For the majority of people in America, a home is the single largest purchase they will make in their lives. That also makes buying a home one of the most stressful things most people will ever do. The good news is that it can be one of the best investments you can make and is still one of the most significant forms of wealth in the country. As market values move up year over year so will a home’s value.
As a first-time home buyer the first question you need to ask before taking the steps to homeownership is: are you ready for the financial responsibility? Homeownership is a long term commitment. If you are going to need to move in less than two years then you should likely not buy a home, but continue to rent instead. Look at buying as an investment that you will hold for at least two to five years, as well as a place to live. As a homeowner you no longer have a landlord to call if the sink backs up or the roof starts leaking. You will be responsible for all the upkeep and maintenance of the property. Saving for a new roof could mean no more eating out and living on peanut butter and jelly sandwiches while you save the funds for the repair. For some people this aspect of being a homeowner can put a definite crimp in their lifestyle but for most with the goal of investing in the future and building wealth, homeowner is exciting and outweighs any down side.
Most buyers start their education on becoming a homeowner by searching the internet for homes in their desired area. Although this is a good place to start, the better place to start is with understanding what costs are involved in making a purchase, and a great way to do this is by becoming prequalified or preapproved for a loan. Beyond the down payment there are closing costs. These costs include such things as taxes and insurance as well as PMI (Private Mortgage Insurance) if you have less than a 20 % down payment. This part of the process can be overwhelming for first-time buyers (as well as some seasoned buyers). But understanding what you can afford will alleviate any surprises during your home search. There is nothing worse than discovering that the home you have fallen in love with online is out of reach because you do not qualify for enough financing for it.
One of the best sources for finding good lender referrals for purchasing a home here in the valley is one of our local real estate agents. Any of our Sonoma Valley agents can give you several good local lender resources that they have used in the past. This is important when the time comes to make an offer on a property. This gives your agent the ability to say to the seller’s agent that they know the person doing the financing and that they can get the loan closed in the given time frame. Every agent here in the valley and likely across the country can tell you a horror story of a client who found a great low cost loan on the internet that was not able to perform or ended up costing their buyer more with undisclosed costs. Don't hesitate to ask your agent questions about each step in the purchase process from house hunting, to making an offer to the closing escrow on your new home.
Here are my top 5 must do steps:
1. A local agent is going to be one of your best resources. We know the neighborhoods and work on your behalf. We will act as your fiduciary and have a duty to advocate for you and your best interest in the purchase of a home. There is no cost for our help. A buyer’s agent is almost always paid out of the seller’s commission.
2. A lender can let you know what you can afford and how much a bank will loan you toward your purchase. A lender can also tell you what programs are available and what kind of a down payment you will need. Most importantly, without a preapproval a seller will not consider your offer as a serious offer.
3. There is a difference between what you can afford and what you are comfortable with when it comes to making payments. A lender will be able to determine you price range and tell you what your monthly payments are going to be but you need to tell your agent what you are comfortable with when it comes to the amount you want to spend.
4. If you don’t know the Sonoma valley then your agent can help you learn about the neighborhoods and schools (even if you don’t have children these can be important for resale). One of the best ways to get to know an area is to walk around it on the weekends and talk to the neighbors. Sonoma is a friendly place and people who are working in their yards will more often than not be happy to stop and chat with you if you tell them that you are thinking of buying in the area.
5. If you have committed to buying a house don’t run out and buy a car or anything big and expensive. This can change your debt to income ratio and will change the amount you can get for a loan. It may seem dumb to have to say it but I have had clients do it and then no longer qualify for a loan.
Above all else ask questions. We have heard it many times and it is always true: there are no dumb questions. Your agent may not have the answers off the top of his or her head but they will always do their best to get you your answer and help educate you in the process of buying a home.
I have been a full-time REALTOR® since 1999. I serve clients in Sonoma and Napa wine country. I am currently the vice president of the Sonoma Valley Chapter of REALTORS®. I can be reach at Terra Firma Global Partners,