First Time Home Buyers Guide
Can I afford a home?
Although it may sound obvious, many people jump into buying their first home without even checking to see if they can afford a home. You will find all sorts of formulas online to see if you can afford a home and how much you can afford. Every formula you use will give you a completely different answer. The best way to find out if you can afford a home and how much you can afford is to: Add your total take home pay for the month, subtract all the bills you pay during the month, subtract all your other expenses for the month, the number that you are left with is what you can afford for a house payment. Remember: your utilities and insurance will likely increase when you purchase a home. Also, remember to keep some money for house repairs, and always put some portion of your income into a savings account.
Mortgage Pre-approval
After you find out what you can afford its time to get pre-approved for a mortgage. Only go to one bank to be pre-approved. In the end you do not have to go to that particular bank for the loan if you feel their rate is too high, but you do need a pre-approval. The pre-approval shows the realtor and the seller that you can afford the home and are serious about buying. When you go to get the pre-approval ask for it by name. Some banks try to give you a pre-qualification which sounds the same, but is not. For the pre-approval you will likely have to fill out a form with your salary and debt and they will also pull your credit report. The bank will send you a letter with the amount you are pre-approved for. Show this letter to your realtor. When you go to put in an offer on a house black out the amount you are pre-approved for when the letter goes to the seller. It gives them leverage you don’t want them to have!
What type of home is best for me?
Once you know what you can afford its time to decide what type of home you want. Do you like two stories or a sprawling ranch? Or is a condo perfect for you? Sit down and write out what is a must for your new home. Are 2 bedrooms an absolute for you? Can you not live without a master suite? Find out what is important to you before you see a realtor. That way you don’t waste your time and the realtors time looking at houses that will not satisfy your needs.
Finding a realtor
The realtor will become a major player in your house buying process. Take the time to interview different realtors and go with one you like. You will be spending a lot of time with them. When you find a realtor you like you should sign with them as a buyer’s agent. When your realtor becomes your buyer’s agent they are working for you exclusively and are working to get you the best deal. If you work with a realtor who is not your buyer’s agent, they are looking out for themselves and trying to get the best deal for them. Remember that whatever you pay for the house they get a percentage of. The higher the price you pay, the more the realtor receives. When the realtor signs on to be your agent they can no longer think in those terms. Basically the contract you sign states they are your agent and will be for a said period of time. These contracts vary from state to state but be sure to ask about them. It’s definitely worth it and it does not cost you anything to sign them on as your agent.
Finding the right home
Your realtor will most likely refer you to an MLS website to view houses in your area. Your realtor will also call or email you when they see a house you might be interested in. When you see a house you like online, don’t immediately call your realtor to view it. This will make you feel very overwhelmed! Do a “drive by”. Drive by the house; make sure it looks like the picture online. Take note of the way the neighborhood looks and the location it’s in. You can rule out many houses with just a drive by. If you feel the area is not exactly what you want, don’t view the house. This limits the number of houses you see and makes you feel less overwhelmed.
Viewing Houses
When you view a house really look at the house. It may look great on the exterior but look farther. Go down to the basement and make sure there are no leaks that the basement is dry and has not been flooded. Also notice ceilings and floors. It’s always a good idea to take a second and even a third look at a house you like. Sometimes you feel differently the second time. Bring a family member or two with you when you go to view a house. Many times they will notice things you do not. Also ask to see the utility bills and tax statements for the house.
If you follow this guide your home buying process should be more of a positive experience. Question anything you don’t feel comfortable about. Don’t be afraid to consult someone else or go to another facility where you feel more comfortable. Don’t forget, you are in charge, these lending institutions and realtors work for you and want your business.
