First-Time Homebuyers: Tips When Buying Your First HomeDec 8 2009
Taking the plunge into homeownership can be an overwhelming process, especially if you're unfamiliar with the inner-workings of the real estate industry. While buying a home is one of the biggest financial decisions you can make, it can also be one of the most gratifying purchases you'll ever have. Before you begin your search, it's vital to understand the efforts that go forth when finding your perfect place.
A Good Fit?
Owning your first piece of property can be very emotionally fulfilling and liberating, although it's also a large leap from leasing. Before anything, you must determine if a home is truly a good fit for your lifestyle. There is a lot of upkeep that comes with taking on a property, such as utilities and maintenance. Can you see yourself mowing that lawn or shoveling your sidewalk before heading out to work in the morning? Not only is buying a home a financial investment, but it's a lifestyle one as well. You must make sure to invest in something that fits well into your routine. A home signifies a settling period, so it's crucial to find something you can see yourself in for a prolonged period of time.
How Much Can You Afford?
It is beneficial to know your credit history before you even begin with your home search. You must know what your limits are, and the best way to do that is to get a copy of your credit report. If you find that you're credit score is lower than desired, you may want to consider various ways of raising it, either by reducing your debt or paying any old bills you may have.
The Department of Housing and Urban Development (HUD) provides a network of free credit counselors, which may be beneficial in determining your housing affordability. These counselors can also help to explain the various types of mortgage opportunities you'll be presented with.
Make sure that you get pre-approved before you even begin your search. If you'd like your real estate agent and mortgage lender to take you seriously, consider showing them that you're already financially sound enough to make a purchase.
Begin Your Neighborhood Search
Ultimately, your home searching process should be broken down by neighborhoods. Consider which areas you believe are most appealing and then do your research. Some important things to consider are: transportation, taxes, crime rates, and school districts. Even if you do not currently have children, you may have them a few years down the road; at that point, it'll be important that you've surrounded yourself with good schools.
Once you have picked out a couple of housing areas, you can then begin to look at homes. First and foremost, distinguish what you like and don't like. This will not only make things much easier for you, but also for your real estate agent.
Choosing a Reputable Real Estate Agent
Ideally, your real estate agent should be familiar with the areas that you've chosen. He/she should have a vast knowledge of the pros and cons associated with your neighborhood(s) and also know the pricing of recently sold homes in the area (for comparable measures).
A good place to look when it comes to realtors is right here on the web. Consider a site such as http://www.realtor.com as a jumping off point. It also may be a good idea to ask around or even see who sellers in the neighborhood are using.
It's important you find an agent that is working for you and understands your needs and concerns. Once you have found one, or maybe even a few homes of interest, it may be wise to talk to neighbors about their experiences living in the area. You may also find it valuable to drive by the home at various times of the day, just to gauge noise levels and neighborhood activity.
Selecting a Mortgage Lender
Just as important as choosing a real estate agent, it's important to choose a mortgage lender that is equally as impressive. You want to ensure that you have a lender that will give you the biggest bang for your buck, essentially providing competitive rates and fees you can acquire.
Lenders typically look at three things when you apply for a mortgage: your credit score, your down payment and your debt-to-income ratio. As it's been said before, getting pre-approved by your lender is a very important step in actually beginning the process of looking for a home.
It's important to stress that you find a lender that is personable and accessible throughout the entire process. Just like the real estate agent, your lender and loan officer should know your lending needs in and out.
If you're concerned about getting enough money for a down payment, there are several federal programs that are out there to assist first-time homebuyers with their financial needs.
Down Payment Assistance Providers (DAP) are designed by HUD to help the first-time homebuyer. Here's where an FHA loan comes in quite handy because in some cases, people are able to get this for as little as 3.5% down. It's a great way for those with low credit scores to obtain financing for their homes. Loan officers (usually aligned with your lender) are great tools to use when trying to figure out what the correct loan product is for you.
Consider a Home Inspection
Once you have narrowed your several choices down to "the one", have a home inspection to ensure its solidity, even if the seller has already had one. If your home has a basement, pay special attention to any mold on the edges of room. Also, consider how old the water heater and furnace are and take note of any rusting. More than likely, if there are indications of mold and rust, the home is going to need repairs. It's important that you don't place all damages on the same weighing level - a leaky faucet isn't the same as a faulty roof.
Take Advantage of that First-Time Homebuyer Tax Credit
The first-time homebuyer's tax credit, assumed to expire at the end of November, has been extended with new provisions that began November 6, 2009. The tax credit, which provides up to $8,000 to new homebuyers, will be available to those who sign sales agreements by April 30, 2010, having only until the end of June to close on their new homes.
In addition to extending the existing tax credit for first-time homebuyers, the legislation also offers a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years. Importantly, there are also more lenient income restrictions to both credits, allowing more people to take advantage of the extension; those that are single filers with annual earnings below $125,000 and married couples with annual earnings less than $225,000 will be deemed eligible. Those seeking homes under $800,000 will also be able to qualify for the 20 week extension.
Keep in mind that several people are taking advantage of this extension. A bid does not necessarily signify a win, especially in these competitive markets.
And Finally...Close the Deal and Start Saving!
Though you may have closed on the home, things are still far from over! A home is an investment, which besides regular mortgage payments, requires a certain level of maintenance. You must open a savings account, if you don't already have one. These will be your funds that are set aside strictly for repairs and maintenance requirements. It's also always good to have this money on hand just in case of an emergency!