|
|
|
 |
|
|
|
|
Riverside & Corona Real Estate
First Steps for First-Time Buyers - Pedersen Real EstateWhat are the first steps when you want to buy a home? First, make sure your credit record will appeal to a lender. If you have doubts, get a copy of your credit report in advance. (You can do this online for free at ConsumerInfo.com and other Web sites). If your credit history is not so great, you're probably better off renting while you buy down your debts and repair your credit. Figuring out what you want. Make two lists: those things that you want and those things that you need. Usually there is some give and take with the list. Decide what you must have and those things that would be nice to have. Below are examples of the list. • Two bedrooms, two baths - must have • Safe, quiet neighborhood - must have • Garden • Ability to add on - would like to have • No major repairs needed - would like to have • Near close friends or family members -must have • Craftsman-style detached home - would like to have • Lots of natural daylight • Parking - must have • Affordable property taxes - must have What can you Afford? Every market is different, but the first step to answering this question is finding out what you can pay on a monthly basis after you've made your down payment—5, 10 or 20 percent of the asking price of the house. Visit a loan officer. The best way to learn what you can afford is to get pre-approved for a loan. Your Realtor may recommend someone or ask friends and relatives for references for good lenders. You'll walk away with a good idea of how your income, assets and liabilities translate into what you can afford, and it can also help your chances of beating out the competition in a sellers market (where there are more buyers than houses on the market) and the necessary pre-approval letter that sellers will require to consider your offer. Do the math. You can also do a simple calculation on your own. Broker wisdom says that monthly payments should be 25 to 33 percent of your monthly gross income. To calculate: Take your monthly income before taxes, including all sources, and divide it by four. Subtract from this figure the total amount you pay per month in debts (loans, charge accounts and the like). The result is the lower end of what you can reasonably afford to pay on a monthly basis. After deducting monthly homeowners insurance (say, $50 per month) and property tax payments ($100), you'll see approximately what you can afford for your monthly loan payment. To calculate the higher end, divide by three instead of four. There are also many mortgage calculators on the internet that can quickly figure mortgages. To find out how this translates in terms of house pricing, multiply your final total above by 12 (months) and then divide that number by the average interest rate on loans today—say, 7 percent. The result is the approximate market you'll be focusing on. Additional costs. Keep in mind that in addition to the purchase price you'll need extra cash for closing costs (including points and fees), inspection and future expenses. All in all, to get through closing—meaning, once you've signed the last remaining paper after agreeing on price and terms with the seller—the cost will typically be 2 to 7 percent more than the agreed-upon selling price. If you calculate that from the middle zone, at 4.5 percent, a $200,000 house will cost $209,000 to purchase. Be sure to consider annual property taxes and repairs (predictable and unexpected). Take heart in knowing that most first-time buyers are simply getting into the market. Your dream house may be two or three houses into the future, so don't feel like you have to spend every penny you can afford if it means trading off some cherished freedom. The most important step - Get your financing taken care of. It is crucial that you work with a lender and get "all your ducks lined up" before you start seriously looking at homes. We said this earlier, but it is important and worth repeating: Sellers won't even consider an offer without a pre-approval letter from the buyer's lender. This is not the same as a pre-qualification. Starting the house hunt. Now that you have an idea of what you can afford, you can focus on whether you're in the market for a condominium, townhouse, single-family detached home. Begin interviewing Realtors based on recommendations. A great Realtor can educate you about what to look for and avoid, provide reliable references for other experts you'll need along the line—such as lenders and inspectors—and represent you in negotiations and at closing. It definitely pays to shop around. Now you're ready for the fun stuff: the house hunting. Go to as many open houses as you can stand, even at times your broker isn't available, and then go to another. (Just be sure to sign in under your broker's name.) In the neighborhoods you're considering, include some homes you know you can't afford and some priced below your means. Think of it as leveling out your learning curve. Talk to friends and family about their buying experiences. People are often surprisingly open about what they've learned about financing, construction—and even themselves—in the course of buying their first house. And finally, if there are times when you just can't bear to see another overpriced house with kelly-green shag carpet, take a day off—and remind yourself that someday you'll know it was all worthwhile. Learn about buyer's closing costs here Back to main page Pedersen Real Estate
|
|
