Top 5 Tips for First Time Home Buyers
As a Senior Loan Officer in Michigan I get asked if I would have any advice for first time home buyers. Below are my top 5 tips for first time home buyers:
5. Think in terms of a payment you are comfortable with vs a specific amount you want to spend.
As a lender I typically ask a potential borrower what they would be comfortable paying for a house payment including taxes, insurance & any home owners association fees etc. This is very important because I don’t know the things you might value. For instance, you may save hundreds of dollars every month for a vacation you take once a year, or you may frequent casino’s more than you like to admit. At any rate no one will understand your budget better than you.
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4. Get yourself into pre-approval shape.
There is a lot of advice I could give a first time home buyer as it relates to being “ready” to purchase. Make sure that you are making all of your payments on time. This is an essential component to having a credit score that is worthy of being pre-approved for a home loan. Even if the main reason you are wanting to purchase a home is because you really don’t like your landlord, make sure to pay your rent on time, every time.
If you currently live with family and do not have a rent payment do your best to “pay” yourself the equivalent of your new house payment each month into your savings account. This is important because that new 70″ 4K Ultra High Definition TV in your parents basement/your apartment is not proof that you can make your new house payment. What I am helping you to avoid is something called “payment shock.” An example of payment shock would be that you currently do not pay rent while simultaneously not having a savings pattern. To determine how to calculate payment shock visit http://wiki.fool.com/How_to_Calculate_Payment_Shock
If you have cash that is stashed under your mattress it will not be able to be used as a down payment for your new home. This comes as a surprise to many first-time home buyers. If you know that you will be purchasing a home a few months down the road get that money into your bank account so that it can “season.” You should have the cash deposited at least 60 days prior to making an offer on a home.
3. Make a plan and stick to it.
The goal of home ownership is something that you share with countless numbers of other people. Know what you want to accomplish. Write it out. Make a vision board with pictures of homes you can see yourself living in. Nothing will make you work harder to accomplish your dream than keeping your dream before you.
Here is a phenomenal article on “The reason vision boards work and how to make one.” http://www.huffingtonpost.com/elizabeth-rider/the-scientific-reason-why_b_6392274.html
2. Understand the value of having a professional realtor on your side.
I can not overestimate the value of a great realtor. They will meet with you to determine the type of home that will meet your needs and set up appointments to view homes that you are interested in. I have talked with many potential home buyers that have lost out on homes because they were searching the internet only to find the home they loved and thought was available had already been sold. Your realtor has the most up to date access to any home coming on the market giving you the advantage when it comes time to making your offer. Once you find a home your realtor will be your biggest advocate when it comes to negotiating the terms of the contract. It really pays to have a professional realtor representing you and your interests when you make such a large purchase. As a professional in the Michigan real estate and finance industry I would be more than happy to recommend a realtor to you. Not all realtors are created equal and I can say that I work with some of the best in Michigan!
Don’t just take my word for it http://home.howstuffworks.com/real-estate/buying-home/10-benefits-of-using-a-real-estate-agent.htm
1. Know what you can afford and get your pre-approval from a professional loan officer.
I have spoken with many borrowers that had a “pre-approval” from a lender only to find out later it was not worth the paper it was written on. There is a process to being pre-approved. A lender should be looking over your credit report in detail to see if there is anything that could potentially derail your purchase. I personally use a method I call D.I.G., which stands for Discover Investigate and Gather. I want to know what your financial history has been and how things look moving forward. Within a few minutes a professional loan officer can get the pulse of your financial life by asking the right questions. This is essential to you accomplishing your dream of home ownership. I would rather slow a borrower down if there is something we need to work on or “fix”rather than send you out looking knowing that your search will end in disappointment. I can not tell you how many real estate deals I have had to “save” because a lender did not do their due diligence on the front end. Don’t put one of the largest purchases you will ever make into the hands of a novice.
For information regarding your upcoming home purchase and to get your pre-approval contact me today! Download my free mobile app