First-time home buyer? Here’s what you need to know
My husband and I are very excited to buy a house… eventually. When will we be ready? We don’t really know. The whole process is incredibly vague and intimidating. Simple conversation about it tends to makes us anxious and eager to postpone.
Anxiety about buying a home is common among those of us who have always rented it. August 2017 survey by LoanDepot, found that although 52 percent of tenants millennials are pressured into buying a house, half are worried about the costs associated with such an endeavor, and only 18% think it is something they can achieve financially.
Using the 28/36 rule, which we covered here, is a great way to figure out how much you can actually afford, but money matters are just one (albeit important) aspect of the confusion surrounding buying your first home.
We consulted with real estate and mortgage experts to come up with a list of what to expect from this complicated process, and how to handle it.
Make a list of 10 things you want
“The best thing to do at the very beginning is make a list of the top 10 things you look for in a home and be sure to rank them or at least note the flexible ones, ”advises Joshua D. Arcus, broker and president of the residential and commercial divisions of The Siderow Organization.
“The list could include price, location, size, renovation, views, etc. Adds Arcus. “It’s important to know ahead of time that you’re really looking to tick as many of these boxes as possible, but some will need to be adjusted. And along the way, you might very well find some new things to add (and hopefully some to take away). “
If you are moving with others, make sure they have a say in the list.
“All parties involved in the decision-making process must be present and on the same page when starting the process,” says Justin moundas, a real estate agent at Douglas Elliman Real Estate. ‘Describe your likes / dislikes about the house and / or house styles, determine your short and long term needs in terms of space, number of bedrooms, bathrooms and the potential for expansion to the house. to come up. “
Be comfortable with your credit score
“Know your credit score and make sure there are no surprises / mistakes,” says Wendy N. Arriz, an agent of Warburg Realty. “Many people are now subscribing to Experian [or another consumer credit reporting agency] and receive monthly updates on their credit score status. It’s a great way to keep tabs on things.
The members of Crédit Sésame with a conventional mortgage loan have an average credit score of 682.
“If your credit needs some work, there are a few easy ways to improve it, ”says Collin brennan, editor-in-chief at Credit Karma. “Knowing more about the three types of home loans available before you visit a financial institution can help you determine how much you need to save. “
Brennan’s pro tip: “Try to limit your [home] purchases within a 45-day window, as multiple mortgage lender inquiries within this timeframe may be processed as one request.
Talk to a mortgage broker or loan officer
Next, find out if you are pre-qualified for a mortgage loan by consulting a mortgage broker or loan officer.
The difference between the two: a loan officer works for the lending institution; a mortgage broker works as an independent agent for you and the bank. The latter makes the loan process easier to choose the right lender and guides you through the process – and you give a commission if the loan ends. A loan officer usually works with a commission or a salary provided by his institution.
“[They] ask you questions about your savings, income and other relevant matters, and initiate a credit report. If there is a second borrower, the loan officer will also have to manage that person’s credit, ”says Kevin Buckthorpe, executive vice president, Freedom Mortgage. “Once the loan officer has all of this information, they will tell you how much you can afford and what type of loan or loans you qualify for.
Prepare your personal financial papers
Once pre-approved for a mortgage, you will need a lot of information to complete the purchase.
“A loan officer will ask you for pay stubs, bank statements, tax returns, and other information that documents your financial situation to complete your loan application,” Buckthorpe explains. “If you want to save time, plan ahead and prepare a case in advance with your most recent bank statements, pay stubs from the last 3 months and the most recent W2 or tax returns which can easily be provided to the loan officer. They’ll need all of this information to take out your mortgage – essentially, to make sure you’ll be able to pay off your loan.
Get a real estate agent – and be aggressive with your expectations of them
The next step, Buckthorpe notes, is “to find a real estate agent with knowledge of the local market. Based on your pre-qualified purchase price, the agent will work with you to help you find homes that fit your budget and needs.
Let that real estate agent do the hard work for you, including the negotiation.
“A good buying agent will work hard to find all the details on the homes you are interested in and will not only negotiate the best purchase price for you, but possibly negotiate other stakes like closing costs and repairs that would normally be the responsibility of their purchaser. , “said Brenda Di Bari, Certified Associate Real Estate Broker in Halstead, New York. “This agent will also have the team of professionals to recommend such as a home inspector, lawyer, contractor or builder, mortgage brokers from various banks who can give you quotes (maybe you can beat the offer interest rate from another bank). A good agent will also save you a lot of time in finding properties for you after you have fully understood what you are looking for, made your appointments, and organized all the steps along the way.
Love at first sight can lead to buyer’s remorse
Once your real estate agent starts showing you houses, try to control your competitive emotions. You may want to beat other buyers immediately, but keep your horses and visit the property a second time before you bid.
“Don’t fall in love with a house immediately,” says Moundas. “I always recommend my clients to see a property twice before making an offer. It is important to imagine yourself in the house, in the neighborhood, etc. This minimizes the risk of buyer’s remorse. “
A lower offer could discourage sellers
Asking for a lower price than the home is listed at is normal in real estate, but going low risk offending the seller beyond the point of compromise.
“Providing a modest offer on a property can be insulting to sellers,” says Mundas. “If you are a serious buyer, work with your real estate agent to establish comparable prices to establish a reasonable bid price. If your bid is lower than the asking price, ask your agent to provide sellers with the rationale for a lower bid, including recently sold homes in the area, property condition, trends in the area, etc.
Prepare an inspector
Once final negotiations are complete, hire a licensed inspector (again, your real estate agent should be able to recommend a few) to perform a home inspection. They will assess the property to assess its condition and see if it needs repairs.
“A second or even a third inspection may be necessary to determine if the house has termites or other problems, such as mold, lead-based paint, or asbestos,” Buckthorpe explains. “The appraiser will examine the house and determine how close the sale price is to the value of the house. Your lender will pay special attention to this information.
If the house is far from perfect but at the right price, look for the potential
“All buyers have the ambition to find the home of their dreams, but unfortunately that is not always possible,” explains Moundas. “Sometimes it’s important to look at a house not for what it is today, but for what it can be.
Other useful tips
“Typically, this whole process takes between two and six months for most homebuyers,” Buckthorne explains.
In this spirit, Lindsey Harn, Realtor at Richardson Properties, suggests these additional tips for getting through this process.
- Don’t be afraid to ask questions.
- Check with several lenders before agreeing to an interest rate.
- Avoid making large purchases on credit and avoid moving money during the process.
- Walk past the house at several times of the day to get a clear idea of the neighborhood, morning, noon and evening.
- Ask if the seller has any inspections or disclosures that you should be aware of up front. If there are serious issues with the property, knowing it ahead of time can save you a lot of time and potential emotions.
And finally, a tip from most of those consulted: have fun, this is a great step and you will want to remember it in a positive light.