Buying your first home can we intimidating, that is why doing some research before you buy or start the process in imperative.
- Find out what houses are selling for in the area you are looking. Maine Listings or a local real estate office will be a good start, I find that the larger national sites are delayed and don’t always depict the most accurate picture.
- Get to a mortgage loan officer first; find out what your total monthly housing cost would be, including taxes and homeowners insurance. This will give you an idea of what you can afford before you speak to a realtor. How do you find a loan officer? Ask a friend or do a quick search online. Try to find someone who you like, you are going to spend the next six months to a year working with this person.
- Check out your credit, issues with credit or the inability to make down payment can put a stop to your homeownership plans. Educate yourself; look at your creditworthiness early in the home-buying process. If you or your loan officer find mistakes, your loan officer can contact the credit reporting bureau to make sure they are corrected. And don’t worry, more often than not prospective buyers have some blemishes on their credit.
- Get your paperwork in order, your loan officer will need a good amount of documentation before getting you pre-approved or pre-qualified. Assemble pay stubs, bank statements, W-2s, tax returns for the last two years, statements from current loans and credit lines, and addresses for the past two years. Getting pre-qualified will force realtors to take you seriously and know that you already have some skin in the game.
- Find a good realtor. The same as a loan officer, you are going to be working with this person for a while, so it’s best if you like and trust them.
- Talk to your realtor about the real estate climate. Do they believe prices will continue falling or do they think your area has hit bottom or will rise soon? What neighborhoods are up and coming?
- Ask your loan officer how much you'll likely pay in closing costs. The upfront cost of settling on your home shouldn't be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items like homeowners insurance or homeowners' association fees.
- If you get declined by a lender don’t stop there, get a second or third opinion. If a bank or credit union turns you down go to a mortgage company and vice versa. Depending on your situation, different types of lenders will work better than others. Portfolio lenders, like some banks and credit unions can bend on rules that mortgage companies cannot. However, sometimes banks and credit unions don’t offer the expansive spread of products that mortgage companies typically do. At times, mortgage companies can have more flexibility and you don’t have to open a special checking account to get a loan with them.
- At the end of the day, remember to look at the big picture. Buying a home is a great way to build wealth, but maintaining your investment can be laborious and expensive. You can’t call your landlord when something breaks, or when your hot water heater stops working.