You can find for-sale properties through listing websites, local publications and your real estate agent. Start touring homes to develop a sense of what you want and don’t want in your home, as well as what type of inventory is available in your desired neighborhood. Once you find a property that meets your needs, work with your agent to negotiate a fair price with the seller.
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Do some research online, but work with a live person who can review your situation, answer questions and, if necessary, suggest how you can improve your credit.“Online calculators do not always include insurance and taxes or PMI [private mortgage insurance required if the down payment is less than 20%] and are not always an accurate picture of what the payment or actual fees for the loan are,” says Anita Wagoner Brown, director of sales and marketing for Home Creations, the largest new home builder in Oklahoma.
You can buy a home without a Realtor, but there’s really no reason to do so. Because in most cases, the seller of a home pays the real estate commission. So, as a buyer, you have nothing to lose. (Some real estate firms do charge a fee to buyers; if you don’t want to pay for their services, look for a Realtor that charges sellers exclusively.) And having a Realtor on your side can help you all the ins and outs of buying a home, which can be confusing.
Buying a house across the street from a high school didn’t seem like such a bad idea when you saw how nicely renovated it was. But when you don’t have kids and Friday night football games are keeping you up later than you would like, you realize you should have made a pros-and-cons list regarding the location. Don’t let a charming interior override a location you dislike or a lot that will give you flooding problems. “If you don’t like your lot, don’t buy the house, because you cannot change that,” says Kim Wirtz, a Realtor for Century 21 Affiliated in Lockport, Illinois.
Paranoid buys are sometimes difficult to work with. They may not believe the price is an accurate assessment of the house's market value. They'll submit low-ball offers and then show frustration when they are consistently rejected. Paranoid buyers don't trust real-estate agents, and may even try to buy their home without an agent, which is generally an unwise choice.
Before you head out home buying, you should seek pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies. Each mortgage lender will scrutinize your financial background—such as your debt-to-income ratio and assets—and use this info to determine whether they're willing to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that's good, since a purchase price that's beyond your financial reach will make you sweat your mortgage payment and puts you at risk of defaulting on your loan.
FHA Loans – FHA loans are the most popular type of home loan used by first-time homebuyers. This is because they are easier to qualify for and have a low 3.5% down payment. FHA home loans allow for higher DTI ratios making it easier to qualify for a home loan with low income. They also have the lowest credit score requirement of any mortgage, you need just a 580 credit score with 3.5% down.
You will have to provide proof of employment and proof of income to qualify for your mortgage. This shows the lender that you are creditworthy. It’s usually not great to quit your job during the home-buying process for this reason. Some lenders may ask for employment verification later in the home-buying process, so your approval could actually change if you take a lesser paying job during the home-buying process.
| |RateShield Approval locks your initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your exact interest rate will depend on the date you lock your rate. Once you submit your signed purchase agreement, we’ll compare your rate to our published rates for that date and re-lock your interest rate at the lower of the two rates for an additional 40 to 60 days. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Quicken Loans. This is not a commitment to lend. Additional conditions or exclusions may apply.
Closing costs and prepaids: Alex Clark, a real estate Endorsed Local Provider whose team closes an average of 100 homes a year in Portland, Oregon, advises his clients to save around 3% of a home’s purchase price for closing costs and prepaids. But that percentage can vary depending on how expensive fees and taxes are in your area. Closing costs are the fees charged by title companies and lenders involved in your real estate transaction. Prepaids cover any prorated property taxes and insurance items.
The winning bid isn’t always about price – the seller wants to feel confident about the entire transaction at the end of the day. If your bid includes your preapproval letter as opposed to a competing buyer’s prequalification, or you’re willing to let the seller take a little more time to move out, your offer might be the package the seller chooses.
As a metro area straddling two states – Missouri and Kansas – Kansas City keeps the cost of living cheap for residents of both states. With housing and utilities typically costing just over 26.3 percent of the blended annual household income, Kansas City moved up two spots on the Best Affordable Places to Live list this year, when it ranked No. 19 in 2016.
How to avoid this mistake: Ask a mortgage lender about your first-time home buyer options and look for programs in your state. You might qualify for a U.S. Department of Agriculture loan or one guaranteed by the Department of Veterans Affairs that doesn’t require a down payment. Federal Housing Administration loans have a minimum down payment of 3.5%, and some conventional loan programs allow down payments as low as 3%.
As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you'll know immediately if there's a problem that must be dealt with. Here's a bit of information that focuses on a few common problems that home buyers must deal with before they close on a house.
First-time homebuyers are often moving from rentals that use less energy (gas, oil, electric, propane, etc.) and water than a larger new home will. It is easy to be ambushed by soaring rates when your new house has ceilings higher than your rental – or older windows that leak air. Then there are unexpected utilities, such as buying gas to power a lawnmower. These costs can blow a budget.
