Do you live and work locally with no plans to move away anytime soon? If so, buying a home might be the right decision for you.
Let’s look at some frequently asked questions about buying your first home.
Q: I am a first-time buyer and still can’t afford the type of home that I want. Should I wait or keep renting?
A: As a first-time buyer, you are likely an emotional buyer. Be realistic about your commute to work, monthly payments and then ask if this is a desirable location based on the resale value. An experienced real estate agent and loan officer can help answer these questions and more.
Q: I have $10,000 to invest. Should I put that money in stocks or buy a house?
A: Purchasing a home is by far the best long-term investment. For example, say you use that $10,000 to buy a $150,000 home, and the house appreciates a modest 3 percent during the first year. That means a gain of $4,500 after one year. Putting the same $10,000 in the stock market and posting a similar 3 percent gain would net a $300 return on investment.
Q: Interest rates keep going down. Should I wait until they go even lower before I buy?
A: Interest rates for a 30-year fixed rate mortgages are currently below 6 percent. This is extremely favorable for buyers. In fact, they are hovering near a 30-year low. Waiting for lower interest rates is a dangerous game to play. Even those who follow the market for a living cannot predict when interest rates will bottom out. If they could, they would all be multi-millionaires.
Q: As a first time homebuyer, I don’t even know where to start. What do I do?
• Step No. 1: Meet with the real estate agent. When most first-time buyers meet with me we discuss many things, including what they’re looking for and where they are currently renting. We then go online to browse homes in certain locations to get some idea of selling prices.
• Step No. 2: Meet with a local loan officer. This meeting is very eye opening for most buyers. For example, if a renter is paying $900 for monthly rent, is it advisable for this renter to commit to a $1,500 monthly mortgage for their dream home? No. The bank underwriter might not approve you for such a large monthly payment. Furthermore, your needs and preferences could change shortly and then you will be house poor and stuck where you do not want to live. Statistics show that most homeowners move about every five years.
This meeting allows the loan officer to provide the buyer with a few monthly payment options and loan types as well as down payment amounts and closing costs. Buyers with less than perfect credit often are advised to seek credit repairs (many Realtors, including myself, offer a free credit repair service to assist).
• Step No. 3: Start shopping for a home. Most buyers who have been working with an agent and a loan officer will be able to gain a loan pre-approval status quickly. This status means you now have the ability to buy a home. On the shopping day, your agent will have several homes mapped out for viewing. When the monthly payment and conditions of the property match your goals, it is time to make an offer.
I suggest that buyers view homes on the day they are most relaxed. Making an offer at the end of touring homes will help you understand how your offer will be perceived by the sellers or the bank. For most realistic buyers, their offer will be accepted on the first or second offer. Always remember to make an offer that the seller cannot refuse.
• Step No. 4: Closing the deal. In today’s market, almost six out of 10 homes are short sales. What that means is that you need to wait an average of two to four months for a final approval letter. Once you receive your letter, you can perform your own appraisal to secure your loan and interest rates.
Annie Christian is owner of The Annie Christian Real Estate Group and is a real estate broker. She helps clients with everything from buying and selling to foreclosure and short sale. To submit a question to her, call 351-5117. Her website is www.anniechristian.com.