How to be a successful first-time homebuyer

Having managed many real estate transactions in the 5.5 years I've been in the business, I always came across buyers who asked me the same question, "I want to buy a house, what do I do"? So I decided to write this blog to give would-be buyers a heads-up on how to accomplish your goal and buy your home.

1. Know how much you can afford. No, I don't mean play a guessing game. I mean look at your monthly income and monthly expenses and bank accounts. Next, find a mortgage broker or a lender and obtain a pre-approval letter for a home loan. A mortgage broker is someone who works with several lenders to find the best loan package for you. A lender is an institution or company that will be the source of the home loan and grant you the loan. In order to get a pre-approval letter, the broker or lender will require initial documents from you: pay stubs, W2, bank statements, loan application, etc. These documents will give the lender an idea of how much you can afford to buy. The pre-approval letter will be given to you after the lender has screened these documents. A pre-approval letter is NOT a guarantee of loan approval. It is a confirmation that based on the initial documents you supplied, you are qualified to purchase up to a certain price. Your final loan approval will be given after intense scrutiny of your credit history, employment, more documents, assets/liabilities, etc. This scrutiny usually does not occur until you have submitted an offer to purchase a home. When that offer is accepted by the sellers, the ball game starts. The lender will start the process of securing a loan package for you.
2. Find an agent who will represent your best interest. Hiring a buyer's agent does not cost you anything. Not hiring an agent may cost you on missing out on sccessfully negotiating a sales price or important advice on the nuances of purchasing a home that will protect you in your decision to make the biggest investment of your life.
3. Know the cost of homeownership. Some costs associated with owning your home: property taxes, HOA, maintenance and upkeep, utilities, repairs and landscaping. These are the major costs that I can think of, being a homeowner myself. Also, the age of your home is definitely a factor in how much $$ you'll spend in maintenance and repairs.
4. Prepare for the emotional rollercoaster. Depending on your local market, you may find yourself in bidding wars for the best homes. Prepare for the stress this can create. You may realize that your dream home is not what you can afford. Prepare yourself to be realistic on your expectations for the price you can afford. You may need to adjust your offer price or accept a rejection of your offer. You may have waited 2 days to decide to put an offer for a home you really loved only to find out that it is no longer available. Prepare yourself to accept the consequences of procrastination.
5. Hire a home inspector. I always advice my buyers to have a home inspection done. It is to your advantage to know if there are any existing issues with the home and the potential costs to fix those issues. For my buyers that buy new construction, I advice them to have an inspection done before the 11-month builder home warranty check. Any issues that the home inspector finds should be put on the 11-month punchlist for the builder to address.
6. Have at least a 5% downpayment. The more $$ you have as a downpayment, the better your loan package will be.
7. Know your credit score. Get a full credit report and make sure that it is accurate. If there are discrepancies that you believe should not be there, fix it ASAP. The lender will look at your credit score and will make a determination what your interest rate will be based on this score. The higher your FICO score is, the lower rates you will be given. If your credit score isn't great (below 680) start working on getting it higher by paying off credit card balances and/or lowering balances, making payments on time. Do not open new accounts.

This is just a start to get you on your way. Buying a home is a process that takes commitment from you and your agent and setting realistic goals. If anyone tells you that buying real estate is easy and simple, they are either very rich with lots of cash to plunk down on their dream home (you don't come across this often) or has never bought or sold real estate. My bet is on the latter, that person has never been involved in the buying or selling process.