Home is Where the Heart Is
A Guide to Buying a First House
by Andy Jacob
Back to Real Estate Info

You're in love, and owning a home goes with marriage like champagne with wedding cake. After the emotional high of getting wed, you will want the purchase of your first house to be as stress-free as possible to prolong that honeymoon long into your Golden Years. Here's a guide:

Know your resources 
The first step towards owning a home is to analyze your finances. Arming yourself with information will make you more confident in negotiations with sellers, agents, brokers, and lenders. You will want to have a clear understanding of what you can afford. Most everyone, especially first-time homebuyers, will need a loan to help with financing. How big a down payment you can make may dictate not only what your monthly payment is, but also how closely your finances will be examined! Determine how much of a down payment you can afford to make. Calculate your net worth by adding up all your assets and subtracting your liabilities. From your net worth, subtract what funds you need toward moving expenses, college, emergencies, retirement or other vital savings.
The amount you are left with is what you can afford to put down on a home. Estimate conservatively. As a general rule, almost everything costs more than anticipated. If you can't put down at least 20 percent of what the home is worth, you may have to pay private mortgage insurance. This ensures you will not default on the lender.

Typically, your monthly expenses and your mortgage payment should equal approximately 36 percent of your gross monthly income or less. This is a general guideline and situations differ depending on your credit history, income and type of loan for which you qualify.

Prior to house shopping, keep your credit clean. Avoid large purchases on credit. Those lending you money toward your home will want to know that you have a history of paying what you owe. If you have negative information filed on your credit report, contact creditors who have filed it and contact the credit bureau about any damaging reports that have been filed incorrectly.

Before engaging home sellers, you will want to meet with a lender to pre-qualify for a loan. A lenders pre-approval shows home sellers that you are serious about what may be the largest purchase in your life - particularly helpful if bidding against others

Know what you want 
By now you know your spouse's favorite food and how they like their coffee. But a valuable get-to-know-each-other session will be to talk about your likes and dislikes in a home and neighborhood. Take two sheets of paper. On the first, write "home" at the top. On the second list, write "neighborhood." Divide each sheet of paper into two columns with "likes" on one side and "dislikes" on the other.

What do you and your spouse want in a home and neighborhood? What do you not want? Be specific and realistic Practical items for the home and neighborhood lists are lighting, number of baths, commute time to work, school districts, etc. After reviewing your priorities decide what type of home and neighborhood you desire.

Shopping for a home 
Now you know what you can afford and what you want; there are three ways to get it. You can shop for your home without outside help. This is done by searching the real estate classified and cold calling. This will quickly acquaint you with what the different neighborhoods cost and is a great way to start shopping whether you ultimately do it alone or with help. Classified shopping will put you directly In touch with the seller's market without middleman fees. Cold calling is surveying neighborhoods for rooms, which you right like. Then, cross-reference their phone numbers in a local directory or with public land records. Don't limit yourself to houses with For Sale signs when cold calling. This may give you first crack at making an offer.

Using a professional real estate agent is the most common form of house shopping with good reason. Agents have more access to what homes are for sale and where. Another plus is t1at no fees are drawn from the buyer's side. However, in many cases the agent is paid by the seller, so make sure you understand the agency relationship between you and your realtor.

Some homebuyers opt for a buyer's broker. Buyers' brokers also allocate homes but are compensated for their time by the buyer When searching for an agent or buyer's broker, speak with your friends who have used them. Ask for references and review their level of experience. Talk to a number of professionals until the "feel" is right.

The Purchase 
Once you and your spouse agree on a home and understand the costs involved, it's time for the plunge. Write out an offer to the seller. Make this offer for less than what you believe the seller is asking This is called a purchase or sales agreement. The seller may accept or make a counter offer, which you may decline and further counter. If an agreement is never reached in this process, move on to another home.

The offer, if accepted, will become the sales agreement. Before signing the agreement, make sure the home is thoroughly inspected. Terms covered in the sales agreement are numerous for your and the seller's protection. Someone savvy in real estate law should review the sales agreement on your behalf before you sign.

An escrow account or title company is often utilized to handle the transaction. These entities act as neutral third parties that receive all funds, acknowledges the lender, passes the funds on to the seller, and transfer the title to you once all of the obligations have been met.

Closing on the home loan 
At the time of closing, the buyer can count on fees outside of the down payment. These vary among lenders. The good news is mortgage lending is highly competitive and there are plenty to shop among for the best deal. At the time of closing, you will meet with the seller and lender with any legal representation on hand. Have adequate funds in your checking account to pay for a down payment and other costs. Have a copy of the purchase agreement for your reference.

Other materials to have on hand include two years worth of tax returns, bank statements and paycheck stubs. Also, have the tax bill, deed, and title or survey. Closing is the final step in the exchange of title. Congratulations, you are now husband and wife… and homeowners.

Conclusion 
Like marriage, the rewards of home ownership are vast but not without sacrifice. Mortgage payments can cost around 30 percent of your annual income. The interest on mortgage payments, however, is tax deductible, which makes it more sensible than renting for married couples who can afford it. Be prepared to spend time when house shopping and money when house buying. After you have successfully purchased your first home, you can enjoy it as is or further tailor it to the perfect love nest for you and your Spouse.

Back to Real Estate Info