Caution- Speed Bumps Ahead
As an experienced real estate agent, I've seen and heard my share (and experienced my own) horror stories when it comes to buying a home. So, I'm about to lay it on the line with you as if you were my good friends or family members who were about to embark on purchasing their first home as a couple. I'm going to get to the nitty gritty dirty details so that you and your partner can avoid the speed bumps along the way and get to the closing table unscathed..well, maybe minus a hubcap.
Legal Issues First
If you are married, you can skip this paragraph. Believe me I know first hand that it's not very romantic to talk about legal issues when buying a home with someone you are not legally wed to (in that state if it's same sex marriage). However, relationships and engagements do end prior to tying the knot (it happened to me). You need to have your ducks in a row and speak with an attorney as to how to structure the mortgage, how the title will be held and of course, who's names will be on the deed. One person may not be on the mortgage, but both parties should be on the deed in order for maximum protection.
Now everyone needs to read this. If there are any outstanding child support issues from a previous relationship/marriage, it needs to be taken care of prior to seeking a mortgage. Laws have changed. You cannot escape it when buying a home. The last not so pleasant question that is required by law to be asked is "Have you been married previously"? If you have and your new partner is not aware of it, now is a good time to spill the beans. I have an attorney friend who was conducting a closing and came to that routine question when it turned out the soon-to-be husband had indeed been married not once, but twice before...and his fiance had no knowledge of either weddings. Needless to say, the closing didn't occur nor did the wedding.
Mortgage Pre-Approval
Don't even think about calling up a real estate agent to take you out "looking" at homes until you have been pre-approved by a reputable mortgage lender. Unless you know what that magic number is, you will just be wasting your time and getting upset if you can't buy that gorgeous home you saw last month because it's out of your budget. Find out what you qualify for and take it to the next step where your credit is pulled. This will generate a mortgage pre-approval. You will absolutely need this when you write up a contract. If you aren't comfortable spending the entire amount you qualify for on a monthly basis, then work with the loan officer to determine what you would be. Let's say you are qualified up to $2500 per month, but you only feel comfortable with $1800. Speak up and have them calculate a figure you could live with. Then go out looking at homes that will fall into that price range.
How long are you planning to live there
Did you know the average length of time in a home is only 7 years. Yet, when first purchasing that property, they thought they would be there 15 years. You need to think about how long you will be in this home. If it's a starter home, then don't get caught up on the fact that it has to have 4 bedrooms now. You can do that for the next one. Perhaps you think you're only going to be in that 2 bedroom condo for a couple of years. Remember you can't get everything the first time around. So, you need to get the most that's right for you.
You Found THE House, Now What Should You Do
- Always have a full home inspection- Never skip this for budgetary reasons. This could be the best $450 ever spent if it detects a problem that is the responsibility of the seller. If you live in the Princeton NJ area, definitely conduct a radon test for $50. At least one of every four homes I've sold had a higher radon level and the sellers successfully re-mediated it. Don't sweat the small cosmetic stuff that the inspector will put in the report. Please. Home inspections are designed to uncover structural, environmental and other more significant issues. If the disclosure said they didn't put on a new roof and the furnace/ac is the original, don't expect the seller to provide you with a new one if the others are in working order. Just because the inspector writes "budget for a new one because it's at the end of its life cycle" doesn't mean you should expect a new one.
- Get a survey- Your lender may or may not require it, however it is a good thing to have. If could turn up issues such as your neighbor's fence is 1 foot on your property.
Mind your Dollars and Sense- What should you not do
When you apply for your mortgage here are some things that may seem like commonsense, but some buyers have not listened and lost out on the loan. Here's what you should NOT do:
- Sign a new car loan
- Buy a house full of furniture on credit
- Change jobs
- Co-sign a loan (yes, it will be part of YOUR debt now)
- Skip a payment or get behind on any bills
- Deposit a wad of cash into your bank account without having the proper documentation that it is part of a "gift funds towards downpayment". That even means if you just got married, don't deposit all the checks one week prior to closing. That will waive a red flag
Congratulations! Pop open the champagne and put out the new welcome mat (that your real estate agent might have bought for you). You have successfully navigated the speed bumps of buying your first home. Now you get to make monthly checks to your lender until you want to move-up and sell your first place. Oh, that's for another blog.
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