Buying your first home is an exciting, yet daunting endeavor. Home ownership remains a goal for many people, with the promise of freedom and the satisfaction of making a financial investment in your future. There are definitely pros and cons to be considered in deciding whether to rent or own, but we will address those in a separate post.
If you have decided that home ownership is for you and want to best prepare yourself for the task of buying a home, here are 5 things you should know as a first time homebuyer.
First, if you will be making an investment into home ownership with any other person (spouse, significant other, family member or friend), make sure you’re on the same page about your purchase plans. It may be surprising to find out once you start to look at properties that certain things that are important to you are not the same things that your co-purchaser is prioritizing. There can be a lot of moving parts when going into a first time home investment, which can easily become overwhelming. Creating a plan that takes into consideration both person’s desires with respect to location, neighborhood, size of property, type of property (single-family home, townhome or condo), turn-key or fixer-upper, and budget will help streamline the process.
Second, meeting with a mortgage broker will help you pinpoint which programs may be available to you as a first time homebuyer. Did you know that you may not need to put down 20% of the purchase price to qualify for a mortgage? There are a number of programs available to first time homebuyers to help you get into a home. In addition, if you have served in the military, you may be eligible for Veteran’s Administration (VA) loan programs, which include terms that are often more favorable than traditional mortgage loans. United States Department of Agriculture (USDA) programs may also be available if you are purchasing in certain rural areas of the country. Don’t forget that saving for a down payment, no matter what type of loan for which you may qualify is only part of the process. You will also need to have separate funds available for closing costs, including escrow and title fees and mortgage loan fees. A thorough mortgage broker will help you look at your debt-to-income ratio, factor in additional costs of insurance and property taxes and then set a realistic maximum.
Need some recommendations for mortgage brokers? Give us a call at 541-788-1095! We will be able to connect you with one right away. Your team of professionals helping you as a first time homebuyer will include us as your real estate agents, mortgage brokers, home inspectors, and title/escrow professionals. We offer the added benefit of Stephanie’s legal license for document review and to confirm permitting, as well as Frank’s residential specialty contractor license for licensed and bonded home repairs before or after closing!
Third, get a pre-approval from a lender.. This is an absolute must before you start a home search and to avoid disappointment. You may have been led to believe that you can afford a $300,000 home, either by using online tools, or even talking to your Uncle Jimmy who used to work for a bank. But to actually have any offer you write be accepted by a seller, you need to include a pre-approval letter. While a pre-approval letter is not a loan approval, it is based on consideration of a number of factors on which the bank can determine it is likely you will be approved for a loan in the amount set forth in the letter.
Fourth, most first time homebuyers are aware of the need to have a savings account for a downpayment – whatever that percentage is determined to be best for your situation. But did you know that switching jobs, taking on new debt, or even closing credit cards in the year prior to purchasing a home can also negatively impact your ability to secure a loan at the best rate possible? The name of the game is to show consistency and patience. Pay down loans to the extent possible while you’re building up savings. Don’t forget…. even after you have been approved for a mortgage loan and your offer on a new home has been accepted, do not take on any additional debt before closing! Mortgage underwriters are analyzing risk right up to the moment the loan is funded and the transaction closes.
Finally, make sure your home will have what you need! First time homebuyers often overlook details like whether the refrigerator or washer and dryer are included with the sale, or whether there is ample on-street parking if there is not a garage on the property. Circling back to the last point, make sure to wait to buy any new appliances until after closing. That may mean that you won’t have a way to wash your clothes or store your groceries after you move in, so be sure to have a backup plan! With a trusted real estate broker like us, we will be looking out for potential pitfalls to help you avoid surprises after closing.
If you’re ready to be a first time homebuyer and want to work with a team who will confidently and thoroughly guide you through the process, call Frank and Stephanie today at 541-788-1095.
