First Time Home Buyers - Who knows how to buy a house? (Step 1)

Who knows how to buy a house?  Raise your hands - who knows?

 

Okay, then, it looks like a lot of you know how to buy a house so why am I writing this blog?  Because first time home buyers don't know what they don't know.  It sure looks easy on HGTV - heck, those first time buyers look at three homes and buy one in less than 30 minutes!  Navigating the market and buying a home is a tad more difficult than that, in the world outside of "reality" TV.  In fact, it ranks up there with death and divorce on the stress-o-meter.  You need to start by building your team:  a Realtor and a lender to see you through what is likely the biggest investment you've made in your life so far.

Where do you start?

FINANCES

If you don't know how much it actually costs to buy a house (those things called closing costs and other things like inspections, in addition to the actual home purchase price), you don't know what you can buy.  This comes even before deciding where to buy the house, how many bedrooms you need, and where the TV will go.  It could even come before picking the right Realtor, although the right Realtor will be an excellent resource for the right lender.

The first step in the home buying process is connecting with a great lender.  You want a lender with a variety of loan options, with a high level of customer service, with a local presence.  Some of the big banks and online lenders promise great rates, but are they going to be available to you when you can't get a document you need, when you have questions about the process, when you are in high anxiety about spending your life savings?  A great lender will take the time to explain every step, the reason behind every question.  They will guide you through the loan application process, over the options you have on types of loans to see what works best for you.  They will talk with you about how much down payment you need to avoid PMI (private mortgage insurance) which could add hundreds of dollars to your mortgage payment.  And they will tell you when it makes sense to put down less, pay the PMI and then refinance.

Ideally, you should start this process a month or two before you are ready to buy.   A good lender will also help you get your credit in check (if it needs checking), as well as guide you through how to keep that credit in check during the whole process.  You may not know what slipped into your credit report when you weren't looking and you need the time to get it corrected.

WHAT DO I NEED TO GET A LOAN?

It takes time to gather all the information needed for the loan approval process:  your most recent two years of W-2s, personal Federal Tax Returns, most recent paystubs, the last two months of statements from your assets (checking, saving, investments, etc.), your I.D., your social security card, your 3rd grade social studies project. 

A loan pre-approval letter, along with an underwriting report (known as a "DU") on your finances is usually required just to submit an offer.  Your FICO score is also frequently requested, although usually included in the DU.  In addition to the fact that you can't even make an offer without the finances in order, most Realtors will not show you homes without the pre-approval loan work being done.

Step 1, first time buyers?  Get your finances in order and the loan approval started with the right lender.  By the way, that never changes, no matter how many times you've bought a home.  It always starts with the finances.  So now you know what to start.  If you need to know how to find a great lender, start with your Realtor, who will have excellent lender resources for you, people they've worked with, who they know will be there for you.  The lender is part of your team in getting you the home you want.

I have excellent lender referrals for my buyers.  These are lenders I know are there through every step of the process, are available to help, answer questions, educate and get you the best loan for you at the best rate.  Did you need a referral?  Give me a call or send me an email for lender referrals as well as a "Home Buyers Handbook - What You Need to Know About Buying a Home".

Next up?  Choosing a Realtor. (pick me! pick me! pick me!)