Saturday, June 13, 2009

So you’re thinking of buying your 1st home? Step by step directions!

You’re already shopping online. I know that, because you wouldn’t be reading this blog if you weren’t. :-)

You are going to need a good Lender and a good Realtor. You really should contact a Lender first, but if you’re unsure of where to go, choose a Realtor, and take his/her recommendation of Lenders. Realtors know from experience which Lenders are reputable and responsible.

You’re likely going to use FHA financing, which requires a 3.5% down-payment. This can be gifted from a relative, but the Seller can not pay it. You can ask the Seller to pay your closing costs, but they can not assist with your required down payment.

How much money do I need to have saved?

Your up-front out-of-pocket expenses will include (1) earnest money -typically 1% of sales price; (2) appraisal ($350-$400); and (3) inspections ($400-$500). For a $100,000 homes, that’s possibly $1900, PLUS your $3,500 down-payment, PLUS closing costs (unless you ask the Seller to contribute to your closing costs ($3,500 to $4,000).

You need to speak to a Lender FIRST to know how much home you can afford. No decent Realtor will take you house-hunting until you are pre-approved with a Lender. Plus, you don’t want to look at $125,000 homes, only to discover that you can only afford a $110,000 home. Trust me – there’s a huge difference in that $15,000 and you don’t want to begin this adventure with a disappointing start.

PLEASE DO NOT check your credit scores on the internet!! These scores are rarely accurate and will only adversely affect your score due to multiple inquiries. Your Lender can help you prepare if you provide all required information up front. You will not make it through the Lender’s Underwriter if you have had an insufficient check in the last two months, regardless of how high your credit score is. Your Lender can guide you and advise you so that you can prepare for a smooth transaction.

The $8,000 stimulus package is a great incentive to purchase your first home now, but it’s not worth it if you’re not ready. Is your job secure? Do you intend to use that $8,000 to buy new furniture for your home or can you set some of it aside for when your hot water heater unexpectedly breaks?

Once the Lender tells you it’s time to shop, select one Realtor to help you shop. Realtors can set up custom searches that are much more efficient than the searches you can do on We also know what to look for as far as homes being compliant with FHA guidelines. We are experienced negotiators and will walk you through the process.

I remember my first home purchase with the fondest of memories. It became my treasured money-pit and wonderful haven. Educate yourself, surround yourself with professionals, and have a great time!

Lori Cain

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