Preparing to purchase a home can be a period of nerve-wracking anxiety for any homebuyer. As a first-time homebuyer, you have a course in front of you that is sure to include uncertainty, excitement, confusion and frustration – at times all in the same day, maybe even in the same hour.
By arming yourself with preparation and knowledge, you’ll have a much better chance of having a positive home buying experience by ultimately reaching your goal of fulfilling “The American Dream” and owning your own home.
Follow these seven steps, and you’ll be well on your way to owning your own home.
First, know your credit report. The first and perhaps the most important step of preparing to buy your first home is to know and understand your credit. Reach out to the three big credit bureaus – TranUnion, Experian and Equifax – for a free copy of your credit report, which you’re entitled to, for free, once a year.
Familiarize yourself with your credit history and make certain that everything is reported thoroughly and accurately. This review should be an ongoing responsibility that you start well before you even think you’re ready to buy a home. By starting early, you’ll be able to take the time to make any corrections and continue to improve your credit score.
Next, home buying requires teamwork and group of dedicated professionals. Perhaps the two most important team members are the real estate agent you’ll choose and the lender.
Choosing the right professionals is critical. Certainly an inexperienced first-time homebuyer should not have an inexperienced agent helping them through the process. Look for an individual that is imbedded in the local community where you want to live. He should have professional designations that indicate a pursuit for higher professional standards. Your real estate agent should be respected within the local real estate community as most transactions require the cooperation of at least two agents.
Friends and relatives do not make the best agent. Sure there is a loyalty factor that needs to be considered as commissions are in the thousands of dollars. Some of the worst transactions I have ever witnessed have had emotional attachments of an agent that was too close to the transaction. It’s personal enough for the buyer and seller; your professionals should not be emotionally attached as well.
Remember, all real estate is local, and your real estate agent should be too for so many reasons.
There are a number of good ways to find a good lender. Your bank or credit union probably offer a home purchase loan. There are lots of discount guys that advertise on the radio and TV, and there are those who come recommended by your real estate agent.
A successful real estate transaction requires a lot of behind-the-scenes communication and coordination between the real estate agent and loan officer, so it may be best to consider your real estate agent’s advice and check out one of their lenders of choice. The lender will value the relationship with the agent and go above and beyond to make certain the agent is happy with their performance, so they continue to receive referrals. When you find a lender on your own, you are a one shot commission and may not receive the same level of service.
Considering the preapproval process is the third step. The actual process of buying your first home does not start with searching for your dream home, unless you have the cash to buy it outright. Experience knows that most first-time homebuyers will require a home loan to complete the transaction.
It’s important to be “preapproved” by a lender before you start house hunting. The worst thing any homebuyer can do is look at the “perfect” home that they believe they can afford only to find out that the bank won’t loan them that much, for one reason or another.
The difference between a “prequalification” and a “preapproval” is huge. A “preapproval” is the process of the lender gathering all necessary documentation and verifying all aspects of the credit application. This process will allow the homebuyer and real estate agent to focus on homes they know they can afford.
Fourth, consider your budget carefully and truthfully. Just because you’re approved for one amount does not mean you have to spend every dime for which you’re approved. Perhaps your credit score, income, down payment and debt to income ratio has you qualified an amount that stretches your budget. Find a payment that makes you comfortable and stick with it.
Remember, the cost of paying for your new home is not just the principal and interest mortgage payment. There will be property taxes and insurance and maybe even private mortgage insurance as well.
Next consider your lease. Are you currently leasing a house or apartment? Know when your lease expires and what the penalties are if you broke the lease. Buying a home is stressful enough and not having to worry about your current living arrangement is priceless.
Have a conversation with your landlord, and let them know that you are in the process of shopping for a home and wanting to buy your own home. Perhaps, your landlord may be willing to sell you the home you are currently renting.
Look into down payment assistance. Many perceive these programs to only be available to low income buyers, but many are available for the mid-level income buyers as well through local and state housing authorities.
Some programs offer no-interest loans or grants with a few conditions attached. When researching the various programs, be sure to ask for a list of lenders who will participate in the programs, as not all lenders will.
Also, inspect everything. When you make the commitment to buy a home, there is typically an inspection contingency that allows you to inspect every aspect of the home.
You’ll want to know that the roof is good and that the plumbing and electric systems are all to code and functioning properly. Check the foundation for cracks and leaks. Mold is a big issue, look for any signs of water damage where mold may be growing behind the walls. Appliances and fixtures all need to be in working order. There are so many variables with any home. It’s important that you take the time and invest in good inspectors who will give you an unbiased opinion of the condition of the home you have in escrow.
Take the time to plan your purchase and you should be very happy with the outcome. Rush any of the steps and you’re certain to have regrets.
Call us at (951) 296-8887 and get educated. For questions regarding available inventory and/or other real estate matters contact, [email protected] Mike Mason, Broker/Owner of MASON Real Estate Cal. BRE: 01483044, Temecula Valley resident for 30+ years, Board of Director (since 2011) Southwest Riverside County Association of Realtors® (SRCAR).