The information age has allowed first time buyers to be much better prepared than buyers a decade ago. There is no shortage of available information online, on tv and in print -to educate you on the home buying process. You can search for property from the privacy of your own home, day or night. But, information overload can be overwhelming and it may not all be applicable to your situation. Here are a few of the basics.
Knowing what you can afford is the best first step. Pre-qualification is important for a couple of reasons. Looking at your financial picture through a lenders eyes can either confirm that you are credit-worthy now, or identify areas you can work on now to improve your chances for loan approval in the future. The application process helps you determine your buying power, which can also help identify the best location to start your home search. Lenders use income-to-debt ratios to determine just how much they’re willing to lend you and that could be different from what you feel comfortable paying each month.
Pre-approval takes you to the next step. Your credit-worthiness is established as part of a formal loan application. Income and assets are verified, and you’ll learn what loan programs are available to you, and their accompany interest rates. This ultimately affects your monthly payment, so it’s very helpful to know that up front. Also, many California communities are fast-moving markets, so being prepared helps you respond appropriately when you do find the right property.
There are financial programs to help first time buyers. Find out if you’re eligible. There are city and state down payment assistance programs available. Most have income limitations, but if you’re eligible, they can help strengthen your purchasing power. Other programs can help cover closing costs. Programs have pluses and minuses. But understand them to see if they’re right for you.
Quotes you receive from lenders can vary greatly. Understand why. When people are in the house-hunting-lending-shopping mode, they naturally talk about it to friends and family. Comparing the interest rate a friend or relative received to the one you were quoted isn’t a straight forward comparison. So many factors go into an interest rate that you’ll want to get familiar with how it all works so you can make an informed decision. APR (annual percentage rate) is a great term for you to know and understand.
Don’t let anyone rush you. Buying a home should not be an impulse decision. Multiple offer markets often create a sense of urgency, or one of missing out. Don’t lose sight of the big picture – finding a home or neighborhood you’ll be happy with for years to come. Skipping inspections, or removing all contingencies up front just to ‘win the deal’ may not be the best decision for you in the long run.
Everyone will have an opinion. The amount of advice you may get during your home-buying process will boggle the mind. Ultimately, you’ll be the one living there. So, take it all in, but listen to your heart. It’s interesting how when working with people, I can ‘see’ when they find the right house. Their posture and their expressions change, very subtly, but still noticeable. Before any words are stated, I can see that they’ve found ‘the one’.
Your wants and needs may shift as you get learn the market. There is a terrible expression I heard in my early days as a Realtor ® that I found very distasteful. “Buyers are liars”. Not at all! When someone starts on their home buying journey, they have ideas about what they want, versus what they need. And when the ‘what they can afford’ piece enters into the equation, everything can shift. Sometimes it’s a willingness to look at a slightly higher price range; other times, it’s considering a different location. Usually buyers going through these types of transitions are getting comfortable with a change in their ultimate direction.
You need a good Realtor ®/Lender team. As lending guidelines have changed, more consumer protections have been built in. Complications with short sales, investor flips and bank owned properties have entered the equation. You need a team who will communicate well with each other and with you. Staying current on market and industry changes will keep you educated and prepared.
You’re buying so much more than just a house. It’s a home. And a neighborhood. A school. A commute route. A lifestyle. A community. A place to call your own. So give it the time and attention such a big decision should receive so you will be happy with your choices.