First Time Homebuyer Tips

by Elizabeth Hotz, First Time Homebuyer Specialist for The Kentwood Company

First Time Home Buyers

First Time Buyers

A majority of the homes I sell are to first-time homebuyers. Most first-time homebuyers, armed with a Realtor.com login and a city map, seem indestructible. However, I have learned that there are several common issues first-timers need to address. These are a few tips to make sure you get the most out of your home buying experience.

Elizabeth Hotz Kentwood Buyer Specialist
Elizabeth and a buyer celebrate her first home closing! 

1.  Get Pre-Approved. Before you start your search, visit a qualified and recommended Mortgage Lender and get pre-approved for a loan. Visiting with a Mortgage Lender will help you define your price range and give you a better idea of monthly payments at each price point – so there are no surprises.

Furthermore, a pre-approval letter will give you more negotiation power when it comes time to making an offer on a property – Sellers are much more likely to do business with a Buyer that they know can afford the home. Getting pre-qualified is an easy process that can be done quickly and, in some cases, simply over the phone. Most of the time you’ll need to present the Lender with the following information: W2s, Savings Account Statements, most recent pay stubs from a current employer, and a Social Security number to bring up your credit score. Credit scores are an important factor in determining how much of a loan you qualify for. Plenty of Lenders now have access to programs that can tell you what steps you need to take to repair/strengthen your credit which may help you qualify for more money, a better interest rate and/or eliminate the need for a co-signer.    

2.  Let Your Realtor Be Your Guide. I had a friend who knew she wanted to live in this one particular area. So, she spent an entire day driving around and writing down the addresses of every home in the neighborhood with a sign in the front yard. To her, it seemed like an effective way to find exactly what she wanted, until she turned the addresses over to her Realtor and got increasingly frustrated when she discovered that most of the homes were either out of her price range, too small, or already “Under Contract.” Don’t take this route. Most agents have a variety of search tools and networks that keep them on top of what’s available in your market. If your agent doesn’t – get a new one and require that they do their job.

3.  Internet Beware. Conducting your own home/listing searches seem to be the cry of the day for consumers, and the Internet has certainly stepped up to meet this need. Whether it’s through a personal Realtor’s site or one of the big timers like Realtor.com, Buyers are inundated with information for homes listed as For Sale that isn’t always correct. Listing Agents have found a number of loopholes to get as many people interested in viewing a property as possible. They use incorrect neighborhood names, list duplexes as single-family homes, confuse you with square footage (i.e. total vs. finished, above-grade vs. basement), and use seemingly attractive words like cozy or good bones. Send your Realtor homes that interest you and let them do the research to make sure it’s worth your time.

4.  Open House/Sales Center Etiquette. Visiting Open Houses or the Sales Centers for

Berkeley Park in Denver, Colorado
Berkeley Park In Northwest Denver is popular with first-time homebuyers.

new construction can be a bit confusing and, frankly, intimidating. If possible, have your Realtor accompany you. That’s their job. However, if you find yourself stopping by on a whim, there are a few things you can expect. First, there’s no need to knock or ring the doorbell (unless directed). Just walk right in. Open Houses are typically hosted by a Realtor. Feel free to ask them if they are representing the Seller as a listing agent. Each Realtor handles open houses differently. They may request that you sign in before looking around the house. This is a typical request and something you should do. That way, the Seller has a log of everyone that has come through their home. If you are working with a Realtor, do mention it and present his/her card if possible. This will keep the other Agent from contacting you or putting on the full-court sales press. If you are not working with an agent, you might want to talk to the Open House Realtor and “interview” them for the job. They may be knowledgeable about that particular area or other homes nearby in your price range. Many buyers have found their agents simply because they clicked at an Open House. Sales Centers are very similar to Open Houses, although they will seem more formal. Most sales people are not licensed agents and work directly for the builder. They will also ask you to sign in and give them information about what you’re looking for. Again, if you are working with an Agent, make sure to mention it at this point. If you don’t, and move forward with the purchase of a home from them, the builder may not let you be represented by an agent at all. Most Sales Centers will have a model you can peruse. Plus, they should be able to provide you with information on the project, standing inventory, incentive information, estimated HOA fees and services, etc. In both situations, feel free to wander around, open drawers and closets, and, most of all, ask questions.

5.  Jump on the Right Opportunity. When I was little, my mom always told my sister and I to shop around and check out all our options before committing to buying anything. This resulted in long Saturdays of trying on every black prom dress in the mall or searching till spring for the perfect winter boots. This rule should NOT be applied to house hunting. When you see a home first-hand that meets your criteria and feels right – where you can envision your furniture and brushing your teeth – STOP RIGHT THERE! Don’t keep on searching with this home in the back of your head. In this game, you snooze, you loose. And in any market, the good homes will still sell. If you are lucky enough to get a great home before it’s sold,  you need to move on it! Otherwise, that great home will likely sell soon. I have had that happen to several buyers who wished they had acted more quickly.

