Mortgage Insights Blog

Buying a home for the first time is both exciting and nerve-racking. It is something everyone dreams of, but it is also a huge commitment. Before you contact a local real estate agent who can take you on a tour of local homes open houses, start by getting pre-approved by a local mortgage broker or lender. A pre-approval is more involved than just a simple pre-qualification, but once you are pre-approved you will have a more realistic expectation of the price range that you should be looking into and puts you in a better position with sellers when you make an offer.

If you’ve set a timetable for buying a home, make an effort to pay down your credit card debt before applying for a loan. Your debt will have a major impact on how much you can borrow. Also, be sure to take the time to research all the different types of home loans available. For instance, be sure that the lender or mortgage broker you contact will help you find out if you qualify for a Veterans Affairs loan, Fannie Mae or Federal Housing Administration loan, which requires a smaller down payment. And, some lenders even offer special programs for first-time buyers and others can direct you to down-payment assistance programs available to low-income earners through state, county and community redevelopment offices such as CalHFA.

After determining your mortgage options and possible down-payment assistance programs, you should think about how much of a down payment you can realistically afford. If you don t have much money saved, you may be able to arrange a loan from a parent or relative who is willing to help out. Experts advise that your annual mortgage payment, taxes and homeowner s insurance should not exceed 28 percent of your gross income. As you calculate how much you can put toward a down payment, be sure to set aside three to five percent of the home s value for closing costs and remember to keep some money in reserve for extra mortgage payment, furnishings, moving expenses, etc.

Once you have a comfortable price range in mind you should begin contacting local Realtors who can make recommendations of neighborhoods where you think you might like to live based on your particular search criteria. Decide which features in a home are most important to you and write them down. For example, if you cook a lot a big kitchen may be a priority. For couples with children a location with a good school district is a must. Some features like a fireplace, patio or large dining room may not be that important to you.

The next step is to drive through the neighborhoods as recommended by your real estate agent and take notes of the homes for sale that catch your attention along with the distance to schools and the overall feel of the neighborhoods. You can save time and gas by doing some preliminary research online and by looking through the real estate listings on-line (www.mlslistings.com) and in local newspapers.

Don’t get too carried away with the first couple of homes you see. Take the time to shop around and make sure you’ve explored different neighborhoods to get a clear idea of what is available both in new and pre-owned homes. Condos, townhomes and courtyard homes are other options you may want to explore if having a big yard isn’t a priority, but these properties usually come with extra housing expenses such as homeowner association dues.

Talk with several real estate agents and choose one that you feel comfortable with. For first-time buyers, having an agent who is patient and who can explain the intricacies of the buying process is critical. Be sure and stick to your budget as you have other homeowner expenses such as property taxes, hazard insurance, mortgage insurance, and even homeowner association dues to pay besides your mortgage.

Don’t be disillusioned if you don’t get the first house you make an offer on. Let the real estate agent guide you to other suitable listings and keep looking. And be prepared to deal with feelings of panic and confusion once your offer is accepted and the mortgage is approved. Your mortgage broker and real estate agent will help guide you through the steps leading up to the closing.