Most of us don’t do so well the first time we try something, because there’s no substitute for experience. Especially if we’re male and don’t read the instruction manual. But when we decide to purchase a home for the first time, make a run at something we always thought was out of reach, then it’s easy to get lost in the ozone that swirls around the whole process. Looking at houses (This could be ours!) talking with lenders, driving neighborhoods, figuring out commutes, schools – it’s all a new and heady experience. It’s easy to undergo a momentary lapse of reason, or attention, or both. So here are some common oversights that almost everyone encounters the first time around.
• Budget. Even if you’ve never made one work before, it’s time to begin. Before you go house shopping, figure out what you can afford for a mortgage payment; taxes; a maintenance fund; insurance; loan closing costs – see? There’s a lot more to this then paying the monthly rent. And keep in mind; it’s a thirty year commitment.
• Check your credit reports and clean them up the errors and omissions. Then, if you can, get a pre-approved loan. Prequalification really doesn’t mean much; it simply indicates that the lender has checked your credit references. But walking in the door with pre-approval on a loan makes you a cash buyer. The seller is going to take you seriously and you’ll have some leverage in price negotiations.
• Sit down with your agent and go through the home-buying process. Learn what escrow is, understand every fee that is going to be tacked onto your home purchase and ask every question you can think of about seller’s obligations and buyer’s obligations. There’s a lot of new terminology, so plan on asking twice.
• Don’t over shop, so you won’t overbuy. The internet makes it awfully easy to look at houses in every part of your chosen location at every price range. The best way to avoid temptation is not to look. Chose your price range and tell your realtor that your upper limit isn’t moving. And don’t browse the web in those price ranges you can’t afford – expectations will simply turn to disappointments.
• When you find a serious prospect, spend the money on a thorough inspection. If the house is on a hillside or landfill, hire a soils engineer as well. If the inspector says the roof is shot, find out how much a new one will cost and bring it to the negotiation table. Don’t be blinded by the fact that you’ve found THE house. It could also turn into THE nightmare.
• Shop for your loan. Learn about the elements of a first-time mortgage: points, fees, interest rates. Insist on a loan without prepayment penalties – leave yourself the right to refinance or to sell the property without being penalized. Remember that the loan officer needs you – it’s not the other way around. There is a frightening assortment of loans out there with adjustable interest rates that are designed to look attractive to people dazzled by the process. Remember, this is a thirty-year budget until you decide otherwise.
• Talk to your friends who have been through it. It will help you to right-size the whole process, which can seem enormous to the first timer.
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