Tips for the First Home Buyer

The challenge of buying a home for the first time can seem so daunting that it's tempting to either just go with the first house that falls in your price range or continue to rent. To help you demystify the process and get the most out of the purchase, we'll examine what you'll need to consider before you buy, what you can expect from the buying process itself, and some handy tips to make life easier after you purchase your first home. Contact Kristin Benedetti BRE Lic # 01946447 at Berkshire Hathaway La Jolla at 858-900-5578 or via email at lajollaluxuryhomes@outlook.com for assistance finding your first home!

The first thing you'll need to determine is what your long-term goals are and then how home ownership fits in with those plans. It could be that you're simply looking to transform all those "wasted" rent payments into mortgage payments that actually give you something tangible. Others see home ownership as a sign of their independence and enjoy the idea of being their own landlord. Narrowing down your big-picture homeownership goals will point you in the right direction. Here are five questions to ask yourself:

1.What type of home best suits your needs?

You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condo, or a multi-family building with two to four units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can also save on the purchase price in any category by choosing a fixer-upper, although the amount of time, sweat equity and money involved to turn a fixer-upper into your dream home might be much more than you bargained for. Check out http://lajollaflips.blogspot.com for some great information on buying a fixer upper, which can be well worth it if you prepare yourself for all that it entails. No surprises= great results! 

 If you are thinking about starting a family soon or if you already have some little ones, carefully consider the location. Good schools and low crime rates are a must. La Jolla and Del Mar have great investment opportunities for first time buyers, while providing adjacent neighborhoods that you would be able to upsize when ready without uprooting the family. Scripps Ranch, Rancho Bernardo, Carmel Valley, and Carlsbad also had a great selection of homes in very family oriented neighborhoods, at a lower price point.

2.What specific features will your ideal home have?

While it's good to retain some flexibility in this list, you're making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trust-worthy appliances.

 When you discuss your preferences with your realtor, make a list of which preferences are a must and which are negotiable (close to freeway access/ work/ ocean/ hospital/college, stairs, ocean view, office/ den, pool, fireplace, extra storage space).

4.How much home can you actually afford?

Before you actually begin the purchase of your new home, it is important that you begin to organize your documents and review your credit standing. Your credit, though not always the only factor, is the most important factor when considered for financing for a home loan. You should review your credit reports and capture a clear understanding of where you stand. Even if you have great credit, you must make an analysis. Lenders look at your income-to-debt ratio, as well as your credit score and activity. It is important that this ratio reflects that you can afford the expenses of the home (principal, interest, taxes and insurance). Most lenders agree that your income-to-debt ratio should not exceed 28 percent to 30 percent of your overall income. If you find that your credit needs improvement or your ratio is too high, this is the time to initiate the adjustments that are needed.

 Paperwork is also very important in your preparation. You will need to gather your yearly tax returns, W-2s, regular pay stubs and bank statements. Your lender may require additional information, which they will present to you at the time of purchase. However, if you have these initial items readily available, you will be on the right track.

5.Who will help you find a home and guide you through the purchase?

A real estate agent will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you've chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent's expertise can protect you from any pitfalls you might encounter during the process.

The Buying Process

Now that you've decided to take the plunge, let's explore what you can expect from the home buying process itself. This is a chaotic time with offers and counter-offers flying furiously, but if you are prepared for the hassle (and the paperwork), you can get through the process with your sanity more-or-less intact. Here is the basic progression you can expect:

1.Find a home.

Make sure to take advantage of all the available options for finding homes on the market, including using your real estate agent, searching for listings online and driving around the neighborhoods that interest you in search of for-sale signs. Also put some feelers out there with your friends, family and business contacts. You never know where a good reference or lead on a home might come from.

2.Consider your financing options and secure financing.

First-time homebuyers have a wide variety of options to help them get into a home, including federally-backed loans and loans for homebuyers who don't have the standard 20% minimum down payment. Your state may also have its own programs for first-time homebuyers. Your mortgage interest rate will also have a major impact on the total price you pay for your home, so shop around. It will really pay off.

3.Make an offer.

Your real estate agent will help you decide how much money you want to offer for the house along with any conditions you want to ask for, like having the buyer pay for your closing costs. Your agent will then present the offer to the seller's agent; the seller will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits. If you reach an agreement, you'll make a good-faith deposit and the process then transitions into escrow. Escrow is a short period of time (often about 30 days) where the seller takes the house off the market with the contractual expectation that you will buy the house - provided you don't find any serious problems with it when you inspect it.

4.Obtain a home inspection.

Even if the home you plan to purchase appears to be flawless, there's no substitute for having a trained professional inspect the property for the quality, safety and overall condition of your potential new home. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options if you find yourself in this situation.

5.Close or move on.

If you're able to work out a deal with the seller, or better yet, if the inspection didn't reveal any significant problems, you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period, while praying that nothing falls through at the last minute.

Things you'll be dealing with and paying for in the final stages of your purchase may include having the home appraised (mortgage companies require this to protect their interest in the house), doing a title search to make sure that no one other than the seller has a claim to the property, obtaining private mortgage insurance or a piggyback loan if your down payment is less than 20%, and completing mortgage paperwork. (For more on the pitfalls of private mortgage insurance, check out Six Reasons To Avoid Private Mortgage Insurance and Outsmart Private Mortgage Insurance.)

Congratulations New Homeowner ... Now What?

You've signed the papers, paid the movers and the new place is starting to feel like home. Game over right? Not quite. Let's now examine some final tips to make life as a new homeowner more fun and secure.

1.Keep saving.

With homeownership comes major unexpected expenses, like replacing the roof or getting a new water heater. Start an emergency fund for your home so that you won't be caught off-guard when these costs inevitably arise.

2.Perform regular maintenance.

With the large amount of money you're putting into your home, you'll want to make sure to take excellent care of it. Regular maintenance can decrease your repair costs by allowing problems to be fixed when they are small and manageable.

3.Ignore the housing market.

It doesn't matter what your home is worth at any given moment except the moment when you sell it. Being able to choose when you sell your home, rather than being forced to sell it due to job relocation or financial distress, will be the biggest determinant of whether you will see a solid profit from your investment.

4.Don't rely on making a killing on your home to fund your retirement.

Even though you own a home, you should still continue to save the maximum in your retirement savings accounts each and every year. Although it may seem hard to believe for anyone who has observed the fortunes some people made during the housing bubble, you won't necessarily make a killing when you sell your house. If you want to look at your home as a source of wealth in retirement, consider that once you've paid off your mortgage, the money that you were spending on monthly payments can be used to fund some of your living and medical expenses in retirement.

Conclusion

This brief overview should help put you on the path towards filling in any gaps in your home-buying knowledge. Remember that the more you educate yourself about the process beforehand, the less stressful it will be, and the more likely you will be to get the house you want for a price you can afford - and with a smile on your face.

For assistance with any of your  real estate needs contact Kristin Benedetti at Berkshire Hathaway HomeServices 1299 Prospect St. La Jolla, California 92037, BRE # Lic 01946447 , Cell: 858-900-5578, lajollaluxuryhomes@outlook.com , www.lajollaluxuryhomefinder.com.   I can also provide you with referrals to reputable contractors throughout Southern California, if you need any help with home improvements. To get pre-qualified or if you have any questions about financing, please contact HomeServices Lending, an affiliate of Wells Fargo Home Mortgage at (858) 436-3483.