Guide To Buying Your First Home

GUIDE TO BUYING YOUR FIRST HOME

Adulting can be a really difficult thing, but we all start somewhere. Perhaps for you, it started as an afterthought while sitting in your apartment or at your parent’s home, and you have an epiphany! “Hey, why am I paying someone else’s mortgage?” Now you’re on to thoughts of, oh man, what do I do now? Fear not, we are here to guide you to the American dream of home ownership from epiphany to handing you the keys to your new home. 

DO YOUR RESEARCH FIRST AND START 3 TO 6 MONTHS OUT:

You’ll want to at least be employed at the same place for a year or more but two is better. If you had to change employment through no fault of your own within less than a year, at least be in the same profession as the last employer. It makes underwriters (the people who run the numbers and decide if you’re credit worthy for your home loan) less nervous if you are at least consistent with the employment type.

Get an idea of your credit score. You’ll want to see what kind of surprises or errors there are and dispute them. DO NOT use a credit score app. If you have it already, get it off your phone. Those sites sell your information to collection agencies and may decrease your score. Not everyone agrees with what I’m about to tell you, but NEVER EVER dispute an error online. It shortens your timeline of rights for responses. Always, always, dispute in writing. You want to aim for at least a 620 or better score. 640 means you’ll qualify, but rates may be higher, 680 you’re in the clear, 700 and above, you’ll qualify for almost anything.  If you haven’t established credit yet, get a basic credit card. You can apply for one that’s secured by your own funds or one that’s about $500 through your bank or a credit union. This can boost your score upwards of 100 points, but try to only charge about 10% of the card limit, then pay it off every month. Speaking of banks, you need to carefully watch your spending and do not accrue overdrafts. Too many of those and you’ll be writing a lot of letters in your loan process to explain. 

You’re going to need at least some cash saved, even if you are getting a no down loan, to cover earnest money (at least $1,000), about $500 to pay for home inspection, but bank on at least $2,500 to cover incidentals related to home purchase. 

GET A PREAPPROVAL FROM AN ESTABLISHED LOCAL LENDER:

I’m sure you’ve seen the advertisements on tv about home loan places with names that suggest “Speed” or “fast”. NO! If you use these loan places, you, your Realtor and title, escrow folks will descend into a nightmare of talking to call center people and this may drastically extend your time to close and will anger your sellers and their team. You need a hands on local lender that actually answers their phone. If you’re unsure of who to use, ask your friends or relatives for referrals or people that they’ve used before. Interview these people before you hire them. Are you the customer that needs hand holding or asks a million questions? You’ll want to pair with a lender who is responsive to your calls and answers within a few hours. Why is this important? Because they will be running your credit report and that generates what’s known as a “hard inquiry”. Every check on your report generates hits on your credit score and lowers it, so you want to be sure of who you’re working with. 

Ok, now you have your pre approval. Please remember that it’s just a limit. That doesn’t mean you have to buy that much house. You don’t want to be house poor and have no nest egg to do repairs or, you know, eat! Ask your lender how much house you can buy at the mortgage payment you feel more comfortable with.

FIND A REALTOR THAT YOU LOVE:

Here’s where it gets fun! Once again, ask friends and family for referrals. You’ll need to interview these prospects. Just because they’ve been in business a long time or because they’re new, or Aunt Gina used them, does not mean they’ll be good or bad. Read their reviews or Google them to get a feel for how their clients feel about them. A newer agent may go the extra mile for you to close the deal. You want to avoid agents that are just after a paycheck. Your agent should want to establish a relationship with you even after you’re closed and any agent worth their salt will have incentives and spoil you. They should be checking in on you periodically after the sale and giving you updates on your purchase throughout the process. If they’re not willing to slay dragons and sprinkle magic fairy dust on a problem, find another agent. 

It’s not enough to just hire an agent, you want to hire a Realtor. Why? Realtor’s are held to higher ethical standards than an agent and they have special training for those standards. It’s the equivalent of the difference between an associates degree and a masters degree. It doesn’t mean they will make a good fit or negate the need for interviewing a potential agent but it definitely implies greater reliability in terms of being in an association known for ethical standards! You also should not be afraid to fire that Realtor if you feel they’re not listening to you or your needs aren’t being met. This is your show.

SHOPPING FOR YOUR HOME, BEING UNDER CONTRACT AND CLOSING:

You’ve got your pre approval budget, found your Realtor, now to find that home. A good Realtor listens to what you like, what your needs are and learns from you as you shop. Listen to your agent. They may learn that you need at least 2,500 square feet, 4 bedrooms, etc., but you asked to see a home that your agent knows won’t work for you. It’s going to take all your willpower to not go to tour that home, but please listen. It’s a waste of both your time and theirs. We have a tool in our arsenal that we use under Northwest Multiple Listings that we input your criteria (price limit, beds, baths, RV parking, etc) that will auto email you listings that match. Easy Peasy! 

You found the home, you’re under contract and the wait begins. Make sure you are being responsive to your lender when they request documents and send them ASAP. Delays in your response time could extend your loan time and you could potentially lose the deal for failure to perform. DO NOT buy anything under credit at all. No furniture shopping, no new car. Wait until you get the keys in your hand. Don’t deposit large checks into your savings or you’ll have to explain that too. In other words, if Auntie Sue gives you an inheritance, speak with your lender before depositing it. I know it seems odd that a bank would not want you to have money, but to them they think if someone’s shelling out a ton of cash for you, you may not be as solvent as you appear. Just behave, LOL!

It’s closed, you have your keys! Congratulations. The relationship with your Realtor shouldn’t end there. Your Realtor will normally check on you, bring a housewarming gift and in our case (here’s where interviewing your agent comes in handy), we let our client’s use our moving box truck for free after closing. Trust the process, learn and have fun. This is the biggest, most important transaction of your life. If you follow these tips, it should be smooth sailing.

Amy Maiello

P.S. If you need assistance with credit repair, see below.