Valuable Advice for First Time Home Buyers
Purchasing a home for the first time can be exciting and terrifying..all at once! But if you learn more about the process and what some common pitfalls are before you even start looking, you’ll have a much smoother transaction when you are ready to head down the home buying highway. Let’s take a look..
1. Save, save, save
It pays to save for a home in advance. Even if you’re planning on taking advantage of being a Veteran (thank you for serving!!) which offers Vets 0% down home loans, plan on going with an FHA loan with 3.5% down, or even a USDA rural development loan with 0% down odds are you’re still going to need some money. Purchasing a home comes with closing costs. This is separate from your down payment. These costs include things such as pro-rated taxes, title fees, transaction fees, and so forth. Now, in some circumstances the seller of a home will assist in paying the buyer’s closing costs…but make no mistake these are YOUR costs not theirs. So if a seller does pay a percentage of yours that can end up being part of negotiations on price, and so forth. On top of closing costs, getting a home inspection is a really good idea. And that can cost anywhere from $300 up. Then there’s the appraisal that the lender will require. Some lenders with some types of loans require payment in advance from the buyer for this which can cost $400 give or take depending. Lastly, just having a little money put back in the bank is a good idea. What if some unexpected costs should occur? The furnace stops working or a plumbing leak? (Mind you this is where having a home warranty will help! More on this later) Your car needs a repair? Child needs braces? Even if you do not come across any financial setback in those early home owning days, chances are once you have your home you will want to put your personal touch on it. Maybe some new paint, a new dining room suite, install invisible fence for your dog, and so forth. These items are easier to obtain if you’ve saved in advance. Because then you’ll be less likely to accumulate credit card debt doing those things.
Obtain a pre-approval before you get serious
Even if you’re months away from starting your home search, checking out some different lenders, seeing what types of programs they offer, and learning how much home you can afford is important. A lender can let you know if there are any debts you need to pay off in advance of purchasing, how much they will pre-approve you for, and lastly how much your monthly payment might be. Homeowners expect Realtors to show their homes to buyers that are well qualified to actually purchase their home. Meaning- a buyer that has already taken steps to obtain a pre-approval from a lender.
When a Realtor schedules a showing for you, it is taking that time from another potential. It is also taking time that the seller has to prepare the home for showing, and then leave the home for that amount of time. Sometimes this includes packing up pets and young children. A lot of work goes on behind the scenes on the part of the seller before you ever step foot into a home. As you can imagine, if the home was just “open” to anyone for appointments it would become really difficult on the seller to repeat this process constantly, and all for folks whom do not even know if they can buy the house if they like it.
Lastly, it’s important to note that Realtors work do not make any money until a buyer finds a home that they wish to write an offer on, get it accepted, and go all the way to the closing table. We might show a buyer 10 homes or 50…but at the end of the day we do a lot of work for our buyers before we ever see a dime. We do not get paid hourly, or any amount of money for showing buyer’s homes. Our commission is based off of the sale of a home which then is paid to us at closing. So if we’re running around showing homes to buyers that do not even know if they can buy..that’s precious time and money we could be potentially wasting…wear and tear on our vehicles, gas expense, time away from our clients that are truly ready to buy, and time away from our families and life outside of work.
This is in no way meant to sound harsh, just simply a look behind the scenes so buyers can better understand why it is so important to speak with a lender in advance.
Find a Realtor you can trust
There are many Realtors and it’s important that you find one that you feel comfortable with and start building a lasting relationship. It might seem as if any Realtor will do. You just need someone to unlock the door so you can take a look around, right? No, wrong.
Your Realtor will wear so many hats during the time you work together:
– Search for homes meeting your specific wants and needs
– Provide detailed information on homes you are interested in including area comps, if it’s in a flood zone, copies of disclosures, and so forth.
– Schedule and orchestrate routes for showing tours
– Take you to see homes and help point out the good and bad of each
-Negotiate on your behalf during initial offers as well as later in the deal as repairs are needed
-Be the voice of reason
-Mediate any issues between various involved parties
-Be your go to source of information
-Head up your home buying team of professionals including the lender, title agency, listing agent
And all of this is just the tip of the iceberg, as each deal is different and takes on its own path.
Set the stage
Once you find “the one” with your Realtor and prepare your initial offer it’s important to keep in mind that your Realtor is a professional working on your behalf and will provide you with suggestions that will help you present an offer that all parties can be happy with. Home buyers want a GREAT deal on a home, and at times this can lead to what are called low ball offers. Meaning, offers on homes that are way below the market value of the home. The average home listed on the market is not going to accept these types of offers. Of course you want to negotiate for the best deal, and so does your Realtor. He or she will look at similar homes in the area to come up with some comparables, and on occasion they might find that a home is in fact overpriced at which point they will inform you of what would be a good offer. The point here is many factors go into making an offer and your Realtor will help set you up for success.
If you come in with an extremely low offer and ask for many other items such as closing costs and home warranties the seller will more than likely be put off. What this does is create a strained situation for negotiations later when the inspections and appraisal are completed. A seller is going to be more likely to take care of repair items if your offer in the beginning was reasonable. It’s really a dance of give and take; a balance needs to be found so that both buyer and seller are happy with what they’re getting at closing.
Get that inspection
General home inspections give buyers a chance to learn more about their new home. They’ll find out where the water shutoffs are located, information on the main mechanics of the home and if there’s any special care needed, and so forth. A home inspector will also point out any potential health and safety issues such as mold, fire hazards, or gas leaks. Sometimes further testing is needed for certain findings. Most home inspectors will give you a detailed report with photos that explains each defect found and how best to treat it. Your Realtor will review the report with you and you will decide what items you would like to request the seller to repair. Then, it is back to the negotiating table. It is important for buyers to note that typically the home inspection is more of an awareness tool and not meant as an all-inclusive laundry list for the sellers to handle. All homes will have issues, even new homes. The key is to see if any of the items found by the inspector are potentially dangerous, or so costly that it may affect your decision to purchase the home.
Consider a home warranty
Odds are that during the initial writing of an offer your Realtor will mention home warranties. A home warranty is typically a one year warranty that covers the main mechanics in the home such as the furnace, central air unit, hot water tank, and kitchen appliances. Some warranty companies do offer add-on plans for things like pools. If the home you’re purchasing has older appliances and mechanical items it would be a good idea to include a home warranty in the deal. You can ask the seller to provide one, or purchase it yourself. Most of the time these warranties are paid for at closing and typically start at $300 and go up from there, depending on what is included.
Hopefully these tips will help you make informed decisions as you prepare to become a homeowner. As always feel free to call, email, or text me with your questions and to get started!