THE BEST ADVICE FOR FIRST-TIME HOME BUYERS

Before you start seriously shopping for a home, there's some groundwork you should do to put yourself in the best position to buy a home.

Start early, a couple of months before you talk to a lender or hire a real estate professional.

Check and repair your credit

The Fair Credit Reporting Act requires the three nationwide consumer credit report companies, Equifax, Experian, and TransUnion, to provide you with a free copy of your credit report and FICO scores upon request once a year. You can order the reports by visiting AnnualCreditReport.com, or call 1-877-322-8228.

Each credit report company has its own criteria for scoring your credit report. A lender will usually use the middle FICO score. All three scores need to be as high as possible for you to receive the best interest rates.

If you can, order the reports at least three months before applying for your home loan. If you find a mistake you need to correct, or you want to improve your score by paying down an account, you'll need at least two months before the credit score improves.

You can dispute an inaccurate item on the report by contacting the consumer reporting company and the information provider in writing. Be sure to include copies of your proof.

Don't accidentally raise your scores

Lenders not only look at how much credit you're using, they consider how much credit you have available. However, now is not the time to be opening any new accounts or closing existing accounts.

Don't purchase furniture or a new car or any other big ticket item before buying a home. Lenders are very careful about the amount of debt you have and how much you pay down every month on the debt payments you have.

Get Loan Pre-approval

Don't start house hunting without knowing how much home you can buy. To find out, you have to apply for a loan, which means you're sharing financial information with the lender such as income and work history, student loans, child support or alimony, and credit card balances.

Contact your lender for a preapproval letter. The letter shows that the lender has taken a 1003 loan application, studied your debt ratios to your income, and helped you select a loan program such as fixed rate, ARMs (adjustable rate mortgages), FHA or VA government-backed loans, etc.

Your lender will confirm your down payment source, interest rate, type of loan that's best for your circumstances, and the terms of your loan. The lender will give you a loan commitment based on your qualifications. The home you select must meet appraisal, and the underwriting department must approve the loan.

A preapproval letter will open doors for you, pardon the pun. Sellers will be impressed because you're prepared to buy and that a lender has agreed to process your loan. Your real estate agent will have to know the terms of your loan in order to write your offer.

Find out about federal, state, and local government incentives

Get help with your loan rate, closing costs and/or down payments through federal and state housing authority programs. For example, there are also incentives for workforce personnel – police, fire fighters/emergency services personnel and teachers.

Each community is different, so click on HUD's Housing Authorities to find out what's being offered in your community. Your city may be offering tax incentives to revitalize a designated public improvement area.

Narrow the choices

Think about how you want to live. One story or two? Low-maintenance condo or big yard for the kids? New or older home?

Drive through the neighborhoods you're interested in and look at homes. Visit a few open houses in the neighborhoods you will consider. They will usually be listed in your local newspaper with the hours hosted. Be sure to tell the real estate professional hosting the open house that you are already working with a buyer's agent.

With Google maps, video, virtual tours, multiple photos, school reports, neighborhood reports and more available online or on phone apps, you can get a good idea of what neighborhoods, home styles, and home prices are like where you want to live.

Find an Experienced Real Estate Broker or Agent

Buying a first home is a complex process. An experienced real estate broker or agent will assist you all through the process: the home search, comparable homes sold, making an offer, inspection, repairs, and the appraisal, as well as help you find the best value, neighborhood, and quality home for your budget and requirements.

The seller's real estate broker pays your broker or agent out of your loan proceeds. If you don't use your own agent, the seller's broker keeps the commission, so you might as well avail yourself of professional advice. Your real estate broker or agent works in your best interest.

Don't expect perfection

There's no perfect home. You may want all the latest amenities of a new home, but even new homes come at a price, including longer commutes, higher community fees, and bigger pricetags.

Homes that need updating are priced below homes that are up to the minute and move-in ready. That could be to your financial advantage, so try to look beyond outdated fixtures and focus instead on the floorplan and dimensions. Ignore the seller's tastes and imagine each room clean and clear of clutter and with your own things in them.

Most cosmetic changes are relatively inexpensive, and you can even pay for them with your mortgage loan, in some cases. Talk to your lender.

Think long-term investment

Buying a home can be a wise financial investment, if you buy right and hold your home for long-term gain. Because of closing and moving costs, it's nearly impossible to buy a home and sell it immediately for a large gain, but it is possible to sell after a couple of years with no capital gains tax should you make a profit.

According to the National Association of REALTORS^®, home equity growth beats inflation by about one to two percent annually, not to mention government subsidies for home ownership in the form of tax relief and other incentives.

However, if you look at owning a home strictly as an investment, you'll miss many pleasures. Look at your home as a home, rather than part of your portfolio. Buying a home allows you to live in the neighborhood you want for as long as you want, without having to worry that the landlord is going to sell out from under you. Your stake in a home makes you part of the community, committed to making it a better place to live.

Source: http://realtytimes.com/consumeradvice/buyersadvice1/item/30229-20140828-the-best-advice-for-first-time-home-buyers

Creating your home wish list

Before the home search begins, your real estate agent will want to know as much as possible about the features and amenities you desire. To help your agent better serve you, analyze what you want and what you need in a home's features and amenities.

Features:

• Age: Do you prefer historic properties, or newer ones?
• Style: Do you have a special preference for ranches, bungalows, or another style of construction?
• Bedrooms: How many?
• Bathrooms: How many? Are they updated?
• Living and Dining Areas: A traditional, formal layout, or a more open, contemporary plan?
• Stories: How many?
• Square feet: How much space?
• Ceilings: How high?
• Kitchen: How big? Recently updated? Open to other living areas?
• Storage: Big closets, a shed, an extra-large garage?
• Parking: A garage or carport? Room for how many cars?
• Extras: Attic or basement?

