People fear what they don’t understand. A good example is the purchase of a home. The average consumer knows very little about the home buying process. Between finding the right house, making sure it won’t fall apart the day after you buy, and finding the best financing, it’s no wonder so many people are afraid to buy homes.
Purchasing a home is one of the most important financial decisions you’ll ever make. For a first-time homebuyer, the decision to purchase can be daunting. It represents a major step since you and your family will potentially be assuming your largest responsibility. As with any major decision, it’s important that everyone—especially first-time homebuyers—take full advantage of the information that’s available to more clearly understand the home buying process.
To prepare, do some research before beginning the search for your dream home. Here are 6 steps to get started:
STEP 1: Before you start your house search, think carefully about what it will be like to be a homeowner. For most people, homeownership can be one of the most significant financial turning points in their lives. The advantages (tax benefits, pride of ownership, financial investment) far outweigh any drawbacks.
STEP 2: Your credit history is one of the first things a lender will look at in making a decision on your loan. Request a copy of your credit report from Experian, Equifax, Innovis and/or TransUnion, and review it carefully to be sure all the information is correct. If you find discrepancies, work with the credit agencies to resolve them.
STEP 3: Saving for a down payment can be one of the biggest barriers to homeownership. Mortgage lenders recognize this dilemma, and some even offer loans with down payments as low as 0%, under certain circumstances.
STEP 4: Keep in mind that most real estate agents represent the seller, not the buyer. But it’s possible to work with a Realtor who is dedicated to YOUR interests as a homebuyer. By using a “buyer’s agent”, you have a real estate professional in your corner who can disclose things to you about the seller (or the home) that you’d never learn if you dealt only with the seller’s agent. Best of all, even though a buyer’s agent works for you (not the seller), you don’t pay their commission (the seller does)! If a Realtor won’t offer you a buyer agent agreement, look for another agent.
STEP 5: Before you begin working with a Realtor, find a mortgage lender you can trust and ask to be pre-approved for a mortgage. Pre-approval is different from pre-qualification. Getting a pre-qualification letter is easy. You just call a mortgage lender, provide some basic financial information, then wait a few minutes for the letter to come via fax or email. Getting a “pre-qual” from a website is just as easy. Enter some information, click “submit” and voilà.
A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification, but the additional due diligence is exactly why the pre-approval carries more weight.
Most lenders will provide this service free of charge. Pre-approval will let you know exactly how much you can spend on a home BEFORE you start your search. A pre-approval in hand also makes you a more attractive buyer when you’re ready to make an offer on a home. Home sellers are more likely to accept an offer from a buyer who can demonstrate the ability to secure financing.
STEP 6: Many mortgage lenders, nonprofits, and even Realtors offer homebuyer education classes to prepare you for homeownership. Classes normally run about four hours and cover the basics of home buying. Some of the topics covered are how to apply for a loan, finding the right Realtor, making an offer on a home, and the advantages and responsibilities of homeownership.
So, what’s in it for you?
Obviously, there are real advantages to getting yourself out of the “trap” of paying rent. Now that you’ve seen some of the steps involved in achieving that goal, what’s the best way to proceed?
Yes, you could wander out into the mortgage market on your own and start shopping, comparing and negotiating directly with banks. Even if you’re working with a trusted real estate agent, you’re still pretty much on your own when it comes to financing since most Realtors don’t fully understand mortgages.
Keep in mind that that once you’ve signed a purchase agreement, you have to apply for a mortgage almost immediately. Is a day or two long enough for you to make a decision all by yourself that could affect you and your family for the next 30 years?
Dealing directly with a financial institution can add even more stress. Most banks like to “cherry pick” the easy clients that fit into standard off-the-shelf mortgage products. If your needs are slightly different, you may be turned down or end up paying a higher rate.
Why complicate and struggle through what should be one of life’s greatest pleasures? As your local mortgage lender, I’d be happy to help you realize your dreams of homeownership and take care of everything for you, for FREE. By working with a true professional—someone who has specialized knowledge of home financing—you can get the best available mortgage program and rate plus be confident you’ve made the right decision for today and the foreseeable future. The result: you’ll possibly save thousands of dollars and take a big step toward future financial security!
