For first time home buyer Emily Cohen, the process of owning took an unconventional route. She and her husband, Shawn, were able to buy the home they were renting from their landlord. However, the tips they got geared toward conventional first time buyers were invaluable in their search.
The process presented itself with more than one question. Which meant Cohen had to do a little more research online to ensure she didn’t miss any steps.
We spoke to real estate expert Andrew Fortune to help answer first time home buyers’ common questions.
As the founder of the Great Colorado Homes, Inc., a real estate agency based in Colorado Springs, CO, Fortune said he spends a great deal of time working with first time home buyers.
“With every first time home buyer, we sit down and have a home buying consultation meeting where we go through all the steps they need to learn about,” he said.
Fortune provides first time buyers a checklist. Read on to learn some of the items on his list so you’re more prepared when it comes time to buy your first home.
What are the qualifications for first time home buyers?
Fortune suggests first time home buyers first get to know their credit score and eliminate any outstanding debt before they look into qualifying for any loans.
“From the lender standpoint, the two things they’re going to look at is credit score and their debt to income ratio,” Fortune said. “I would say that takes care of 80 percent of their approval.”
There are other factors that come into play such as if they’re caught up on filing their taxes.
Got those issues squared away? Great! It still doesn’t mean you’re ready to look for homes, said Fortune, who has been a licensed Realtor for a decade. First, it’s time to look for a lender or broker.
Cohen said one of the biggest things she learned during the process is the practice of shopping around for a lender or broker, and for the best rates.
Cohen and her husband were are able to drop the interest rate on their loan from 3.5% to 2.75% with a little extra research and work.
“It ended up saving us a lot of money and a lot of money in each month’s mortgage payment,” she said. “That was something I totally didn’t know about at all.”
How to Stay In Your Price Range for a New Home?
Prior to looking at any home with first time home buyers, Fortune likes to explain the housing market they’re getting into and what homes are currently on the market.
He doesn’t want his clients to look in a neighborhood they can’t afford.
“A lot of people can get pre-approved, but pre-approved for the amount that justifies the home they’re looking at,” he said.
For example, a home buyer who is pre-approved for $300,000 needs to know how far that will go where they want to live. If you’re looking in Colorado Springs, for example, you’ll probably get outbid in your first 10 homes with that bid because the market is so competitive.
This is why Fortune says it’s key his clients understand this question: “Is the amount they are approved for a realistic amount to buy a house in the area they are looking.”
How Much Should a First Time Home Buyer Put Down?
Saving for a down payment is necessary, says Fortune, but how much you put down will vary with each individual.
“If you say yes, you want to start this process (to buy a home), you’re going to need some money,” he shared.
Although the down payment mostly likely won’t be 20 percent of the home’s price.
“I don’t anyone who’s put down 20 percent in years – it’s an old number,” Fortune said. “Most people will put 2.5% to 5% percent down.”
Should I Pay for a Home Inspection?
In short, Fortune says yes. A home inspection is a limited review of the home’s current condition. This can help buyers learn about the problems with a house prior to purchasing it.
“We’ll have home buyers that say ‘I read in a blog that I could get my offer accepted if I just waived the home inspection,’” he said.
The financial risks to a first time home buyer is far greater if they opt out or waive the home inspection, Fortune said.
“I always tell people don’t do it, don’t waive the home inspection because you’re desperate,” Fortune said. “You might regret this years later and it might cost you tens of thousands of dollars when a home inspection costs $300 to $400.”
As Fortune explains, if the first time home buyer agreed to waive the home inspection, but then learns they’ve got $60,000 of damage in the house, they won’t be able to get out of the contract because they waived the home inspection.
Cohen said she was able to do a home inspection, but only after she did some research.
“Being a first time home buyer we didn’t know what we were doing and a lot of times a real estate agent is taking care of those kinds of things,” she said.
What Costs Should You Factor In Buying a Home?
For Cohen, who moved into a neighborhood outside of Phoenix, she suggests factoring for a down, home inspection fee, moving costs, and home improvements. In some cases first time home buyers still have to pay rent on their apartment while they get ready to move.
Luckily Cohen and her husband didn’t have any moving costs incurred, but after being renters for a long time they agreed to spend money on new furniture.
“Allow yourself to make some purchases once you buy the house but at the same time keep a level head as far as perspective on your budget and debt,” she advised.
Fortune said he provides his clients with a list of the costs of maintaining a home – things the mortgage company isn’t going to cover.
“Sometimes we’ll sit down with and then they’ll say ‘you know what, I don’t even want to buy a home now,’” Fortune shared.
If you’re a first-time home buyer and still have questions about the home inspection process, keep reading on what to expect, what to look for and what questions to ask.
Need an explanation on mortgage types, keep reading for tips from two mortgage specialists. Maybe you’re looking to move in the future, but want to wait for the best season to buy a house, keep reading for tips to time your purchase!