Wouldn’t you agree that everyone wants to be successful buying their first home? Afterall, your first place is where you will eat together, drink together, find safety from the world, and enjoy the comforts of home while you create memories that last a lifetime. I’m nearly 50 years old and the smell of fresh pizza smothered in Italian sauce and steamy cheese coming out of the oven in the kitchen of my childhood is still a fond memory every time I eat pizza with family or friends. Your new home will be filled with memories. Unfortunately, for the uniformed, first-time buying experiences often become a nightmare. But it doesn’t have to be that way. Here are a few important tips on how to make your first experience a winning venture.
You can avoid one of the most painful consequences of buying a home by talking to a professional lender before you step one foot in a home. Here is why. First, it’s human nature to want just a little better than you can afford. Am I right? Many first-time homebuyers spend the first part of their search looking for love in all the wrong places to use a popular tune. In this case, the wrong places are the wrong prices. When you sit down with a qualified lender early in the process, they can act as a guide, navigating you through the loan pre-qualification and pre-approval process. They will help you know what you can spend and save you a lot of wasted time spent on researching homes that aren’t a good fit.
Once you sit down with a professional lender and determine what kind of mortgage you can get, the next step to a successful home purchase is really being honest with yourself and coming to grips with what you can afford. What you can spend and what you can afford are two very different things. A mortgage is what you can spend as determined by a financial institution, whereas what you can afford takes into account all of the priorities of your life. If you like taking trips to Disneyland with your family, but your mortgage maxes out your funds, then you probably can’t afford the home you are looking at. A comfortable lifestyle includes a reasonable mortgage that leaves money on the table for the rest of life. Too often, inexperienced home buyers buy what the can spend instead of what they can afford. Take the time to sit around the dinner table with your family and talk about these concepts. Make a budget on a napkin and list out the fun stuff you like to do and how a new mortgage will affect it. Then, when you have honestly come up with the numbers, move on to the next step.
In his movie, Revenue Reserve, filmmaker Doug Orchard interviews some of the most successful and influential people in real estate. One of the key principles that comes out of the movie is the idea of having a reserve of liquid cash that is available to weather any financial storms that may affect your property. For investors, a good rule of thumb is to have a 30 percent revenue reserve that can be used to make mortgage payments in an emergency, do repairs on a property, or pay for other unexpected expenses. Homeowners, first-time or otherwise, should establish a revenue reserve for their property to insure against unexpected expenses that have the potential to destroy credit and lead to loss altogether. The point in all of this is that you should plan your mortgage and lifestyle expenses in a way that leaves a reserve of funds in the bank once the transaction is complete, and then build on it over time. Implementing this principle will put you in the top 10% of happy homeowners and reduce stress often caused by unexpected expenses.
As a first-time homebuyer, you are part of a select group of people that can get help from the Department of Housing and Urban Development. No first-time buyer should purchase a home without first discussing options that are provided by HUD. HUD is not a lender. HUD does not actually loan money to people in any way. Instead, HUD insures banks and mortgage lenders by backing up the loans that the issue to people who have never purchased a home before. One of the most common programs they offer is the 203(b) Basic Home Mortgage Loan. In return for insuring the loan, lending institutions, savings and loans, banks, and other lenders agree to lend based on specific criteria that you must meet.
HUD qualifications include:
The FHA also provides a program called the Good Credit Rewards Program. This program is designed to help homebuyers with good credit by providing the funds they will need to make a down payment and cover closing costs.
There are other assistance programs available and the best way to take advantage of them is to contact a lender who can provide you with road map to success.
Curious why a majority of real estate transactions in the United States are created and managed by a real estate agent? The answer is simple. Homebuyers do not enjoy the risk of financial loss caused by a bad purchase. Fear, pain, and danger should not be words that describe a home purchase. Yet sadly, many do-it-yourself home buyers unsuccessfully stumble through the nearly one hundred plus tasks vital to a winning purchase and sale. They find themselves stepping on transactional landmines that could have easily been avoided by an experienced agent. A good Realtor is worth every penny. They will save you time finding the right property, save you money negotiating the deal, and save you heartache managing contract requirements, expiration dates, lenders, title companies and more. That’s why most FSBO’s don’t mind working with a buyer’s agent.
For-sale-by-owner sellers want to make extra money, but understand the complexity of managing a transaction. FSBO sellers like to have the buyer’s agent do all the paperwork and manage all the tasks for both sides because they see the value in using a professional real estate agent to make sure everything gets done right. Learn from FSBO sellers and use a real estate agent. Tens of thousands of buyers and sellers can’t be wrong.