You have decided you want to stop renting and are ready to buy your first home and now youâ€™re wondering, â€œWhere do I start?â€ This is one of the top questions I hear from potential first-time buyers as well as one I see over and over on real estate websites such as Trulia, Realtor.com, Zillow,
Itâ€™s easy to understand why; thereâ€™s so much information out there itâ€™s difficult to separate the valuable from the worthless or simply outdated.
My advice is to start by speaking with a local mortgage lender and ask to get pre-qualified. This will at least give you some idea of whether youâ€™re ready to get a mortgage or if thereâ€™s some work youâ€™ll need to do first, to improve your credit or if youâ€™ve just relocated to the area for some time to elapse in you new job. It will also give you a good idea of how much you can afford as well as what this would equal in terms of monthly payments. Remember: Just because the bank is willing to lend you a certain amount doesnâ€™t mean you must borrow that amount. As a first time buyer I would advise you to seriously think about spending between 10-20% less than you may qualify for. Ask the lender youâ€™re speaking to how close your credit score is to meeting their criteria for a better rate. There are buyers who, with very little effort, can move themselves up a notch. If youâ€™re one of those buyers this could save you many thousands of dollars in terms of the interest rate you can get as well as the fees a lender might charge you. Itâ€™s information worth having.
Remember youâ€™re not committing to a specific lender now nor are you shopping rates; youâ€™re just trying to get a good sense of what you can afford and the loan programs youâ€™re likely to qualify for. Not every lender is a good fit for every buyer, and a good RealtorÂ can speak with you and point you to lenders that may be able to offer you a better deal. At least when you sit down with a Realtor youâ€™ll be able to tell them that youâ€™ve spoken with a lender and have been pre-qualified for a loan up to (fill in the blank with the $ amount), and let them know whether youâ€™re qualified for a conventional loan, an FHA loan, or some other form of mortgage.
Now youâ€™re ready to sit down and interview some Realtors to find an experienced Buyer BrokerÂ who will help you locate, negotiate and close on a home. A good Realtor will be able to talk with you and help you figure out whatâ€™s really important to you, whether itâ€™s a certain location, or a school district, or having a larger lot, or perhaps a town home community with lots of good amenities and people who may be demographically similar to yourself in terms of age or some other factor. Thereâ€™s no one right answer; weâ€™re all different, but as you and a Realtor speak youâ€™ll be able to start solidifying your own thoughts on what really matters most to you. Often after this initial conversation you realize you need to make some changes to your parameters; donâ€™t sweat it, itâ€™s a process and a good Buyer Broker understand this.
Thereâ€™s no set formula for how many agents/brokers you may need to interview. Sometimes the first one you meet is a great fit while other times you may need to interview several. Donâ€™t let anyone pressure you into signing a Buyer Broker agreement at the first meeting. You need to feel comfortable with them and honestly they should not be unduly anxious to have you sign an agreement until theyâ€™ve earned your confidence.
Most agents want you to sign an agreement for 6-12 months. I donâ€™t recommend this. As a buyer, I would not sign an agreement for more than 90 days at the most. As a Buyer Broker I only sign agreements for 2 weeks and only after having gone out with a prospective client a couple of times to make sure that I feel weâ€™re a good fit for one another. My feeling is and always has been that I donâ€™t need a contract to begin with; either I will earn a clientâ€™s confidence or I donâ€™t deserve their business. I donâ€™t expect my buyers to buy a home within two weeks nor do I feel the need to trap them into a long-term commitment. My buyers can always extend their Buyer Broker agreement with me or, if either of us decides weâ€™re not a good fit, then neither of us is tiedÂ into a long-term agreement. I would caution you that if the broker youâ€™re speaking with wonâ€™t accept a 30-90 day agreement, thatâ€™s reason enough to keep looking. Iâ€™ve written about choosing a great Realtor before; hereâ€™s the link
I hope this information proves useful and I wish you all, â€œHappy House Hunting.â€