10 Tips for First-Time Home Buyers
As or nation’s housing and job markets continue to recover, many first-time home buyers are gearing up to become home owners. However stricter lending regulations have been put in place and some buyers remain concerned about the home buying and financing process.
Advanced preparation is key. Not just a couple weeks, but longer term preparation. Know how much you can afford, pay down your debt, get pre-approved for your mortgage.
Here are 10 Tips for First-time Home Buyers:
1. Think about your credit rating. Poor credit makes you a bigger risk in the eyes of the lender. More risk can lead to higher interest rates and higher monthly mortgage costs. Make sure you pay your credit cards, auto payments, rent and other expenses on time. Tip: The credit bureau likes to see payments made on time, but they also like to see that you are paying a little extra each month. It doesn’t have to be a lot, but just a little bit more than the minimum amount.
2. Consider Taxes. When you purchase your home, you will also have property taxes to pay. Some areas have higher tax bases than others so you will need to take that into consideration when you build your budget. However, the good news about property taxes is that you can claim them on your income taxes if you itemize. (speak with a professional about this)
3. Know what your real estate agent’s role is in the real estate transaction. It is their job to represent your best interest and your best interest only. They have a fiduciary responsibility to maintain your confidentiality and to negotiate the very best deal on your behalf.
4. Know the Neighborhoods. What type of location works best for you? Look at your needs and the needs of your household members. Do you need to be close to work? Is it important to be in a certain school district. Will you need to be closer to public transportation? All of these things can affect where you decide you would like to look for your new home.
5. Get a Home Inspection before you sign the paperwork. You can make the inspection a part of the offer. The inspector can help you understand the condition of the property and home and alert you to existing or possible problems with the property. Here is also where your agent comes in handy. Should your inspector find issues, your agent can help you negotiate which party will be responsible for the repairs or if the sellers would be willing to negotiate on the price so you can get the repairs done yourself.
6. Downpayment. There are many lenders who specialize in helping first-time buyers with their financing. A 20% down payment may not be necessary with some of the programs they may have to offer. The Wyoming Community Development Program offers several programs and terms and conditions vary for each. Be sure to check out which type of mortgage you might qualify for and ask your lender to be sure you are choosing the best long-term program.
7. Pre-Approved. Of all the advice I can give you, this may be the most important piece. Get pre-approved by your lender before you start looking at homes. There are two methods that lenders use to give you numbers for the amount of home you can afford. Pre-Qualification and Pre-Approval. There is a huge difference between the two and lenders know that as well.
Pre-Qualification – This is when you visit a lender and they look over your expenses and income briefly to see what you might qualify for if you were to purchase property.
√√ Pre-Approval - Pre-Approval on the other hand, will be an actual approval for a specific amount of money that the lender feels that you are able to work with to purchase a new home. They will run the credit reports, request income verification and so on. They actually approve you for a loan.
This is very important because if you are looking at properties and you find the home of your dreams and there are multiple offers, your offer may be chosen because you already have the financing approved and can move quickly. It can mean the difference between a higher offer that has to be approved by a lender or an instant offer that ready to go.
8. Start saving as soon as you can. You'll need money for a down payment, closing costs, moving expenses, and other expenses. Put off trips and luxuries until after you're in your new home. If you start spending money before you are approved, it may just be the one thing that makes the lender say no. You may come in overspent.
9. Look into gifts and grants. WCDP is a great place to see what types of programs may be available. There are military programs, first-time buyer programs and down-payment assistance programs as well as others. They also have a number of properties that qualify already for WCDP assistance.
10. Start Now. Take your time, and ask as many questions as you feel you need to. Being a first-time home-buyer can be challenging, but millions of people do it each year -- and you can too.
Use these 10 Tips for First-Time Home Buyers to help you get started. Don't forget I am here too!
I work with many first-time buyers to help them through this sometimes-confusing process. I don’t expect my clients to come and know everything there is about the real estate transaction. That’s my job to help you through with minimal bumps in the road. And I’m darn good at it!