First-Time Homebuyer’s Guide

Don’t Ignore Your Credit!

Has it been a while since you’ve taken a close look at your credit? If you’re like me, it probably has. Even before consulting with a lender, get a copy of your score and understand what it means. Seriously, do it! Knowledge is power. Your credit score plays a large part in the loan you can qualify for, so it is crucial to maximize your potential by doing everything possible to repair your credit.

Prepare for the Down Payment

There are many options for your down payment… it’s not just 20% or nothing. First time homebuyers may qualify to pay just 3 to 5 percent up front. At 3.5% down, FHA loans are a great option for getting a home with less money to start. However, if you can afford it, there may be advantages to putting more down. This would equal lower monthly payments and also eliminate costs such as mortgage insurance. Make sure you start saving early so that you have options and can weigh these options with your lender to determine what’s important to you… less money now and higher payments, or more now and lower monthly bills.

Figure Out What You Can Actually Afford

Your debt-to-income ratio is the percentage of your gross monthly income that goes towards paying debts. You may qualify for a loan in which you pay up to 50 percent of your monthly gross income, however that may be more than is compatible with your actual finances. Be realistic about how much you can comfortably afford. Even if you qualify for more, don’t overextend yourself on your monthly payment… I know I wouldn’t want to cut out my monthly shopping money!

Find the Right House

Find an agent who will personally get to know you and your needs, and who is on top of the real estate market in your area of interest. Home buying in Southern California today can be extremely competitive, with many houses getting multiple offers. You have to know about homes immediately when they come on the market, and you must get out there and take a look in order to even be able to get an offer in on time. Also, do your own research. There are numerous resources online for looking into crime rates, school systems, walking scores, and many other things that you’ll want to know about a neighborhood before you move in. And drive around at different times of day… you don’t want there to be any surprises once you move in!

Make an Offer that Makes Sense

It’s a free country and sellers can list their house for whatever price they want! A good agent will provide you with a comparative market analysis showing the true market value based on what similar houses have actually sold for in the past few months. Your agent will help you decide on a fair offer based on the market value, whether or not there are other offers on the property, condition of the property, etc. You don’t want to overpay for a house, but you also don’t want your offer filed in the round bin!

Stay the Course

The home buying process can be stressful–it’s a huge investment and there are many hurdles to jump–but I always tell my buyers to remember their goals and why they started the process to begin with. At the close of escrow, when your moving in to your new home, you’ll be glad you went through it. After all, you’re only a first time home buyer once!


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