6.  Home For Sale? Shopping for a home is not like shopping for a car – just because it has a price tag on it, doesn’t make it yours. Especially in a Sellers’ Market, many homes are being snatched up before they barely get on the market. Sometimes it’s a neighbor who has been waiting in the wings or perhaps the Listing Agent tipped off one of their Buyers before the listing went public. Even if you are able to make an offer on a property, remember that the negotiation time can be one of the most stressful. If going back and forth over price isn’t hard enough, there is always the risk that another, competing party could enter in a better offer at anytime. Don’t be discouraged - there is more than one right property out there for everyone. 

7.  Inspect, inspect, inspect. Once a home goes Under Contract (or in Escrow in some

 
Elizabeth sold this actual home! 

states), one of the most critical steps is the Home Inspection. In the state of Colorado, this is your last Get-Out-Of-Jail-Free card, your last chance to terminate the contract without any consequence to the Earnest Money. Make sure you get a recommended and qualified Home Inspector to evaluate your soon-to-be new home. This is not the area to skimp on money-wise either. Yes, there are inspectors who will look at your home for $100, and most of the time, you get what you pay for. It takes a professional, ASHI certified inspector to successfully evaluate the physical condition of the home (structure, construction and mechanical aspects), identify needed repairs, and to estimate the remaining life of major systems (heating, plumbing, roof, etc.). These inspectors typically charge anywhere from $300-$500 and will provide you with a written report of the inspection – a powerful tool in negotiating with the Seller what repairs will be made prior to closing.

8.  Hidden Costs. When you purchase a home, it’s important to keep in mind that there will be additional costs that you need to bring to the table beside simply the price of the home. We call these additional expenses Closing Costs. These costs will be figured into your Settlement Statement provided by the title company, but they are not covered by your loan. Some of these items that will increase the money you need to bring to closing are: Title Insurance, Appraisal Fee, Administrative Fee, Survey, Record Warranty Deed, Mortgage Processing Fee, HOA Transfer Fee, Title Closing Fee, etc. To see a complete list of possible Buyers’ Closing Costs and going rates click here (http://www.thinkglink.com/Buyer_Closing_Costs.htm). Please note that the Buyer will not be responsible for the Realtors commissions – that is the duty of the Sellers. Other expenses that you may consider are Home Owners Association fees, taxes, trash, and parking. Each of these fees will vary depending on the property and the area. 

Most of all, try to remember that in any home buying transaction there is a whirlwind of emotions - excitement, anxiety, thrill, sometimes disappointment. It’s important to trust yourself and ask for help.        

 

November 7, 2007 | Filed Under Denver Real Estate News, Home Buying Issues, Home Loans 

Comments

6 Responses to “First Time Homebuyer Tips”

  1. first time home buyer on November 7th, 2007 7:49 pm

    a lot of ppl forget to get the preapproval….then they wonder why the lender ask for 1million documents!

  2. jen on November 16th, 2007 1:30 pm

    this is all good info. i wish i had known these things before my husband and i bought our first home.

  3. Emily on November 27th, 2007 1:44 pm

    This is wonderful information and will help both the first-time and experienced buyer!

  4. Atlanta Real Estate on November 30th, 2007 7:13 am

    Great info all buyers. Upon getting the preapproval from the loan officer, the buyer should also get a good faith estimate. Even though the home has not been selected and the negotiations have not taken place the good faith estimate will provide some basic insight into the closing costs required to close the transaction. The buyer can also use this information in negotiating how much of the closing costs will be paid by the seller. Most loan guidelines allow for the seller to contribute 3% of the purchase price of the home toward closing costs. I have even seen some programs that allow up to 6%.

  5. Robert Blake on February 14th, 2008 8:29 am

    As another Denver blogger, glad to have found your post Elizabeth…and I must a fine job.

    One thing I will add is on “Pre-Approval” letters be sure they say they buyer has been approved through an “automated underwriting system”. FNMA for conventional loans uses a system call Desktop Underwriter/Originator.

    This way you and the buyer are not caught with a worthless letter since the letter is only as “good” as they guy who wrote it. If it’s been run through and approved by the system you can always ask for the “approval report” as well as the letter.

    Rob K. Blake
    PS: In that same vein, I’ll have to disagree with the “Good Faith Estimate” advice given above…it’s only as trustworthy as the guy who wrote it…so get a good recommendation and do your homework on the provider before blindly trusting any “disclosure”.

  6. Gene on February 24th, 2008 2:44 pm

    This is wonderful information. I’m in the process of selling two homes right now (my own, and my inlaws’) and have found so much conflicting information on the web. This article really clarifies some of the issues I’ve been dealing with.

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