First-Time Home Buyer Tips

First-Time Home Buyer Tips
Planning to buy a house this year? Check out these12 tips shared by lenders, builders,
buyers, sellers and agents!
There are numerous things that will cry out loud for your attention. It helps to work with a
trusted agent who understands your needs and can alert you to potential pitfalls.
1. Your finances
§ Don’t wait for the lender to find out how much you can afford. Do your
homework. Consider how much you are willing to spend. Remember, this
is a lifestyle decision. Think about other expenses such as travel, education,
and maintenance reserves. The lender will base their assumptions on the
amount you qualify for, not on the amount you are comfortable spending.
§ When you are contemplating how much of a loan you can afford, make
provisions for insurance, taxes, homeowner association dues and
other unanticipated costs you may incur.
§ The best strategy is to actually calculate the taxes and other expenses rather
than “ballparking”. Be prepared so that you won’t be surprised. Your
agent will help you find the property that fits the price you are willing to pay.
2. Ask your agent about:
§ Types of mortgages
§ Risks and benefits of different types of financing
§ Types of homes and the best match for you
§ Location, features and price range
§ Tax issues and responsibilities of a homeowner
3. Avoid nasty surprises
Request a copy of your credit report as soon as possible and look out for:
§ Too many open credit cards accounts
§ Unclosed accounts you thought you had closed
§ Alleged non-payments and inaccuracies
Make sure you have time to prepare before a lender previews your credit history.
Allow at least a week to close dormant or unwanted accounts and clear up
discrepancies. According to the US Public Research Interest Group (PIRG), 79%
of credit reports contain serious errors or mistakes. Make sure you are in the
21% that does not have the errors!
4. Collect and organize your documents
Accumulate all the necessary information you will need when you file your loan
application. Ask your mortgage lender for a checklist so that you are fully
prepared.
§ Income tax returns and W2s for last 2 years
§ Pay stubs for the last few months
§ Bank statements for the last 2 years
§ An updated and accurate credit report
5. Get preapproval, not prequalification
§ Preapproval allows you the security of shopping for a home that you can
afford
§ Preapproval tells the seller that you are serious, ready to buy, and solidly
financed.
§ In a competitive bidding situation, pre-approval can be your advantage over
other offers that are not pre-approved.
7. Avoid pre-mortgage pitfalls
Don’t do anything that can negatively impact your ability to qualify for a mortgage
loan. Till the time your loan closes steer away from:
§ Changing jobs
§ Switching banks
§ Moving your money around
§ Making major purchases
8. Make 2 lists: your need to have and your nice to have list
If you are buying the house with a spouse or partner, involve him/her while
preparing the list. If you have children, ask them what they would like.
Consider:
Size and space Pool
Number of bedrooms and bathrooms Sun-deck
Fireplace School district
Wooden floors Short commute to place of work, school etc
Vicinity to shopping outlets Garden
9. Develop a realistic approach and stay open-minded
No home is perfect! You may not be able to get everything you seek within your
price range. On the other hand, you may find a great deal on a home that is
slightly different from what you were looking for. Perhaps it’s a fixer-upper with
potential to become your dream home, or it has a feature you’d like and is
missing another feature you had wanted. That is why the “need to have list” is so
important. It will help you stay objective.
Prioritize your needs & analyze the trade offs:
§ How important is a new or a newly remodeled home? If you are trying to
keep the price down, think about what you can upgrade later.
§ How important is location? A longer commute may be worth it for more
space or a newer home.
§ Does an older resale home seem like a bargain? Consider insufficient
electrical wiring, plumbing, and resale value.
§ How good is the school district? If you don’t plan to have children of a
school going age living with you, you might consider an area in a less
desirable school district.
§ How much storage do you need? In a smaller home, you may be able to
finish a basement or an attic. If the home has a large unkempt yard, you
could build or purchase a storage shed, or construct a storage building.
Determine what your priorities and needs are going to be for the next 3-5 years
as you may choose to move to another house after that.
10. Take a class on maintenance and fix-up
To save money, you may want to do home repairs yourself. Now may be the
best time to attend to home maintenance and repair classes.
11. Visit your prospective new neighborhood at different times
If you are unsure about the neighborhood you are planning to move to, visit it at
different times and on different days to avoid uncomfortable surprises.
§ Weekdays: How noisy is it during rush hour? Are barking dogs left alone on
neighboring properties?
§ Late evenings: Do your neighbors have loud, noisy parties at night?
§ Weekends: What activities are your neighbors involved in? How many
children are in the area? How do neighbors react when you approach them?
12. Try the commute
Do a dry run of your drive to the office from the new neighborhood during rush
hour.
Think about all the activities that you are involved in and the different places you
may have to drive your family to.
§ Will you be able to drive the kids to games, events, and other activities?
§ Will you be commuting through maddening traffic or a pleasant and quick
drive?
§ How long does it take to get to the closest freeway?
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Tips for Home Buyers

GETTING STARTED
Tips for Homebuyers

1. HOW DO I KNOW IF I'M READY TO BUY A HOME?
You can find out by asking yourself some questions:
§ Do I have a steady source of income (usually a job)? Have I been employed on a
regular basis for the last 2-3 years? Is my current income reliable?
§ Do I have a good record of paying my bills?
§ Do I have few or no outstanding long-term debts, like car payments?
§ Do I have money saved for a down payment?
§ Do I have the ability to pay a mortgage plus additional costs every month?
If you answer to these questions is "yes", you are probably ready to buy your own home.
2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?
Start by thinking about your situation. Why do you want to buy a home? How much can
you afford in a monthly mortgage payment (see Question 4 for help)? How much space
do you need? What areas of the town do you like? After you answer these questions,
make a "To Do" list and start doing casual research. Talk to friends and family, drive
through neighborhoods, search for new listings on search engines (Yahoo and Google),
and look in the "Homes" or “Real Estate” section of the newspaper.
3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?
The two don't really compare at all. One advantage of renting is being generally free of
most maintenance responsibilities. But by renting, you lose the chance to build equity;
take advantage of tax benefits; and protect yourself against rent increases. Also, you
may not be free to decorate or remodel without permission and may be at the mercy of
the landlord.
Owning a home has many benefits. When you make a mortgage payment, you are
building equity. And that's an investment! Owning a home also qualifies you for tax
breaks that assist you in dealing with your new financial responsibilities: like insurance,
real estate taxes and upkeep, which can be substantial. But given the freedom, stability,
and security of owning your own home, the new responsibilities are worth it.
4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT YOU
CAN AFFORD?
A lender looks at what is known as debt to income ratio. For most lenders, this is 50% of
your gross income. Take your income before taxes and divide it in half. Your mortgage,
taxes, insurance and other monthly payments cannot exceed this number.


The amount of money that you can borrow is also a measurement of your risk. The lender
will look at credit, employment, income, assets, equity, etc.


5. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?
Your home should fit the way you live: with spaces and features that appeal to the whole
family. Before you begin looking at homes, make a list of your priorities: things like
location and size. Should the house be close to local schools, your job, or public
transportation? How large should the house be? What type of lot do you prefer? What
kinds of amenities are you looking for? Establish a set of “minimum requirements” and a
'wish list." “Minimum requirements” are things that a house must have for you