Columbus Real Estate News

For many people, buying their first home is a rite of passage and ownership in part of the American dream. And while many excited hours are spent planning interior color schemes, choosing new furniture and dreaming of moving day, many first-time buyers spend equal amounts of time fretting and fearing the home buying process. Let’s face it, if you’ve never purchased a home before, the prospect can seem downright intimidating. There are many decisions to make—legal, financial and emotional, just to name a few. Luckily, there are steps you can take to ensure an enjoyable experience.

Do Your Research
Information is essential. Being an educated consumer puts you on the best track when you do start searching for a home. For example, many first-timers think that it’s cheaper to rent than to buy failing to factor in the tax benefits of homeownership. Furthermore, with PMI or Private Mortgage Insurance, large down payments are a thing of the past and today’s down payments are about the same, if not less than starter costs for renting.

Not only do first-time buyers need to be informed about the home buying process and requirements, it is also crucial to audit needs and wants before beginning the process. Determine parameters ahead of time and make sure you know the difference between what you need in a home and what you want. Many first-timers misinterpret a want as a need and as a result dismiss homes that perfectly fit their needs during their search. Examples of needs include; number of bedrooms, garages, adaptation for the handicapped or school proximity. Examples of wants include wood floors, or a specific brand of appliances.

Talking with those who have recently been through the process, attending home buying seminars, visiting a local Realtor for information (such as my Team) or talking with a builder sales agent at a new community are all good ways to do your research. Remember, home buying processes where you live may work differently than in other states, so avoid relying solely on an out-of-state relative’s advice.

Focus on Your Financials
One of the first things a first-time buyer should do before beginning the process is to get a good financial picture in order. Developing a home buying budget will save you surprises later in the process. Both real estate agents and lenders can help you gain an understanding of how a home is financed and assist you in determining what you can afford. Banks generally insist that: 1) your monthly housing costs, including mortgage principal and interest, property taxes, homeowner’s insurance, and private mortgage insurance, should equal no more than 28 percent of your gross monthly income; and 2) that sum plus your minimum monthly payment on any long term debts should equal no more than 36 percent of your gross income. The rule of thumb here is to aim for a home that costs about two-and-a-half times your gross annual salary. Use this only as a general guide, though. Many factors can change that equation. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.

Don’t forget to review your credit reportsfrom the three top credit scoring companies (you can do this free of charge, once a year at http://www.annualcreditreport.com ). I definitely would emphasize reviewing your credit reports before making an appointment to meet with a lender, as this will allow you to clear up any misreportings or mistakes and improve your score prior to speaking with a lender. (for tips on improving your credit score please read my blogs on this subject)

There are four crucial financial elements to be aware of when buying a home: mortgage pre-approval, down payment, mortgage options and closing costs. Investigate the costs for each of these elements and make sure to always get comparison offers from lenders. Remembers you have to be comfortable paying a certain amount for a mortgage, but be aware that there are also extraneous costs to remember including; insurance, taxes and homeowner’s association dues.

You will also need to raise cash for the down payment and closing costs. Lenders ideally like to see a down payment equal to 20 percent of the home’s total purchase price. If you can put down more than that, the lender may be willing to approve a larger loan. If you have less, you have the option of doing an 80-20 loan (or a 80-15 loan, that is a 1st or primary loan equal to 80% of the purchase price, and a second loan equal to 20% or 15% of that value). If you have a great credit score you might be eligible for 100% financing however, in this case you will have to pay for PMI or Private Mortgage Insurance, this protects the bank in case you fail to make payments. PMI adds about 0.5 percent of the total loan amount to your mortgage payments for the year. So if you finance $100,000 your PMI will cost $500 annually. PMI will be removed or cancelled when your loan is paid down to 80% of it’s value (appreciation is also a factor here).

Find Good Representation
Having a representative you can trust to help you through the process can make a huge difference to the first-time home buyer. In the world of real estate, it may be easy to think everyone carries more weight than you in the process, especially if it’s your first time. But the truth is that the consumer is the most important person in the process. If you decide not to buy, the entire process stops. So flex your consumer muscle. Demand good representation, whether it is your builder, your Realtor or your mortgage lender. Make sure your questions are answered and that you fully understand each step in the process.

If you are looking to build a new home, you’ll still want to include a Realtor as they will help walk you through the process, keeping it on track and protecting your interests all the way just as they would if you were purchasing an existing home. Furthermore, the builder pays your real estate agent’s commission and will not discount the cost of the home if you decide not to include an agent in the sale. Your agent will save you money on the front end with your purchase but they can also assist in the selection of appointments and features buyers demand and which will benefit you when it comes time to sell.

Ask The Right Questions

Having good representation in your corner is important, and one of the signs of good representation is that they ask you numerous questions. But what kind of questions should you ask them? When you meet with potential Realtors, lenders or builder sales agents, make sure to spend at least 15-30 minutes discussing what to expect when you’re buying a home.

If you decide to work with an agent or Realtor, how long have you been in the business? What areas and price points are you most active in? What kind of disclosures are sellers required to give buyers in your area? Who does the title search? What types of home inspections are standard in your area? How much can you expect to pay for closing costs? There are various types of mortgage products out there; how do you know which is the best one for you? There is an abundance of online resources to help you determine the right questions to ask. Remember, don’t be shy. You should always demand a full and complete explanation from any professional working on your behalf.

Keep a Cool Head

With all the details that are involved with buying your first home, simple problems often seem like bigger ones when you over-react. Remember to keep a cool head and be patient with the process. Unexpected events can move your closing date or add extra steps. Expect that this can happen going in and you’ll save yourself undue stress. Even though you have a closing date, there are many factors that may cause that date to get pushed back. It’s important to be flexible, remain calm and remember, it all will get done, just perhaps not on the timeline you initially planned.

Avoid Shortcuts

Once you decide to buy a home, particularly if it’s your first, it’s easy to let emotions overwhelm you. Take a deep breath and realize that becoming a first-time homeowner is not an overnight process and by taking all the necessary steps, you will limit any potential regrets. There are no absolute time-frames for buying a home, some buyers find their “perfect home” the first day, for others it may take several months.

By being prepared, doing your research, talking with builders, lenders and Realtors about what to expect and what you need, you can expedite the process, but don’t rush it. For example, never shortcut the inspection process. You may save a relatively small amount of money upfront, but you run the very real risk of not exposing potentially expensive defects in the property. Always hire an experienced professional for inspection; asking a relative with limited experience to conduct your inspection can be as risky as skipping the inspection process completely.

Have a Plan B

Many first-time buyers make the mistake of thinking that if they look long enough, they will find a home that is 100 percent perfect for them. With the thousands of possibilities in home design, location, amenities, etc., this is a pretty unrealistic expectation. What is more common is that buyers will pass on a home that meet 90 percent or more of their requirements only to later realize that the “perfect home” doesn’t exist at which point they decide they would like to reconsider or often purchase this property. Sometimes these buyers get lucky and the home in question is still available, however, in most instances they find the home has been sold. At the same time, it is important to know that while being flexible, it’s okay to have a fall-back plan.

Be prepared to have a Plan B, such as renting a bit longer, if you don’t find what you’re looking for right away. Take your time in deciding what you want, what you are willing to give up, and to find a house with the ‘wow’ factor. Knowing you have other options will relieve the pressure to make a decision.

If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please give us a call and we’d be happy to assist you!

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in;  Bexley  Columbus  Delaware  Downtown  Dublin  Gahanna  Grandview Heights  Granville  Grove City  Groveport  Hilliard  Lewis Center  New Albany  Pickerington  Polaris  Powell   Upper Arlington  Westerville  Worthington