1. How Much Home Can You Afford? As a first-time home buyer, it’s important to have an accurate idea of how much money you can borrow for your new home and most importantly, how much you can afford. Sometimes those two aren’t exactly the same (depending on your financial situation), so always use what you can afford as your main metric for deciding how much house you should mortgage. One of the realities of first-time home buying is the frustrating of finding that perfect home only to discover that it is not in your price range. Call me today!
2. Should You Get Pre-Qualified or Pre-Approved? Often a mortgage lender will tell a potential buyer they are “pre-qualified” for a loan. This can confuse first-time home buyers, who think they will qualify for that amount. Not likely. With a pre-qualification, little information about your finances is verified (often none). You might find out later learn that the amount you were “pre-qualified” for what far different than what you actually will qualify for or even afford. What you need is a “pre-approval” in which more information (your credit and other factors) is checked and you can have a better idea how much you can afford for your first home. With a pre-approval, you’re in a better position to negotiate because the seller knows that your offer is more solid. You’ll avoid wasting time looking at homes outside your price range.
3. What Is Your Credit Score? First-time home buyers should obtain a copy of their credit report and review it. There are places, like www.annualcreditreport.com, where you can actually get a free credit report. If you find an error, it’s much easier to fix it before a house has been found, rather than dealing with it when trying to close on the loan. I can even give you tips to help with any minor blemishes.
4. What Kind of Mortgages Should You Consider? For first-time home buyers, mortgages can be confusing and a bit overwhelming. Ask your mortgage banker every question you can think of. There are no dumb mortgage questions, especially for first-time home buyers. A good mortgage banker will ask you numerous questions about your specific financial needs so that they can match you with the best mortgage. The mortgage best for you will depend on:
• Your current financial situation
• Whether or not your financial situation will change in the next few years
• How long you want to stay in your home
• If your income is steady or fluctuating
5. What Documentation Do You Need? Almost always, you’ll need these items to complete your mortgage application:
• Pay stubs
• Bank and/or other asset statements
6. What Is a Reasonable Offer? Unless you are very familiar with your area and completely understand how to price an offer on your first home, you will want to consider getting help from an expert. Coldwell banker Realtors can be very helpful in deciding how much your offer should be. In today’s buyers market, your best reasonable offer might actually be lower than you would think. Have your real estate agent run comparable sales in your area and pay attention to prices per square foot for recent sales. This can give you a very good idea of how much to offer.
7. What Is a Purchase Agreement? The purchase agreement sets the amount of your offer and usually includes extra details, such as which appliances stay, who pays closing costs (seller can pay closing costs on some home loans) and when you’d like to take possession of the house. Your agent will have you sign the purchase agreement and offer “earnest money”. Earnest money is a deposit showing that you’re serious about your offer to buy the home and will be held by the listing agents broker/title company and will be credited back to you and your costs at closing.
8. Should You Have the Home Inspected? Yes, you should. You should never buy a home without inspecting it, and most purchase agreements are contingent upon inspection. Spend a few hundred dollars and hire a qualified/licensed professional to inspect your new home (before you buy it) —it’s the only real way to ensure the home is in good condition. The home inspector should provide a very detailed summary report listing the condition of each item, and recommending repairs. You should always be there when the home inspection takes place. It usually takes a few hours and you’ll learn not only about the condition of the house but how everything works. Ask questions as you go along. If there are problems, the seller may adjust the purchase price of the home or simply repair the problems.
9. Do You Need Homeowner’s Insurance? Yes, you’ll need a valid homeowner’s insurance policy before you close on your home. You can’t get a mortgage without it.
10. What Are Closing Costs? This is probably the top asked question by first-time home buyers. All mortgage lenders are required by law to disclose in writing your estimated closing costs and fees, so you’ll know ahead of time. If you don’t get this from your mortgage lender, you know something is wrong. Back out before you waste any money. This document is commonly called a “Good Faith Estimate”, insist on having it.
As a first-time home buyer, you’re on your way to being better prepared for getting a mortgage and buying your first home. Don’t take chances. Do your research and ask lots of questions. Both your Coldwell Banker Realtor and Mortgage Advisor will be a wealth of information at your disposal.
Provided By Desty Lorino and Desty’s Team