Buyer prepare: Tips for first-time home buyers
a home for the first time can be scary, but as with anything else in life, the
right preparation brings about good results. Remember, the right home for you
is one you want and can afford.
Step 1: Ask yourself
if you're ready.
You need to decide whether you're financially
ready to buy a home, says Connie Barbosa, vice president and branch manager of
Slade's Ferry Bank in Somerset, Mass. She suggests first-time buyers ask themselves
some simple questions:
- Do you have a steady job
- Do you plan on remaining in the same area for
a few years?
- Do you have enough money set aside for your
down payment and closing costs?
- Do you have an emergency
- Do you live within your means, avoiding credit card
Another consideration is whether you're mentally
prepared for the responsibility, says Charles Glass, a real estate agent who sells
in the Washington, D.C.-Maryland market.
"A first-time home buyer is probably used to
renting," Glass says. "They've got to get used to budgeting
a little differently in terms of having a reserve when things go
wrong. And whether it's a new home or an old one, things will go
wrong. Experienced homeowners know this. First-time buyers don't."
Step 2: Find out what you can afford.
When you're sure you have the right mind set
to be a homeowner, it's time to determine how much house you can
afford. Probably the best way to do that is to get pre-qualified
for a loan. In fact, some real estate agents won't work with someone
who is not pre-qualified.
There are three options for pre-qualifying: go to
a lender with whom you have already established rapport, find a
real estate agent you trust and follow the agent's recommendations
for a lender, or research lenders online.
Glass says the first option is the best because "if
you've built a relationship with a lender, they will go to extra
lengths to make sure they qualify you for the loan."
Your total monthly mortgage payment -- principal,
interest, taxes and insurance (or PITI) -- should not exceed 32
percent of your monthly gross income, Barbosa says. The U.S. Department
of Housing and Urban Development (HUD) suggests that figure should
be 29 percent. So this is not an exact science. You can calculate
a ballpark figure from this information, but then talk to your lender
to get a better feel for how much flexibility you might have with
different lending arrangements.
According to Bank of America's Consumer Real Estate
Group, you should find a lender that offers "first-time buyer
options and financing ideas that take into consideration your personal
situation. For example, many first-time buyer mortgage programs
require only a low down payment or even no money down. If a down
payment is required, you may be allowed to use 'gift' money from
family members and other sources. Some first-time home buyer programs
feature no closing costs. There may also be down-payment assistance
programs available in your community."
Remember, the bigger the down payment, the less you're
borrowing, and the less expensive your mortgage will be in the long
offers programs to help first-time buyers, too. real-estate/agency1.asp
Step 3: Find out what's available
Now it's time to decide where you want to live
and research what types of housing are available -- one-story single
family, condos, town homes, etc. You can get an idea by looking
at ads and driving around the community before you ever call a real
estate agent, Glass says. In fact, he prefers clients who have done
In searching for an agent, find one who makes you
feel comfortable and, more importantly, one who listens to you,
HUD points out that it's traditional for the real
estate agent to represent the seller's interests, although most
state licensing laws require them to treat the buyer fairly. Laws
regarding the relationships between real estate agents and clients
vary from state to state and buyers should be aware who
your agent is working for.
Step 4: Choose a neighborhood.
Once you know the housing stock, you can look
at specific neighborhoods. Cruise by at night time to see whether
you get a "vibe" that it's a safe neighborhood. If you
have children, you'll want to check out the quality of the schools.
You may want to check out what types of large-scale facilities (airports,
highways, chemical plants, etc.) are nearby, and whether you're
convenient to shopping, work and schools. You can do much of this
independently, but you can also ask your agent to help you find
sources of information about such things.
Step 5: Define your house and find it.
Now, you can narrow down the features you want
in a house. Do you want an energy-efficient model? Do you want two
stories, a basement, a bathroom downstairs or a large back yard?
You may not find a unit with every feature that you want, but this
will help you to define what's most important for you, Glass says.
When you've found a house that has your most important
features, is in the right neighborhood and is affordable, you're
ready to buy.
Step 6: Do a home inspection.
HUD recommends that an offer should be contingent
on a home inspection. As the buyer, you cover the cost of the inspection.
If you're unsatisfied with the results, you may ask the seller to
pay for certain repairs or to lower the price, or you may decide
to walk away from the deal.
Reggie Marston, a home inspector who can be seen regularly on HGTV's
"House Detective" program, says home buyers should have
an inspection done regardless of the age of the home and should
interview several inspectors before hiring one.
"A home inspection should uncover defects that could become very
costly to repair after (buyers) assume ownership," he says. "It
will also uncover safety issues, water infiltration issues, roof problems,
structural issues, etc.
"A first-time home buyer should start interviewing
home inspectors before or at the same time they're interviewing
real estate agents and mortgage lenders. Normally, real estate contracts only
allow three to 10 days for a home inspection after acceptance of
the contract and that doesn't allow the purchaser adequate time
to find a qualified home inspector."
Step 7: Shop around for homeowners insurance.
Your lender will require you to carry homeowners
insurance. Such insurance comes in many flavors, so it's a good
idea to search for a policy that meets your needs for protection
while being easy on your pocketbook. Access
insurance information that is appropriate for your state. Many
states provide data on typical rates charged by insurers, as well
as information on the frequency of consumer complaints against a
Step 7: Negotiate.
Once you've found the house you want, you should
make an offer that's lower than the seller's asking price. The seller
expects this and will likely make a counter-offer. You have to decide
before you start negotiating what your make or break point is, and
stick to it. Just be reasonable. Don't expect the seller to give
you a 50 percent discount on a good property.
Step 8: Closing.
In a number of states, it is customary for each
party to have an attorney review the closing papers and to be present
at closing. Whether that's the custom in your state or not, it's
a good idea to hire your own attorney to review the documents to
be sure that your best interests are represented in the paperwork.
You'll foot the bill for your own attorney.
Step 9: Move in.
You've done all the homework and bought a great
home. Enjoy it.