Think You’re Ready to Buy a House? Where Do You Even Begin?
You’ve made up your mind. This is it. This is the last time you renew your apartment’s lease. This time next year, you’re going to be in your own home. Now, how do you make it happen? It’s a pretty big decision to buy a home and a lot of people will weigh in with advice from your friends who just bought their first condo and love entertaining every weekend to your co-worker who bought a house last year and has had one problem after another. While you may be tired of renting, how do you really know you’re ready to be a home owner? Where do you start? You’re not alone in your decision. According to the National Association of REALTORS®, first-time homebuyers make up 35% of all home buyers. Let’s tackle the “how do you know?” part first.
If it breaks, who will fix it?
One of the biggest reasons why people are hesitant to give up renting is home maintenance. Even brand-new homes will require some kind of routine care. You’ll have grass to cut. Lawns to water. Maybe even snow and ice to contend with in the winter. If something breaks, you’ll be responsible for fixing it or paying to fix it. Can you handle that? If so, you’ve conquered your first hurdle. If you’re not sure, that’s okay. You can ease into it. Many home improvement stores offer free workshops on routine home maintenance. Most neighborhoods have handyman services that can come out quickly to fix something. And the internet is bursting with DIY and how-to videos. If you buy a condo, you may even be able to get help with some basic home maintenance through the condo association.
Are you financially fit?
The next thing you need to think about is whether or not your current financial situation can support a mortgage payment. Right now, you’re probably paying rent so you’re used to a fixed dollar amount due on the first of every month. However, your mortgage payment may also include property taxes and homeowners insurance, which may cause your mortgage payment to change from year to year.
If you’re thinking of buying a condo, you may also have monthly condo association dues.
You’re probably already paying for utilities, but if you increase your square footage, you may have to pay more for electricity to heat or cool a larger home.
Then, there’s the down payment and closing costs for your home loan. There are loan programs that may allow you to get help for your down payment and you may be able to get the seller of the home to cover some of the closing costs. But, there may be other fees you’ll still need to pay, such as the home inspection or home appraisal.
If you’ve been saving money for a home purchase, you’re off to a good start. If you have family members who can help you out, that’s great, too, because some loan programs allow gift funds for down payments.
Lastly, when was the last time you looked at your credit report and credit score? Your credit score is important for your mortgage lender. The amount of debt you have and your payment history are also important. You can get three free copies of your credit report each year (one from each bureau), so you may want to check it for any mistakes or improvements you may need to make. Ok, so now that you’ve thought through all of these things and you still feel pretty confident that you’re ready to buy a home, where do you start?
Find a licensed mortgage banker
Since you’re buying a home, your first instinct is to find a real estate agent, but the truth is, your first call should be to a mortgage banker. Your mortgage banker can sit down with you and tell you right away if you pre-qualify for any loan programs, based on some basic information. There’s no obligation, and there’s no cost for this initial chat. Even better, if you’re interested in continuing with the process, your mortgage banker may also be able to give you a conditional approval within a few hours, telling you exactly how much money you may be able to borrow for a home, thanks to To-Be-Determined (TBD) underwriting, also referred to as upfront underwriting. That’s awesome news because with a conditional approval you can go to a real estate agent with a dollar amount in mind instead of looking at houses and then going to the mortgage banker and asking, “How about this one? Can I get a loan for this one?”
“The TBD process is streamlined for the borrower. It takes the pressure off of the end of the process because everything is pretty much buttoned up and done by then,” states Ashlynn Sawyer, Senior Mortgage Banker at Atlantic Bay, about the benefits of upfront underwriting.
A mortgage banker can also help assess your overall plan for your home and help you pick the right mortgage that fits your situation. Do you need a low down payment? Are you eligible to use veteran’s benefits? Are there any programs for first-time homebuyers that you can use? What if the property you want is in a rural area? Your mortgage banker can answer those questions and more. They can also walk you through exactly what happens with your loan process and what you can expect along the way to closing. Your mortgage banker knows all of the key players in your loan approval and can tell you who does what and why.
What if you already have a real estate agent?
It’s okay if you have a real estate professional before you talk to a mortgage banker. They can start looking for properties for you based on your wish list and then help narrow down the search once you have talked to a mortgage banker. Some real estate agents can also tell you what mortgage bankers they’ve worked with in the past on other home purchases to help you get started.
What if you don't have a real estate agent?
Even if you don’t go through a mortgage banker first, you can still easily find an agent. There are plenty of real estate websites such as Zillow or Trulia that can help you get started with your search, which will then lead you to real estate agents in your area. Ask family and friends who they’ve used. Some mortgage bankers have offices near real estate offices to make it easier for you to multi-task your home search. Just make sure that you find a real estate professional who is just as interested in your home purchase as you are. Congratulations on your decision to buy a home. Your home is a major asset and investment for your future. With a little research upfront, you’ll be able to make the process less stressful and know for sure that this is the right choice for you. Ready to buy a home? Please contact an Atlantic Bay mortgage banker today to get started.