First Time Homebuyers

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 and open houses, here are some tips to follow that will help you get a head start on your way to homeownership:

1. Will owning a home benefit you? Before you decide to buy, you have to be ready to give up the conveniences of renting. Having a landlord on call to fix repairs is usually part of the rental package, but once you become a homewoner, unless you're paying homeowner's association dues, all of the regular maintenance of the home will be your responsability. But along with more responsabilty comes large benefits, such as home appreciation, reduced income taxes, and pride of ownership. And, first time home buyers can qualify for a special tax credit if they purchase now until July 1, 2009. Learn more about the benefits of homeownership.

2. Figure out your purchasing power. 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. 

3. Take control of your credit. 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. This might also be a good time to request a free copy of your credit report and review it with a mortgage professional so you know where your credit stands - in today's lending environment it is especially critical to have good credit and maintain good credit if you're thinking of purchasing a home. Read more about Credit.

4. Understand your financing options. Take the time to learn about 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 programs such as a Veterans Affairs loan, a Federal or State Housing Financne Agency loan all which may offer a smaller down payment, or a Conventional (Fannie Mae) loan. And, some lenders even offer special programs for first-time buyers and can direct you to down-payment assistance programs available to low-income earners through state, county and community redevelopment offices.

5. Determine your down payment. 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 38 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.

6. Decide which features in a home are most important. Make a list of the particular features you would like the home to possess. 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.

7. Contact a Realtor and start viewing homes. Once you have completed the steps above and 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. 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.

8. Take your time and be sure and stick to your budget. 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. Keep in mind your overall monthly 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.