Wednesday, August 7, 2013

I am buying my first home - Now What?

The joy's of buying your first home are sometimes overwhelmed by the frustrations of buying your first home.  But with the right team of people, working for you, the process can be worked through without too much headache.

The basic steps:

  1. Find the right Realtor - This point cannot be overlooked.  There are bad realtors.  It's a fact.  There are realtors that care only about their needs and don't understand the needs of the buyer.  There are realtors that don't know the market or care to understand the trends, future outlook, etc.  Then - there are also very good realtors.  Realtors who understand the market, understand the buyers needs, and work to make it a transaction that is smooth for the buyer.  Choose the agent that fights for the best purchase price, best conditions and has things fixed based on the home inspection.   Find that Realtor.
  2. Find the right Loan Officer - Okay - so I am a bit biased on this account.  But this is for sure the most important aspect of any transaction.  (Unless of course you have the $250K in cash to purchase your home free and clear.)  The financing is what makes the close possible.  Without the loan, then the reality of homeownership is a harsh non-reality.   The loan officer that listens, communicates, and works hard for the homeowner, is going to be the best asset to the transaction.  They will ensure that you know what each step will look like, they will do the work upfront to head off any future concerns for an UW and they are well versed in the industry to help should any trouble arise. 
  3. Choose the Right Loan Program - How do you know what the best loan program is?  It's all going to depend on the needs of you, the buyer.  Do you have a good amount of money to use for the down payment?  Do you need assistance with closing costs or do you have the cash to pay for those?  Do you have excellent credit or is your credit lacking in some areas?  Do you plan to stay in the home long term?  Do you have a monthly payment amount that you want to stay within or are you looking to be qualified for the most amount possible?  Do you have gift funds from family members?   The questions are plentiful, and I could go on and on with the list, but you can see that the answers to these questions may define what you choose to do.

  Here is a quick overview of the most common choices for first time homebuyers:
    1. FHA Financing - This program allows the borrower many benefits, including low down payment options (as little as 3.5% of the purchase price), pricing incentives to offset the closing costs via the lender or requested from the seller, gifts allowed for the entire down payment.
    2. Conventional 5%  - This program allows for slightly more in down payment and requires that the 5% come from the borrower's own funds.  It has a lower mortgage insurance payment amount as well as no upfront Mortgage Insurance premium.  (The Mortgage Insurance can also be removed with this loan vs. FHA where the Mortgage Insurance will be on the loan for the entire life of the loan or until you refinance.)
    3. Other Options - There are other programs that allow for grants, lower down payment, etc, but these are very property and borrower specific.  Depending on the borrower's situation, these options can be explored.  However, if the borrower has the ability to do either FHA or Conventional, they usually find these ancillary options are really not that favorable for them in the long run.
There really isn't a best loan program for a first time homebuyer and if the lender tells you there is...then run the other direction.  They aren't evaluating your needs and finding what will work best for you, they are pigeonholing you into something that may not be the best long term.  Remember, finding the right home and getting the right financing all starts with the right Real Estate Agent and the Right Loan Officer.  Make sure you do that work first and the joys of buying your first home will completely negate any potential negativity.

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