Ok so where do we begin? Most first time home buyers start looking for their first home on the internet. (about 90%) There is nothing wrong with this at all. It allows you to see what homes are selling for and it gives you a better idea of what you may get for your money, IE square footage, number of bedrooms and bathrooms, lot size, amenities etc.. What happens most of the time is that you undoubtedly find what looks to be a perfect home and now you are stuck. You have no idea how much the payments will ACTUALLY be, what condition the house is actually is in, or how much money you will need to buy it. So what do most first time home buyers do? They call the Real estate agent that is listing the home to view the property. This is a big mistake! There is nothing wrong with calling an agent representing the home and asking some questions pertaining to the property listed, but that agent has no idea if you are even qualified. Some will still show the home. Others will not until you have your PRE-APPROVAL letter. Either way you won't be able to make an offer on the home until you have your PRE-APPROVAL letter. So why is this so important? It lets the seller of the home know that you have had your finances analyzed and that you can secure financing to purchase a home. The sellers listing agent would not want them to accept an offer and "hold" the home in contract for approximately 30 days if you could not actually buy the home. A seller can have multiple offers on a home, but once they accept an offer, the home is "off the market" and "in contract" pending the home is funded by the buyers lender. This is true for both private sellers, foreclosures now owned by the bank and short sale's where the seller still owns the property and agrees to the purchase contract pending the banks approval on the short sale.
There is also a another HUGE advantage in obtaining your PRE-APPROVAL letter first. You have no idea what loan programs you qualify for. Once you know what programs you qualify for and what you can take advantage of, it opens up whole new world of home to look at! How much will you need down? What if the home needs repairs? Knowing what loan programs you have at your disposal makes the home search easy and fun!
Most first time home buyers are directed to the very popular FHA loan program. It requires 3.5% for a down payment and is very easy to get approved for. Virtually every lender has access to them and steers the buyer to this program. One little known fact about the FHA program is that the property will be appraised and if there are any problems with it, FHA will not insure it and back the loan. It could be something as small as peeling paint from window trim or deck. I know what your thinking now. That's an easy fix. If I have to scrape a little paint and re-paint over to buy my house then no problem right? Well if it is a private seller than maybe, but if it is bank owned than NO WAY. They will not let you on the property to do anything like that! And what if it is not something minor? What if the roof will need replace within the next 2-3 years? What if the furnace is not working, or some of the plumbing is bad? What if the home is ABSOLUTLY perfect for you and your family, but it needs a little work and because of this you cannot get financing? The answer is that there is version of the FHA loan called the 203k streamline that allows you to not only get the repairs financed into the new loan, but anything else you would like to have changed on the home to make it your perfect home. The problem is that your local bank or your retail bank you have your checking and savings account with, do not participate in this program, so if your pre-approval letter comes from them they will not be able to help you. Will they tell you this upfront? Of course not. They are only pre-approving you for the loan programs they participate in and they are slim to say the least.
What if you are currently renting and you do not have any money saved up for a down payment? Should this stop you from being able to buy now while the rates are low and the homes are cheap? According to the retail and local banks yes. Fortunately they are wrong again. There is another government backed loan program that allows anyone to buy a home with no money down! Its called a USDA loan and the banks are not going to show you this option either.
The whole point of this is to show you that knowing ALL the options that are out there will let you buy your first home FASTER, SMARTER, and exactly the way you want! This is why the first and most important step is to get your PRE-APPROVAL letter first AND from a lender that participates in all the government loan programs that are out there!
Once you have your PRE-APPROVAL letter and you have been advised by a first time home buying specialist as to what your loan options are, how much you can afford, and how much the monthly payments will approximately be its time to make a list of what you want your first home to have. Write everything down. You need to list the approximate amount of square footage,number of bedrooms and bathrooms, style of home, lot size, county and school district, and price range requirements. This is where knowing if you have to look at a "turn key" home or a home that needs a little work is also a huge advantage. I will then match you and your pre-approval letter with a real estate agent in the areas you are looking for homes. A realtor has access to MLS listings and they will be able to pull up all available homes for sale in your area that meet your criteria. They will then be able to schedule a day or weekend and show them all to you! Once you find the winner its time to make an offer and hopefully get the house under contract!
Time to move on to the next page that will make you a home buying expert! SELLER CONCESSIONS!!!!!!!!!
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