A Little Story to set the tone…
I remember by first purchase…a condo. I was clueless…no idea what I was doing or what I was really getting myself into. Thankfully, a good friend of mine was my Realtor and she walked me through everything so that I was comfortable. So comfortable in fact that I decided I wanted to be a Realtor as well. I got my license in 1991 and enjoyed a real estate career through 2017 when I retired.
Many people dream of owning their own home. However, it can easily turn into a nightmare if the first-time buyer is not prepared.
There’s a steep learning curve in terms of everything that needs to be done and what paperwork will be required. Getting the right professionals to assist you is extremely important.
Your first step is to determine how much cash you have on hand for a down payment. The more you have for a down payment, the better terms you can get for your mortgage. But let’s not be too hasty. There are a lot of other financial concerns you might not be aware of.
Interview Real Estate Agents. Specifically, you want to interview a Buyer’s Agent. As a home buyer you want your own representation. Don’t call the Listing Agent as they work for the Seller and don’t have your best interest at heart.
Once you’ve identified your Buyer’s Agent your next step is mortgage approval.
Armed with your personal paperwork, you can shop around for mortgages and get a pre-approval. This will be a rough estimate of the top limit you will be allowed to borrow. Then it will be a case of finding the right home within your price range.
Note that “pre-approved” is different than “pre-qualify.” Pre-qualification is a quick and simple process, while pre-approval requires more paperwork, time and energy. Pre-approval, however, carries more weight and may make your offer stand out if the seller receives multiple offers. Don’t lose out on a home because you weren’t prepared.
I like most other Realtors prefer to recommend 1 – 3 lenders that we have worked with in the past. Lenders that get the job done right from the start.
There are 4 residential loan types to consider:
FHA requires a 3.5% down payment
Conventional loans can require a 3%, 10% or even 20% down payment
Rural Development requires no down payment but there are fees associated with this type of loan.
VA requires no money down, but you must be Active Duty or a Veteran to qualify. You will also be paying a funding fee which can be rolled into the loan or paid for up front.
Be clear about everything you need to pay in total before committing to anything.
Beware of Predatory Lending Practices
Some people actually sign a loan agreement in order to get the down payment for the house – the equivalent of two mortgages on the same property. Others don’t ever see the entire “bottom line” of what it will cost per month until it is almost too late. They are congratulating themselves on the great “bargain” until they see the grand total of all taxes, insurance and so on.
Get professional assistance and be very sure you know what you are getting yourself into before signing anything.
Before Making an Offer Visit the Property Multiple Times
There’s nothing wrong with bidding on the first house that you see. However, plan to visit the property at least twice before submitting your offer.
After the initial visit to the property with your Agent, go home, pray and sleep on it, then re-visit the neighborhood during the evenings. Are the neighbors rowdy? Are the neighbor’s yards and homes kept up? Are people hanging out?
Checking out the neighborhood when the majority of the residents are home can help you determine whether the area is a good fit for you and your family. Remember, once you sign the closing papers, there’s no turning back.
Buying a house is a stressful and nerve-racking time, regardless if this is your first or tenth home. Unexpected problems will pop up, usually within 30 days of your purchase. Buying a house can sometimes be an unpredictable process, but the more you know about the process, the easier it is to avoid serious mistakes.
What mistakes did you make when buying your home?