique eligibility requirements, advantages, and disadvantages.

Chart comparing mortgage loan types

If you’re not sure which loan type will best suit your needs, you can always speak with your mortgage lender/loan officer to discuss your finances and best options.

5. You should lock in your mortgage rate

Occasionally, while you're watching your favorite home-buying program, you might wonder why the homebuyer is particularly anxious to close the deal on a certain day or at a certain time. One contributing factor, beyond the desire to move into their new home as quickly as possible, could be that they’ve locked in a competitive mortgage rate and they don’t want it to expire before they close on their home.

Mortgage rates fluctuate frequently, even several times a day, and the best way to secure a competitive rate is to lock it in with your mortgage lender. A rate can typically be locked for a period of 30 to 120 days, protecting you if rates increase, but also limiting you if rates drop.

Most mortgage experts encourage locking in your rate early, but then you’ll want to make sure you close on time so that your lock doesn’t expire and you end up losing that rate.

To get a taste for mortgage rate trends, rate aggregators like Zillow can clue you into the best mortgage rates at any given time, and many top mortgage companies will update their mortgage rate estimators according to market conditions.

6. There are additional costs for buying or building

Jonathan Faccone, managing member and founder of New Jersey-based Halo Homebuyers, says that whether it’s from the house-flipping show phenomenon or the first-time home buyer shows, everyone thinks they know what it entails to purchase and renovate the perfect home. However, a key element missing from the media portrayal is cost. 

Faccone explains that “the flipping shows never show you what the ‘soft costs’ are when purchasing a fixer-upper.” These soft costs include all the costs other than the actual construction-related expenses that will be incurred. 

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Highlight: There are additional or "soft costs" involved in a house purchase or renovation, that you should be aware of.

  • Title insurance
  • Attorney fees (in certain states)
  • Home inspection
  • Home insurance (impacted by vacancy and need for a builder’s risk policy)
  • Closing costs
  • Carrying costs

When planning your home purchase with renovations in mind, plan for the expected, but also the unexpected, costs. Faccone suggests that the amount of money a typical buyer thinks a home needs for a renovation budget should be doubled:

I am always going over budget in my own projects because of the unknown fixes that I didn’t expect lurking behind the walls.

Alberto Marinas, CEO and co-founder of PadBlock, reminds buyers about the impact of the appraisal on the home sale. The price, the value of upgrades, and the reliability of current appliances may not be appraised to the agreed purchase price. Not to mention the cost of new furnishings for the home once the renovation is complete:

This can derail even the most cooperative seller. Unless the buyer has additional cash to cover the difference, the asking price will have to drop to the appraisal price. More often than not, in today’s market, the buyer has just enough cash for downpayment and closing fees — and not a penny more.

Finally, adequate insurance for a house requiring major renovations can be steep. Scott Johnson, founder of Marindependent Insurance Services in the Bay Area, California, explains that “consumers often fail to disclose to the agent their intentions [to flip] and often go mis-insured.” He describes two issues regarding property insurance during a house flip: 

One, if you are not planning on living in your new purchase in the first 30 or 60 days, then the home will be considered vacant and you are not eligible for typical home insurance.

Two, if your home undergoes significant construction, you should secure a builder’s risk policy protecting contractors and workers on your property.

So how much does proper coverage cost under such circumstances? Johnson says it’s impossible to say without knowing all of the details of a situation, but a builder’s risk policy can easily cost $3,000 per year, while a regular home insurance policy might only cost $900.

7. Luxe features require a larger budget

Doug Smith, president of Miller & Smith, a Washington, D.C.-based home builder and real estate developer, has seen "a seismic shift in buyer expectations” over the last few years. 

Today’s consumers bypass anything mass produced in exchange for ‘artisan’ products, fixtures, and features. Thanks to the HGTV phenomenon and saturation of home improvement shows, many buyers expect luxe features, such as hardwoods on every floor and granite or quartz countertops, to come standard at all price levels.

Of course, that’s simply not the case. The price tag of such specialized features is above standard levels, and the customization homeowners crave may not fit into their budget. 

That doesn’t mean homebuyers, flippers, and builders need to be millionaires to make their homes into something that suits some of their preferences. But be prepared to pay more for luxe materials and features in your home. 

