First-Time Homebuyers - Preparing for Homeownership

 

When it comes to purchasing a new home, there is no such thing as a free lunch.  As a buyer's agent, we can assist you and provide you with guidance regarding the home search and sales process.  However, we strongly suggest that you take control of the process, set firm requirements and fully participate in the home search and sales process.  Before you start your home search, you need to prepare for homeownership. 

Here are some simple tips:

(1)  Review Your Credit Report and Score:  Obtain a copy of your credit report from one of the major credit reporting agencies - www.equifax.com, www.transunion.com, or www.experian.com.  Review the credit report to verify its accuracy.  Close unused lines of credit or old credit accounts.  If there are errors, write to the credit company challenging the accuracy of the credit report.  If you have a credit score below 680, take steps to improve your credit score by making payments on time.

(2)  Decide How Much Home You Can Afford:  Prepare a budget and review your income and expenses.  After you have reviewed your budget, determine what monthly payment you can reasonably afford.  Do not delegate this important decision to your lender.  Use a loan calculator such as the BankRate home affordability calculator found at:  www.bankrate.com/brm/calc/newhouse/calculator.asp. As a rule of thumb, you can generally afford between two and three times your gross income.

(3)  Start Saving:  Start saving for both the downpayment and closing costs.  The era of easy money is over.  Although loans are available for qualified applicants, most loan products require some downpayment ranging from 3% to 20% based on a series of factors including the purchase price, your income and expenses, and your credit score.  In addition, closing costs range betwee 2% and 7% of the purchase price.

(4)  Assess Your Housing Needs:  Start by making a detailed list of your housing needs, wants and desires.  Establish a clear set of criteria for evaluating and selecting your new home.

(5)  Select Where You Want to Live:  Research where you want to live.  Start looking at housing prices.  Focus on finding the right neighborhood for your needs.  Consider such items, where applicable, as schools, parks, recreational facilities, public transportation, etc.

(6)  Determine Your Mortage Requirements:  Obtain recommendations to select a qualified lender.  Determine what type of loan products are suitable for your personal circumstances. 

(7)  Obtain Pre-Approval:  Organize your financial records such as W-2 forms, tax returns, most recent pay stubs, 2-months of bank statements, etc.  Make a formal application with your selected lender.  Obtain a pre-approval letter.

(8)  Consider Alternate Sources for Downpayment:  Make inquiries to see if you qualify for any special mortgage or downpayment assistance program offered by federal, state or local government agencies.  Determine whether your employer has a housing assistance program.  If you are a first-time homebuyer, consider adjusting your federal income tax withholding to increase your net pay under the Federal First-Time Homebuyer Tax Credit Program. 

(9)  Calculate the Costs of Homeownership:  Start by estimating your principal and interest payment using a standard loan amortization calculator such as found at www.bankrate.com/brm/mortgage-calculator.asp.  Then factor in the estimated costs of real estate property taxes, insurance, maintenance, utilities, and subdivision or association fees.  Compare the total costs to your original budget to determine whether you can regularly and consistently make these payments.

(10)  Start Your Home Search:  Contact a qualified and experienced real estate professional to assist you with your search.

By taking these steps, you will be prepared to purchase a new home.  For some people, this planning will take days or weeks.  For others, it may take several months.  However, if you prepare to purchase a home, you eliminate uncertaintly, identify problems and make the sales process more efficient and surprise-free.

If you are a first-time homebuyer, we would like the opportunity to meet with you and to assist you with your home search.  For a free initial consultation, please contact Ryan Shaughnessy/Preservation Real Estate Advisors by telephone at 314-971-4381 or by e-mail to ryan@gilded-age.com.

Note:  The opinions and statements contained herein represent my personal opinions and observations.  These blog entries are not reviewed, endorsed or approved for publication by Gilded Age, L.L.C., Gilded Age Sales, L.L.C. or Preservation Real Estate Advisors, L.L.C.