"This investment shouldn’t be entered into without someone who knows the market, the neighborhood, local trends, specific values, and how to navigate the process," says George Lawton, licensed real estate agent with RE/MAX Over the Mountain in Birmingham, AL. "A Realtor who is your advocate and is looking out for your needs can simplify this process and make it enjoyable. But don’t just hire your neighbor’s mom who does this part time for Christmas money. Interview a few that are recommended by friends and family and see who you feel most comfortable with. You may be working together for months, and you want it to be a good relationship."
3. Savings for down-the-road expenses. Of course, you also have to take into account maintenance and other potential costs that may come up as a homeowner. If you live in a particularly competitive or pricey market, such as San Francisco or the District of Columbia, it’s reasonable to expect your monthly costs to be higher than 28 percent at the start.
Despite the District of Columbia having the fifth-highest cost of living out of the 100 largest metro areas in the U.S., the nation's capital is the 25th best affordable place to live. The District’s median blended annual household income – the median total income for households (rather than individuals) that rent or own a home in the area – is more than $95,000. This makes the blended annual cost of living – factoring in mortgage payments, rent, utilities and taxes – of slightly more than $25,000 comparatively affordable.
Even when your purchase offer has already been accepted, if inspections reveal any problems, you may want to renegotiate the home's purchase price to reflect the cost of any repairs you will need to make. You could also keep the purchase price the same but try to get the seller to pay for repairs. Though you may not have much scope to demand for repairs or a price reduction in case you're purchasing the property "as is," there is no harm in asking. You can also still back out without penalty if a major problem is found that the seller can't or won't fix it.
Williams got his start working in entertainment reporting in 1993, as an associate editor at "BOP," a teen entertainment magazine, and freelancing for publications, including Entertainment Weekly. He later moved to Ohio and worked for several years as a part-time features reporter at The Cincinnati Post and continued freelancing. His articles have been featured in outlets such as Life magazine, Ladies’ Home Journal, Cincinnati Magazine and Ohio Magazine.
A conventional loan is a loan that is not backed by the government (meaning that the government doesn’t make any guarantee that you will pay the mortgage), and therefore, carries private mortgage insurance if you put less than 20% down. Conventional loans adhere to guidelines set by Fannie Mae and Freddie Mac and are available to everyone, but are more difficult to qualify for than VA or FHA loans (you need better credit and a steady income, for example).
First-time home buyers tend to pay more than experienced buyers would pay for the same house, according to research conducted by two economists with the Federal Housing Finance Agency. In their analysis of appraisal data from more than 1.7 million home sales, FHFA economists Jessica Shui and Shriya Murthy concluded that first-timers overpay by an average of 0.79%, which was nearly $2,200 per house, according to the data set they examined.
Once you start seeing homes you like, call your agent and ask them to start scheduling viewings. And another, and another. Visit as many homes and open houses as you can. You can use the Trulia app to find open houses scheduled near you. The more comparing and contrasting you can do, the more knowledge you have about the market and your options. Ask your agent for advice about how to buy a house that really fits your needs.
Wouldn't it be great if buying a home were as simple as it is in a game of Monopoly? All you'd have to do is find a desirable neighborhood, hand the bank a few bucks, and you'd receive a house. Of course, the home-buying process is a bit more complicated in real life (especially for first-time home buyers), but it's not impossible. Competition among buyers in many markets has gotten intense, so if you're serious about homeownership, you'd better get your act together. To point you in the right direction, we've prepared a road map of the home-buying process. From choosing the right professionals to signing that final contract, here are the typical steps you need to be aware of.
Several years ago I remember a friend advising me to purchase a house before I was ready, and now I have been curious about the repercussions of purchasing a house outside your financial capabilities. I appreciate that you specifically pointed out that you should never stretch to buy your primary residence thinking that you can take cash out or flip it for a quick profit in a few years. Thank you for the advice regarding financial planning in purchasing real estate!
Next, review exactly how much you’re spending every month – and where it’s going. This will tell you how much you can allocate to a mortgage payment. “Make sure to account for every dollar you spend on utilities, kids' activities, food, car maintenance and payments, clothing, entertainment, retirement savings, regular savings, miscellaneous little items, etc., to know how and where a new mortgage payment fits into your budget,” says Liz Recchia, owner/broker at We Sell Real Estate, LLC, in Phoenix, Ariz., and author of “HELP! I Can't Make My House Payment!”
My tip – STICK TO YOUR PRICE RANGE! We looked at 10 houses in our price range and one house just north of our price range. Of course – the more expensive house looked better. We fell in love with it and we stretched our budget to afford it! We didn’t have a chance to view any other prices in that higher price range either so didn’t know if our offer was too high (it was in hindsight). Just a tip!