Smith explains that his company finds the balance in offering customization and providing simplified options through a selection process where homebuyers can capitalize on what is most important to them. 

8. Managing renovations can get messy

In Fixer Upper, Chip and Joanna Gaines never shy away from the physically messy aspects of flipping a home, whether it’s removing an abandoned refrigerator with rotting food or discovering a termite infestation in a crawl space. But if you’re not a contractor yourself, you need to be on top of your game managing the various parties renovating your home. 

John Bodrozic, co-founder of HomeZada, says that home improvement shows completely underestimate how you, the homeowner, need to manage your contractor on the remodel projects. HomeZada helps customers negotiate pricing, build budgets for projects, and track documents and photos to manage your contractor.  

Bodrozic explains, “you need to review a contractor’s quotes, make sure they are licensed and insured, check their references, and agree to a contract with payment terms that protect you.” Otherwise, you can end up paying more than you bargained for with unsatisfactory results at best — and damaged property at worst.  

Bodrozic also advises homeowners to take pictures during the remodel to document in case things go wrong “so you can hold your contractor accountable to finish the project to your satisfaction.” 

Keep in mind that before renovations or even a purchase, a proper inspection that goes more than skin deep is key to determining if a house is worthy of an offer. And, like hiring a contractor, that depends on someone else (in this case, the home inspector) doing a job right. 

Ben Mizes, founder and CEO of St. Louis-based Clever Real Estate explains that “the walkthrough process isn’t like as seen on TV. There’s much more meticulous inspection of the core systems of the property and looking for major red flags than it is talking about dream floor plans and designs.” A good home inspector won’t let emotions interfere with what should be a thorough and unbiased inventory of the condition of the home.

9. Hiring a contractor isn’t cheap

After watching Ben and Erin Napier from the HGTV program, Home Town, renovate and revitalize properties, you may be tempted to hire a well-known contractor in your area to breathe new life into your home. 

Hiring a contractor isn’t always a cheap venture.

Yes, there are some home renovation projects that require a professional, but there may be some projects you could tackle yourself. That being said, the cost of your own time is an important consideration, since contractors can typically get jobs done much faster than you might be able to by yourself.

The HGTV shows make it seem quick and easy to hire a contractor to completely redo your house, but it’s important to remember that you will be paying for the contractor’s labor, as well as all material costs, so it’s important to have a plan and not get carried away in all the tempting possibilities a contractor could offer.

10. Knowledge and grit don't guarantee success

Successfully renovating a home or even purchasing the perfect move-in ready home can’t be guaranteed on a certain timeline or with certain financial limits, even for the most persistent buyers. Grit, talent, or strong emotions alone won’t carry a sale or renovation to fruition. An evolving market and other factors outside your control are at play. 

John Bodrozic, co-Founder of HomeZada, laments that real estate TV shows “tend to focus on the lifestyle and emotional aspects of buying a home and fixing it up while glossing over financial details” such as negotiating strategies on how much to offer based on list price and other market comparisons. 

In addition to knowing how much of a down payment you can make and the loan amount you qualify for, “it is wise to get a comparative marketing analysis (CMA) to help you determine your approach” when it’s time to make an offer and negotiate. Remodeling costs, too, can vary dramatically based on your product and brand selections and the market conditions with local contractors.

In regards to a complete remodel, even the most experienced flippers find that things unexpectedly go wrong throughout the process. Many of the experts we consulted for this piece shared their own not-made-for-TV stories. 

Ben Mizes, founder and CEO of Clever Real Estate, says:

I wish these shows would share that investing and flipping isn’t as glamorous as it sounds. When I first started investing in real estate, I did all my own work, and there was a lot more hauling of old cabinets and 2:00 a.m. sewer clogs than there were brand new houses and excited buyers.

The final word 

If you’re disappointed we've ruined the picture-perfect world of your HGTV binge-a-thon, take heart in knowing you can still embrace the entertainment value of these shows while also being armed with the knowledge of important details often left out of these portrayals. 

And when the time comes for you to play the lead in your own, real-life house-hunting drama, you’ll have realistic expectations to guide you and keep you grounded through the excitement. 

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