Preliminary items to consider

• Determine what mortgage loan amount you can qualify for.
• Explore different loan options and decide what is best for you.
• Organize all the documentation a lender will require to pre-approve you for a loan.
• Calculate the costs of home-ownership, including property taxes, homeowner insurance, mortgage insurance, maintenance, and association fees, if applicable.
• Do not wait to obtain a loan – Talk to a lender and get pre-qualified for a mortgage before you start looking at properties.
• Think long-term – Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you will buy as well as the type of mortgage terms that will best suit you best.
• Do not let yourself be "house poor". If you max yourself out to purchase the biggest home you can afford, you will have no money left over for maintenance, decoration or to save for other financial goals.

Steps to Getting Your Finances in Order

Establish a good credit history

Pay all of your credit accounts (credit cards, utility bills, auto loans or leases) on time by the due date. 

For credit cards, it is advisable to pay off the balances monthly.

Do not transfer credit card balances to a new credit card, as this will affect your credit score.

Develop a budget

Instead of budgeting what you would like to spend, use receipts to create a budget for what you have spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as medical, dental, auto repairs, etc., as well as predictable costs such as rent, car loans or leases.

Reduce your debt

Try to pay down your revolving credit card accounts to less than 30 percent of the credit limit.

Do not apply for new credit cards or make any large expenditures on an installment loan. 

Have Cash in Reserves

Well in advance, prior to starting your home search, it is advisable to save as much money as possible and have cash in reserves after accounting for your down payment and closing costs.

Save for a down payment

Although it is possible to obtain a mortgage with only 3 - 5 percent down payment – or even zero percent for a VA loan – you can usually obtain a better rate and a lower overall cost with a larger down payment.

You Don’t Need 20% Saved for a Down Payment

Although a 20% down payment would be ideal and would qualify you for the best loan terms – there are first-time home buyer programs that can allow buyers to get into their new home with 5% or less down. You may be able to purchase your home and start gaining equity sooner than you think!

Create a house fund

Don't just plan on saving whatever is left toward a down-payment. Instead decide on a certain amount per month you wish to save, then put it away as you pay your monthly bills.

Keep your current job

While you don't need to be in the same job forever to qualify, having a job for less than two years may mean you may not be able to obtain a loan. Lenders normally want to see that the borrower has worked in the same line of work for 2 years. However, if for example, you are graduating from college with a degree and will start working at a new job in your profession, then this will be acceptable.

Check your credit

Obtain your credit report and carefully review all the information and take a note of your FICO score. Your credit score will impact your overall loan costs.

Look for any errors or unresolved issues and contact the appropriate credit-reporting bureaus: Experian, Equifax, and TransUnion – to ensure they are corrected.

You can obtain your credit report from each of these bureaus at: 

www.AnnualCreditReport.com

Find a mortgage broker or lender you can trust and who is responsive

Provide your mortgage broker or lender with as much information as you can and get pre-qualified, so that when you find a house, you are ready to move on it. The real estate market does not wait for people who are not prepared.

Get pre-qualified

Aiello & Associates can help you determine the loan amount you may qualify for through a pre-qualification process. Being pre-qualified before searching for a home is essential because it helps you look for homes within your price range. Real estate agents also appreciate buyers who submit offers on homes with a pre-qualification letter. 

See: Get Pre-Qualified for a loan

Prepare a budget

While a pre-qualification can serve as an estimate of what you may be able to borrow, it's equally important that you feel comfortable with your monthly payments. 

Before applying for any loan, it’s important to determine how much you can afford to pay each month.

Review all your current monthly expenses, as well as how much you save or would like to save each month – then decide how much of a monthly mortgage payment you are comfortable with. 

Consider Closing Costs

Closing costs typically include: Loan origination fees, title, settlement fees, taxes, and prepaid items such as: property taxes, homeowner’s insurance and/or association fees. Your realtor can help you determine all property-related costs.

Don't forget Property Taxes

Find out how much the property taxes will be. 

Remember that the property tax amount that the seller is currently paying, will not be what you will be paying once you own the home. Your new taxes will be based on the final sales price. Within a few weeks after close of escrow, you will receive a “Supplemental Tax bill” from the County. (If your taxes are impounded with the lender – where you pay them together with your mortgage payment, then your lender may be able to pay the supplement tax amount, provided you have enough funds in your escrow impound account, so you would need to contact your lender to confirm).

Don’t forget Homeowner’s Insurance

Contact your insurance agent who provides your automobile insurance to request an estimate (you will need to provide them with the basic property information). Your current insurance company may be able to give you a multi-polity discount so be sure you ask them for this. Also, once you move into your new home and if you install a monitored alarm system, they may offer a policy discount).

Down Payments

Most mortgage programs require you to make a down payment when you purchase a home. The amount of the required down payment will vary, depending on the type of mortgage program, such as: Conventional, FHA, VA. Determine if you have enough savings to cover your down-payment and closing costs. 

Loan application process

In addition to determining the type of mortgage you would like to pursue and determining your interest rate, gathering the right documents is a critical step that can save time and frustration down the road.

