Last week, I shared a few important factors to consider when buying a home for the first time, including getting your finances in shape and saving for the down payment. Home ownership isn’t for everyone, but there are some big upsides, including getting to live in a comfortable home that reflects your style and meets your needs. Here are some factors to consider as you embark on this journey.
Choose a Realtor. As I said last time, one of the first steps is to choose a Realtor. In a small town like ours, you’re bound to know a few. The best way to choose a Realtor isn’t based on whether they’re related to you or the fact that you went to high school together. Instead, talk to friends and colleagues who have dealt with a Realtor in the recent past, and ask them about the service they received, particularly in light of communication. Interview the top contenders and choose the one with whom you have the greatest rapport. The goal is to choose the Realtor who can help you navigate what is likely to be the biggest financial investment you ever make.
Choose a Lender. Your Realtor can recommend a good lender, one who is responsive and represents a reliable company. Your lender should have the technical expertise to ferret through hundreds of loan programs to choose the one that’s best for you.
Once you and your lender decide on the loan that fits your needs, your lender can help you get pre-approved for a loan (not just pre-qualified). Depending on your situation, you may qualify for a loan with no down payment, low interest rates, or one with mortgage guarantee insurance, which protects lenders against default. Qualifications may depend on your income, whether you served in the military, and/or your status as a first-time homebuyer.
Only buy what you can afford. Even if your lender says you can afford a huge loan, you should stay within your comfort zone. To choose the right home, consider your must-haves. How many bedrooms and bathrooms do you need? How about a yard for the kids and dog? Do you want to be close to work and school? Be careful not to be pennywise and pound foolish. Saving $200 a month on tax-deductible housing costs but adding 25 miles to your daily commute (requiring non-tax-deductible fuel and car maintenance) may not be cost-effective.
Make an Offer. Now that you’ve found the home of your dreams, it’s time to make an offer. One of the most common questions is, “How much should I offer?” This is tough to answer. Nothing is as frustrating as making an offer, only to be beaten by someone who pays $5,000 more—especially if you would happily have paid $6,000 more. Here’s my advice: decide what the property is worth to you and make the offer accordingly. If you’re successful, you’ve got a property based on what it is worth to you. If you get outbid, it wasn’t worth that much to you—you can let it go and move on.
Interest Rate Lock. Once your offer is accepted, you can work with your lender to lock in an interest rate. Just be sure the term for the lock is sufficient to cover the whole escrow period. A 15-day lock and 45-day escrow won’t work. Locking in the rate will cost you money, but it protects you against the risk of rates going up.
Housewarming Party. After all the inspections come back clean and you’re happy with the property, you can close escrow and move in. The last thing to do? Throw a housewarming party. Don’t forget to invite your Realtor and loan agent!
If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.