Tips For First Time Buyers

The Importance of Pre‐Approval (Pre-qualified)

The #1 mistake first time buyers make is NOT getting pre approved/pre-qualified from a lender. Imagine spending the day looking at homes online or with your Realtor®. You find your dream home and decide to make an offer.

But when you meet with your mortgage professional, you find out the home is out of your price range.

The time and energy spent is wasted; leading to frustration for you and the seller.

Getting Pre-Qualified

Choose your Realtor before you get pre-qualified. Your Realtor can make lender recommendations and point you in the right direction. Your Realtor will refer you to meet and interview legitimate lenders to get pre‐qualified for a loan. Consider a federally‐insured bank or an NCUA‐insured credit union to obtain a loan application, good faith estimate (GFE), and a credit score disclosure.

The lender will determine your buying ability based upon:

• work history
• earnings history
• current savings
• debt‐to‐income ratios (current liabilities)
• down payment capacity
• savings reserves post‐closing

Obviously, credit scores will not only impact the loan interest rate, but also will determine if you will qualify for a conventional or FHA loan.

• The minimum credit score for an FHA loan is lower, but includes more up‐front fees to offset the risk
• The minimum credit score for a 97% Home path loan (Fannie Mae’s proprietary product) is usually slightly higher
• For a standard conventional loan with a loan‐to‐value of 95% or higher, buyers will typically need an even higher credit score to obtain mortgage insurance

The lender will establish sales price, loan amount, and loan payment amounts based upon guidelines that calculate your maximum debt limit.

Obtaining a home loan can be a full‐time job, making it a part of the process where you must exercise some patience.

In today’s financial climate, lenders will require a ton of documentation, including:

• Income and asset documents
• Pay stubs
• Each numbered page of the last two bank statements
• IRA and 401K statements
• Brokerage account statements
• Income tax returns from the past few years, and other tax forms

You should also be advised to start saving all your statements as lenders don’t like internet printouts

The reason for this is simple — the banks want to ensure a return on their investment and mitigate any potential borrower default.

Meeting with a mortgage lender before looking at homes is crucial to your success

Most mortgage professionals provide pre‐approval at no cost or obligation to the applicant.

A few more tips that will save you a lot of headache:

• Don’t close any revolving credit cards before beginning to shop for a house
• Don’t apply for new credit cards, car loans or department store charge cards
• Don’t let any account go into collection
• It’s also a good idea for you to always pay insurance co‐payments at the time of doctor’s visits

Buying a home requires patience – and time!

Below are a few points to know about buying a home:

• • Closing on a house can take (on average) four to six weeks from the date the contract is accepted. This time is for
    • inspections
    • appraisals
    • getting your mortgage paperwork in order
    • conducting a title search
    • and obtaining homeowner’s insurance
  • Since you are currently renting a house or apartment, you will need to let your landlord know of your plans to move. If the closing date in the purchase contract calls for a middle of the month closing, buyers should pay their rent through the end of the month so they will be able to move slowly and not feel rushed
  • Arranging time for moving is often overlooked. Work, school, and all your spare time has to be dedicated to the moving process. But if you plan from the beginning, moving becomes enjoyable, if not exciting

The Realtor® Interview – who should you hire?

Not all Realtors® are created equal. It’s important you choose the right Realtor® to help you find the right home for you.

Whether you’re a first time buyer or simply moving to a new home, you’ll want to find a Realtor® who is

• • • Experienced
    • Willing to help with negotiating repairs, if needed
    • Has a great network of possible homes to look at
    • Has a personality that fits with you
    • Listens to your wants and needs and has your best interest at heart.
    • Helps point out things you may not notice when looking for a home and willing to teach you through the process.
    • Has a dream team of assistants helping with all the details

Next month we’ll go into more depth on how to choose a real estate agent.