To ensure a smooth loan application process, you will need to provide some documentation:

See our: Loan Document Checklist

Begin your home search

Decide on a location and identify the features you wish to have in a home. Check local listings and compare prices of comparable homes. 

Get our MLS property search mobile app and search listings on the go!

Consult with your real estate agent to help determine the amount you can expect to pay.

• If you’re not already working with a real estate agent, find an experienced REALTOR© who can assist you throughout the process. (Aiello & Associates can also assist you).
• Develop a wish list of what you would like your home to have. Then prioritize the features on your list. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you and what you can do without. You may have to be a little flexible and compromise on some features so that you do not miss out on the perfect home.
• Select three or four neighborhoods you would like to live in. Consider things such as schools, recreational facilities, safety, transportation, and area expansion plans.
• Be picky – but not unrealistic. There is no perfect home.
• Decide when you may be able to move to your new home. If you are currently renting and have a lease with a few months left, you will need to plan accordingly. If you are on a month-to-month lease, you may have more flexibility.
• A home may look beautiful but it is strongly advisable to have a home inspection done.
• When writing your offer, request for the seller to pay for a 1-year home warranty plan.

Closing your purchase transaction

Once you have found the home of your dreams, there are several steps related to completing your transaction, including negotiating a purchase price, obtaining an appraisal, scheduling a home inspections, following contingency periods, reviewing documents, disclosures, reports, etc.  Your Realtor will help you along the way. 

Be Prepared to Act Quickly

Planning and searching for your first home is an exciting and an emotional time.

It is wise to start preparing well in advance in getting your finances in order and getting pre-approved for a mortgage loan so that you know what maximum purchase price you are approved for.

You may have found the home of your dreams, and you want to act as quickly as possible and make an offer – but if you’re not already pre-approved, chances are that your offer will most likely not be reviewed by the seller. Most sellers request for offers to be accompanied by a pre-approval.

Be Systematic in Your Approach

Too often, first-time homebuyers will be succumbed by emotion and become attached to a less than desirable property. Spending the time to research the local market trends and getting their finances are suitable for a home purchase will result in a significantly more agreeable situation.

Unless there are extenuating circumstances, purchasing a property should never be a rushed process. First time homebuyers are typically in the initial stages of their careers, so diligently researching and utilizing the advice from real estate professionals can either set the foundation for prosperity or create a detrimental situation for years to follow.

Your first home likely will not be your last home

It is hard to predict where our families, jobs, or lives will take us in 5, 10 years down the road, so it is advisable to look for a home that suits your needs for now and for the next few years.

Buy the home you think you will need 3 to 5 years from now

A buyer may find a suitable 1-bedroom home that has sufficient space for what his/her current needs are.  However, as time goes by, things will most like change and they may end up needing additional bedrooms and space. Therefore, it is wiser to buy a home that you think you may need 3 – 5 years down the road.

Keep an open mind while searching for homes

It is important to have an open mind when you are looking for your new home – especially for many first-time buyers who are on a budget. 

Be sure you are being realistic for what is available in the area that you wish to live in, while also keeping within your budget. 

Be sure you know the process

Understand the home-buying process such as: timing of a purchase, funds that will be required for the down payment and closing costs, getting pre-approved for your mortgage loan, and the current market conditions (Is it a buyer’s market or a seller’s market?). By knowing the process prior to looking at homes, you will be prepared to make a quick decision, should you find the home that is right for you. 

The right real estate agent will help you greatly throughout this entire process, which is crucial to making sure the first-time home-buying experience goes smoothly, fun and that you find you the perfect first home.

Do Not Skip the Home Inspection

The home inspection is an opportunity for you to learn about your home. It is Not a chance to renegotiate the contract or walk away if the seller does not repair every little thing. It simply educates you about your home. If the home inspection does uncover significant, serious issues, you and your agent will work together on what items are of the most concern to you and your agent will inform the seller’s agent about the situation and determine the best path to move forward with the transaction.

If the seller is unwilling to remedy the issues and you are within your inspection contingency period, then you have the option to cancel the transaction.

Choose an Agent that you connect with on a personal level

The most important thing that you are going to need in a real estate agent is trust, communication, and responsiveness.

All real estate agents have access to the same homes on the MLS. It is paramount that you find an agent you feel comfortable confiding in and trusting with the most expensive purchase of your life. 

If you do not connect personally, you will not connect professionally and that leads to miscommunications and disappointment.

Communicate clearly with your Agent

Tell your Realtor© exactly what you are looking for, so they can best help you find your dream home. The more specific you can be, the more your Realtor© can be helpful. Simply telling your Realtor, “I want a three-bedroom house with a yard” isn’t going to get you anywhere.

Sit down with your Agent and let them walk you through the process

As a first-time home buyer, you will have many questions, and an Agent’s job is to help you navigate through this and prepare you, as best as possible, for what exactly you will be experiencing. You and your Agent will set realistic time frame goals and expectations on what your money can buy. 

If your agent is “too busy” or doesn’t have the desire to educate you on what buying a home looks like, you may want to consider interviewing someone else who truly cares about you having the best experience possible.

Aiello and Associates can assist you!