First Time Buyer

Although every purchase of a home involves a degree of compromise, the process begins with the buyer’s preferences. When you are working with a real estate agent, it is important that you give your agent a clear idea which of your criteria are flexible and which items you really must have in your new home.

If you prefer a specific location, for example, discuss why you want to live in that neighborhood. The agent might be able to suggest alternatives areas which offer the same amenities or convenience to your office. How important is size? Do you really need four bedrooms or would three bedrooms work, if there is a den for your home office? How much are you willing to correct with redecorating or remodeling? Are you willing to expand your price range by using an adjustable rate mortgage to increase your buying power?

The agent will ask you a lot of questions so that they can use your time most efficiently by showing you houses that meet your criterion as a buyer.

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If you are looking for a new home, it is important to communicate with your real estate agent about any special aspects of your lifestyle that will influence your choice. This information will help your agent to locate the perfect home for you and your family.

Are you a gourmet cook who loves giving lots of parties? Do you want space to accommodate hobbies such as painting, photography, or woodworking? Will your decision be influenced by the accessibility of a community gym, a golf course or tennis courts? Does your son need space to rehearse with his rock band? Do you need a home office? Are you planning to enlarge your family? Is there someone in your household who cannot climb stairs?

Knowing the significant factors that will influence your housing decision helps the agent to narrow the selection of homes on the market.

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Many home buyers are concerned about whether they have an insurable interest in the property before the actual closing. The answer is an unqualified “yes”. Although the buyer is not yet the recorded owner of the property, he or she has an insurable interest in the property as soon as the agreement of sale is executed by both the buyer and seller.

Should you get hazard insurance before the closing? It depends. Buyers do not usually insure a property until the title passes to them from the seller. However, it’s wise to know what the agreement between you and the seller stipulates with regard to insurance.

Most agreements state that the property will be insured for a specific amount. This is very important to both parties. From the buyer’s point of view, it is also critical that an adequate sum or full replacement value be stipulated. Watch out for agreements which read “as now insured”. This is an all-too-common practice which usually indicates that the seller does not to want to increase inadequate insurance coverage

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Many of today’s purchase offers include a contingency clause that allows the buyers to hire a home inspector or professional expert to inspect the property. If there is a significant defect in the property, the buyer can cancel the contract without losing the earnest money deposit. Contingencies are excellent procedures that protects both the buyer and the seller.

The time period for inspection contingencies is negotiable. In most parts of the country, the buyers have about a week in which to cancel the contract if the structural inspection reveals a serious and consequential defect. The positive side to such contingencies is that the inspection usually addresses–and overcomes–the buyers’ misgivings, and confirms their decision to move ahead with the purchase.

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If you are house-hunting, you may spend hours looking at homes only to have them all blend into one giant blur at the end of the day. Which house had that beautifully designed great room? Was it the same one with the small master bedroom? You can remember what is important about each of the many properties that you saw by using the little tricks developed by real estate agents to help them identify the thousands of properties they see.

Carry a notebook with you when you are house-hunting, and give each house its own page. At the top of the page, note the address and price. Write down the exterior construction, style and color, as well as the color of the living room carpet and walls and any other major feature that will jog your memory later. You can nickname the houses–“the cow mailbox house” or “organic garden house”–anything to help you retain a mental picture of the property. This will enable you to recap the day and give your real estate agent important feedback that can speed up your search for the perfect home!

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Several years ago the U.S. Congress tried to protect consumers from a few unscrupulous lenders by requiring all lenders to calculate and disclose the annual percentage rate (APR) you pay on your mortgage loan. But most homebuyers will learn more by directing their attention to the Good Faith Estimate of Settlement Costs (GFE). Although Congress meant well, in practice the APR is not helpful and may be confusing.

If you are looking for a good way to understand your costs of borrowing and/or to compare one lender’s costs to another, the GFE is your best bet. Get your lender(s) to provide a written GFE before you commit your mortgage business. When reviewing a GFE, keep in mind that the lender actually controls only a certain portion of the disclosed costs. Other parties typically control costs of appraisal, settlement, title insurance, recording fees and taxes, survey, and the “prepaid” expenses of homeowner’s insurance, mortgage insurance, real estate taxes, etc. Review these origination fees, discount points, etc. and you will have the ability to understand the full costs of your proposed mortgage loan.

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Looking at homes can become overwhelming for many prospective buyers. The properties start to run together, and you have trouble remembering which homes you liked a lot and which ones you didn’t. Real estate agents use a few tricks that can help you remember what you have seen.

Usually the real estate agent will give you a copy of the listing with all the pertinent information. Write down one distinctive feature on the listing sheet that will help you remember the house. Maybe the house had unusual moldings in the dining room, a red door, or unusual wallpaper. If the house was particularly interesting to you, put a big star on the top of the page to remind yourself that you would like to see it again or even perhaps make an offer. If there are features for which you have a strong preference, or if you eliminate a house from consideration for any reason, be sure to tell the agent why.

Communication between you and the real estate agent is key. This will save you a lot of time and effort in your search because the agent will show you only the homes that meet your particular needs.

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Putting together an offer on a home is easy if the buyer has a lot of money, a terrific job and impeccable credit. Many buyers are not in that precise situation, however. And while sellers like to get their asking price, good listing agents prepare them for the possibility of receiving offers that involve some compromises.

Successful real estate agents know how to put together creative offers and do whatever it takes to make a transaction work. If a buyer is low on cash, the agent may structure an offer that shifts closing costs to the seller, minimizing the amount of cash that the buyer needs to close. A variation of a lease purchase arrangement might be effective if a buyer has recently changed jobs or is self-employed. Owner-financing for part of the loan can make a difference in some cases. If your agent brings you a complex offer designed to get a buyer into your home, don’t say “no” until you understand the offer.

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Most first-time buyers can qualify for a mortgage loan, but they may need help from parents to make the down payment or closing costs on their home. There are loan programs that minimize the down payment and closing costs for first-time buyers. These programs usually require that 3 to 5 percent of the purchase price come from the buyers’ funds, not from a loan or gift. Most lenders ask for the last three months’ bank records. The borrower will be asked to reveal the origin of any large deposits. If the money comes from the homebuyer’s parents, the lender may not consider those funds when qualifying the buyers.

Parents who are planning to help their children finance a home should transfer any funds several months before the house-hunting process begins. If it is a loan rather than a gift, a formal re-payment agreement should be drawn up between parents and children to eliminate potential misunderstandings or future complications with either estate.

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People who are selling their homes should know something about the market group from which their buyers are likely to appear. Many homes are perfect for a first-time buyer. First-time buyers are making a major purchase they have never attempted before, and may be unusually subject to the inevitable stress and anxiety that goes with buying a home.

First-time home buyers are usually younger (between 25 and 34 years of age) and have distinct buying patterns. First-timers are often looking for homes that are smaller, and perhaps older, than repeat buyers. The median home size for first-time buyers is about 1450 square feet. Approximately four in ten first-timers will buy homes built before 1960, compared to two in ten repeat buyers.

First-time buyers are in the process of developing a clearly defined sense of what they want in a house. They may not have enough money to buy their ultimate dream home at first, but seventy-four percent say they like their new home better than their previous residence.

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