10 Tips for First Time Home Buyers

By
Real Estate Agent with Exit Realty Parnters 009527008

 

10 Tips for First Time Home Buyers

 

Are you a first-time homebuyer who’s excited to own your first home? The #1 dream in America is still home ownership.

 

Here are 10 steps to take, that will help you decide whether you're ready to take the plunge.

 

1. Examine your budget closelyand determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28 percent of their income on housing costs. If you go much past 30 percent; you risk becoming house poor.

 

2. Figure out what your total monthly housing cost would be, including taxes and homeowners insurance. In some areas, your taxes and insurance escrow can significantly increase your monthly mortgage payment to an unaffordable amount.

 

You can figure out what insurance will cost by picking a property in the area where you want to live and make a call to a local insurance agent for an estimate.  Obtaining this estimate will give you good idea of what you'll pay if you do buy. For an idea of what you'll pay in taxes, check your local property assessor’s website. Just remember that exemptions and the intricacies of local tax law can create differences between what a homeowner is currently paying and what you can expect to pay as a new homeowner.

 

3. Examine your credit. Right now, tarnished credit or the inability to make a substantial down payment can quash your plans for homeownership. That's why it pays to look at your creditworthiness early in the home-buying process. You can get a free annual credit report and examine it for errors and unresolved issues. If you find mistakes, contact the credit reporting bureau to make sure they are corrected. It's also a good idea to get your FICO score, which will cost you a small fee.

 

4. Get your financial documents in a row.Collect pay stubs, bank account statements, and two years W-2s with tax returns, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have them ready to show to the lender. This may seem like a lot, but in this age of tight credit, don't be surprised if your lender needs a lot of financial documentation.

 

5. You should know what you’ll likely pay for closing costs.  This should not be overlooked.   Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items like homeowners insurance.  You will be able to obtain an average closing costs through your lender when applying for preapproval.

 

6. Find lenders and get preapproved.Getting preapproved for a mortgage helps you bargain from a position of strength when you are house hunting.  You will need a preapproval letter in most cases to submit an offer.  The institute where you bank and a local credit union are good places to start your search.  Applying to multiple lenders in the same month helps improve your chances of getting a loan approved at the best rate possible without pinging your credit score too much.

 

7. After applying with Banks and Credit Unions without preapproval, try ... the government?  With the current tight credit market, it's possible you won't.  So consider getting an FHA loan. The Federal Housing Administration has a program that insures the mortgages of many first-time homebuyers. With this guarantee, lenders who might otherwise feel uneasy about your qualifications will be more prone to lend to you. As a bonus, the FHA only requires 5 percent down payment from first-time homebuyers. You can find lenders that work with the FHA in communities across the nation.

 

8. Don't trust picturesas a first impression…..of course the property isn't what it looked like on the Internet. But just as good pictures can lie, so too can bad ones.

 

Equally, don't be deceived by a beautifully decorated rooms; often rooms are set up to be looked at, not lived in. Don't just walk through an open house. Slow down, sit down and consider how you use a home and whether the layout of the rooms and flow work for you.

 

9. Not everything is a bargainafter four slow years; it’s hard to believe, however the market is picking up. Yet inventory remains low and there are still too few listings, as potential sellers don't want to list at these prices. If you do like a place, it's probable other buyers like it, too! Suddenly you're in a bidding war … in a slow market. Be careful and don't panic.

 

The point I making to first-time homebuyers, you want to keep your head in it and not go with the emotional feeling of ‘we’re going to lose this house.'

 

10. You should have bidding planWhether or not there is competition, plan out your offer; not just the price, but the timing, too.

 

It's okay to be firm, or tough, but it's important to be clear about your intentions. Nitpicking over the inspection results will make you look insincere, and excuses about your financing makes you look like an untrustworthy amateur.

 

As for the bid, think in terms of a series of prices…..  The first offer should not be an unreasonable low-ball number because that can pollute the seller's view of you. Inevitably you'll feel insulted sometime during negotiations. Don't let that influence your goal: the price you're willing to pay for the home you want.

 

Are you ready for the expense and effort of homeownership???  If the numbers make sense for you, taking a few steps at the beginning of the home buying process can save you time, money, disappointment and aggravation.

 

Comments (10)

Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Jennifer... a great "how to" that's easy for first time buyers to understand and from which to develop an action plan.

Jan 25, 2014 12:19 AM
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Jennifer, I love how you have them get all thier ducks in a row before you even mention the actual looking at homes! Excellent first post. Welcome to ActiveRain. Let me know if you need any help here.

Jan 28, 2014 04:51 AM
Joanna Cohlan
Fresh Eyes For Your Home - Chappaqua, NY
Designing, Decorating & Staging Westchester Homes

Jennifer, what a great idea to have a bidding plan for first time homebuyers.  Great post and welcome to AR.  Thanks for the introductions Connie!

Jan 28, 2014 10:37 PM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Jennifer, great tips!  I saw your post thanks to Kathy.  Keep blogging!

 

Jan 28, 2014 10:37 PM
Beth and Richard Witt
Long Island Cash Home Buyer - Center Moriches, NY
Long Island Cash Home Buyer 516-330-6940

Great tips for first time buyers... Welcome to the Rain... Hope you find it as beneficial as I have...

Beth

Jan 28, 2014 11:17 PM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Nice job and good information for homebuyers. Glad to see you are a Rainmaker and you have taken the plunge into the Rain.

Jan 29, 2014 12:30 AM
Cathy Wolters
Wolters Realty & Property Management Company - Cocoa, FL
Your Brevard County Property Management Expert

Great well thought out tips.  I like the one about taking your time and getting a feel for the space, to see if it works for you. 

Jan 29, 2014 10:43 AM
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

Jennifer:

Such a nice plan for first time home buyers to follow.  You have everything they need, now let's hope they follow your advice.

Jan 30, 2014 12:49 AM
Travis "the SOLD man" Parker; Broker/Owner
Travis Realty - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

EXCELLENT List!! I have a similar list on my website for first time buyers.

Jan 30, 2014 06:49 AM
M.C. Dwyer
Melody Russell Team at eXp Realty of California, Inc. - Felton, CA
MC Dwyer-Santa Cruz Mountains Property Specialist

Awesome first post Jennifer!   Solid advice for a first time homebuyer.    I particularly enjoyed it when you mentioned some rooms are set up to be looked at, not lived in.

Feb 03, 2014 07:20 AM