Amenities:

• Office
• Play/exercise room
• Security system
• Sprinkler system
• Workshop/Studio
• In-law suite
• Fireplace
• Pool
• Hot tub
• Sidewalk
• Wooded lot
• Patio, deck, or porch
• Laundry room

 

Eight steps to buying your home

1. Decide to buy.

Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

1. If you are paying rent, you very likely can afford to buy
2. There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
3. The lack of a substantial down payment doesn't prevent you from making your first home purchase
4. A less-than-perfect credit score won't necessarily stop you from buying a home
5. The best way to get closer to buying your ultimate dream home is to buy your first home now
6. Buying a home doesn't have to be complicated - there are many professionals who will help you along the way

2. Hire your agent.

The typical real estate transaction involves at least two dozen separate individuals-insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer's agents, seller's agents, bankers, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform in harmony and get a home sale closed. It is the responsibility of your real estate agent to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout.

Seven main roles of your real estate agent

A Buyer's Real Estate Agent:

1. Educates you about your market.
2. Analyzes your wants and needs.
3. Guides you to homes that fit your criteria.
4. Coordinates the work of other needed professionals.
5. Negotiates on your behalf.
6. Checks and double-checks paperwork and deadlines.
7. Solves any problems that may arise.

Eight important questions to ask your agent

Qualifications are important. However, finding a solid, professional agent means getting beyond the resume, and into what makes an agent effective. Use the following questions as your starting point in hiring your licensed, professional real estate agent:

1. Why did you become a real estate agent?
2. Why should I work with you?
3. What do you do better than other real estate agents?
4. What process will you use to help me find the right home for my particular wants and needs?
5. What are the most common things that go wrong in a transaction and how would you handle them?
6. What are some mistakes that you think people make when buying their first home?
7. What other professionals do you suggest we work with and what are their credentials?
8. Can you provide me with references or testimonials from past clients?

3. Secure financing.

While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment.

From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.

Six steps to Financing a Home

1. Choose a loan officer (or mortgage specialist).
2. Make a loan application and get preapproved.
3. Determine what you want to pay and select a loan option.
4. Submit to the lender an accepted purchase offer contract.
5. Get an appraisal and title commitment.
6. Obtain funding at closing.

4. Find your home.

You may think that shopping for homes starts with jumping in the car and driving all over town. And it's true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long-if weeks go by without finding what you're looking for, the fun can fade pretty fast. That's why we say that looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms.

Questions to ask yourself

1. What do I want my home to be close to?
2. How much space do I need and why?
3. Which is more critical: location or size?
4. Would I be interested in a fixer-upper?
5. How important is home value appreciation?
6. Is neighborhood stability and priority?
7. Would I be interested in a condo?
8. Would I be interested in new home construction?
9. What features and amenities do I want? Which do I really need?

5. Make an offer.

When searching for your dream home, you were just that-a dreamer. Now that you're writing an offer, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies (or “conditions” in Canada).

Price-the right price to offer must fairly reflect the true market value of the home you want to buy. Your agent's market research will guide this decision.

Terms-the other financial and timing factors that will be included in the offer.

Terms fall under six basic categories in a real estate offer:

1. Schedule-a schedule of events that has to happen before closing.
2. Conveyances-the items that stay with the house when the sellers leave.
3. Commission-the real estate commission or fee, for both the agent who works with the seller and the agents who works with the buyer.
4. Closing costs-it's standard for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract.
5. Home warranty-this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
6. Earnest money-this protects the sellers from the possibility of your unexpectedly pulling of the deal and makes a statement about the seriousness of your offer.

6. Perform due diligence.

Unlike most major purchases, once you buy a home, you can't return it if something breaks or doesn't quite work like it's supposed to. That's why home owner's insurance and property inspections are so important.

A home owner's insurance policy protects you in two ways:

1. Against loss or damage to the property itself
2. liability in case someone sustains an injury while on your property

The property inspection show expose the secret issues a home might hide so you know exactly what you're getting into before you sign your closing papers.

• Your major concern is structural damage.
• Don't sweat the small stuff. Things that are easily fixed can be overlooked.
• If you have a big problem show up in your inspection report, you should bring in a specialist. If the worst-case scenario turns out to be true, you might want to walk away from the purchase.

7. Close.

The final stage of the home buying process is the lender's confirmation of the home's value and legal statue, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finance. Your agent will keep you posted on how each if progressing, but your work is pretty much done.

You just have a few preclosing responsibilities:

1. Stay in control of your finances.
2. Return all phone calls and paperwork promptly.
3. Communicate with your agent at least once a week.
4. Several days before closing, confirm with your agent that all your documentation is in place and in order.
5. Obtain certified funds for closing.
6. Conduct a final walk-through.

On closing day, with the guidance of a settlement agent and your agent, you'll sign documents that do the following:

1. Finalize your mortgage.
2. Pay the seller.
3. Pay your closing costs.
4. Transfer the title from the seller to you.
5. Make arrangements to legally record the transaction as a public record.

As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your home-searching process and commencement of your home-owning experience.

8. Protect your investment.

Throughout the course of your home-buying experience, you've probably spent a lot of time with your real estate agent and you've gotten to know each other fairly well. There's no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.

Even after you close on your house, you agent can still help you:

1. Handle your first tax return as a home owner.
2. Find contractors to help with home maintenance or remodeling.
3. Help your friends find homes.
4. Keep track of your home's current market value.

Attention to you home's maintenance needs is essential to protecting the long-term value of your investment.

Home maintenance falls into two categories:

1. Keeping it clean: Perform routine maintenance on your home's systems, depending on their age and style.
2. Keeping an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later