First-Time Home-buyers; 5 Things You Should Do BEFORE You Buy
If you are a first-time home-buyer there is nothign to be afraid of, however there are things you should know and do BEFORE you buy a home! This report will help you avoid the pitfuls many first-time homebuyers make as well as assure that your first home-buying experience is a good one!
This question is on the minds of not just first-time home-buyers but even repeat buyers. This is very understandable as the housing market has faced challenges over the past couple of years and prices have dropped in most parts of the country. This may make you concerned that you will buy a house only to see it's value decline in the coming months ahead. This is a valid concern and obviously no one knows what the future holds in store, particularly in these turbulent times, so we would suggest you take these things into account when deciding if the market is safe for you to buy:
- St. Louis did not experience home price increases during the "boom" to the magnitude many coastal markets, Arizona and Nevada markets did. Therefore we have not seen near as big of price declines, foreclosure rates nor mortgage delinquencies as these areas. So, in other words, St. Louis is a much more "stable" market than many aress which means it is a "safer" market for home-buyers as well.
- The St. Louis market is unique in many ways; the St. Louis city is not part of St. Louis county, St. Louis county has 91 municipalities within it and we have St. Charles, Jefferson and Franklin counties, each with their own niches as well. We have public schools that run the gambit from, quite frankly, poor in quality, to excellent, something that also affects values. For these reasons it is important that you understand the local market and know how various things (such as shool distric, proximity to public transit, etc.) affects the property values. This is one area where a professional, full-time, St. Louis REALTOR® can be an immense amount of help to you.
- Even though there are challenges that could negatively impact the St. Louis housing market and may even bring home prices down further, remember that a house is a long-term investment so a slight dip in value after you buy will, based upon history, appreciate and increase in value over time. One problem during the boom was many of us forgot the "long-term-investment" aspect of home ownership and started "day-trading" houses like one might day-trade stocks. While prices appreciated at a fast enough rate to make that approach profitable for a while, but then the house of cards came crashing down. Just keep a level head, use some good, time-tested, basic fundamentals and you should be OK.
Everyone's situation is different, and, no matter how "right" the market is for buying, it must be right for you as well. To address this, consider the following:
- Do you want the responsibility? Home-ownership is quite rewarding in many ways but it also comes with many responsibities, some of which some buyers find they were not ready for, ill-prepared for or, quite frankly, wouldn't have bought a home if they knew they had to deal with. Home-ownership does bring with it the responsibility to care for it and maintain it (there is no longer a landlord to call to take care of things for you); you are responsible for maintaining insurance coverage on the home, paying property taxes, subdivision association fees and, of course, your house payments on time. Unlike renting month-to-month where you can literally move on at almost any time if you decide you don't like the area, the house or apartment, your neighbor or whatever, or even a lease where you have to stick it out a year, home ownership is much more permanent. Once you buy it will not be easy to make another move anytime soon if you get there and don't like it.
- Are you financially ready? One of the biggest problems with the "housing-bust" we saw over the past few years were buyers that either were not qualified, or finanically sound enough, obtaining mortgages to buy homes only to lose them shortly thereafter. Again, this goes back to basic fundamentals; DON'T BUY if you have not saved enough money to make a reasonable down-payment, pay closing-costs, moving costs, etc., and still have some money left in the bank for "reserves". Also, make sure your income is adequate to support the house payment you are taking on and if there is any doubt then either don't buy, or buy a lower-priced house, you can always move-up later down the road. To find out how much of a loan you may be able to afford use this handy qualification tool by clicking here. To calculate house payment amount, down payment requirement, etc for an FHA, VA or conventional loan for a particular price of home use this tool by clicking here.
- Is your income stable? If you get to this point and feel you are OK and can afford to buy a home, step back and look at the source of your income and consider how solid you think it is. Think about what would happen if you or your spouse lost their job, and if you have the financial reserves to maintain your house payment for a while until the income is replaced. Obviously today it is hard to determine how safe a job is, and it would be hard for anyone to survive very long without an income but give it some good thought and try to be as prepared as you can be.
Even though you will be using professionals in your home purchase and, particularly if you follow the advice in this report, will select good ones, you still should educate yourself about the process to give you a better understanding as you go through it. Plus, by knowing your rights and how the deal should go, you will notice when something is not right or you are not be treated properly.
Below are resources you many want to check out:
- MORE, REALTORS®: Buyers Resource PageOur site which has many helpful reports for homebuyerst that are loaded with information (like this one).
- Fair Housing Info from HUD A publication from HUD that explains what rights and protections the Fair Housing Act gives home-buyers as well as what to do if you feel your rights have been violated.
- Shopping for Your Home Loan A publication from HUD that explains costs associated with home financing, the roles of various professionals in the process as well as a thorough explanation of costs associated with a home loan.
- National Association of REALTORS Home Buyer/Seller Resources
If you think the timing is right for you to buy a home, then the next step is to select a REALTOR® to work with you to help guide you through the process and avoid the "landmines" that are out there. Many buyers want to go it alone for a while and there are plenty of websites out there where you can search for homes for sale from now to eternity, you will save yourself a lot of time and aggravation by simply utilizing the services of a professional REALTOR® from the outset.
So are all real estate agents REALTORS®? No. REALTOR® refers to an agent that is a member of the National Association of REALTORS® and has agreed to abide by their code of ethics that protects their customers, clients, as well as the public and gives the consumer someone to turn to when they feel the REALTOR® has not acted properly. In addition, REALTORS® pledge that they will uphold, and abide by, Fair Housing Laws. In our opinion, you should not consider using an agent that is not a REALTOR®. Granted, we are REALTORS® so the opinion is not un-biased, however REALTORS® have an incredible arsenal of resources available to them to help them serve you that non-REALTORS® simply don't have, plus, you have the protection of the code of ethics as well as a grievance, or complaint process, if your agent doesn't live up to those standards.
Establishing a relationship with a REALTOR® early in the process will give you the benefit of their experience and knowledge to help guide you through the process. When selecting a REALTOR® don't just pick someone because they are a friend, neighbor or relative...treat the process like you would if you were choosing a doctor. If you needed brain surgery would you go to uncle Bob the dermatologist just because he's related? No. Well, REALTORS® have their specialties too; different markets, price ranges, types of property, etc. Select someone that specializes in, and is experienced in, the type of house, area and price range you are interested in.
Even though if you followed the advice above, you have calculated the cost of the price range of home you are looking for and have determined that you can afford it, it is very important that before you actually begin looking for homes that you get pre-approved for a home loan. To get pre-approved you will need to select a lender to work with and then provide them financial and credit information for them to evaluate, then, assuming you do in fact qualify, they will issue a written pre-approval letter indicating that, based upon their review and your current situation you qualify for a loan up to a specified amount.
This step is important for several reasons: One, it confirms to you that you do have the financial resources to buy a house in the price range you are interested in and, two, when you provide the pre-approval letter to the seller with your offer it shows you are not only a serious buyer, but that you should be able to get a loan to buy their house. This gives you a leg-up in your negotiations over a buyer that is not as prepared.
When selecting a lender we offer similar advice to what we offered for selecting a REALTOR® with regard to friends and relatives and would highly suggeest that you select a lender that is a member of the Mortgage Bankers Association for many of the same reasons we suggest an agent that is a REALTOR®.
