By: Christina Williams of Junior Achievement
Purchasing a home at any point can be stressful, and for first-time buyers it can be a nearly overwhelming experience. Fortunately, there are professionals who can help any level of homebuyer navigate the complex process of selecting, purchasing, and closing on a new home. Finding a reputable realtor and lender are the best ways to determine–commitment free, and usually at no cost–just how much house you can afford. Oftentimes the estimated monthly payment displayed on those convenient online calculators fail to include items such as property taxes, home insurance, and PMI (private mortgage insurance—a type of insurance that is required when your down payment is less than twenty percent). Add in those costs and sometimes that seemingly affordable home becomes a financial pipe dream.
A lender, however, will collect your financial information, including broker, bank, and retirement account records; pay stubs; tax return records; and loan and credit card statements. The lender can then provide you with a pre-approval amount and an idea of the type of loan for which you qualify, so you can narrow your search financially. Whether you want to use the whole of your approval amount, or if you have in mind a lower, set monthly payment, a lender can go over these numbers with you and help you determine the best options.
Once you have an approval amount a realtor can locate the best matches within your price range, the type of loan for which you are qualified, and all with as many items from your wish list as possible. How many bedrooms and baths do you need? How many floors? Want a basement or garage? Maybe the best schools or trendiest neighborhood are your main concern. Possibly a house with a wraparound porch has been your lifelong dream. All of these factors will be in your realtor’s head as (s)he culls agency resources to find what you need, want, and can afford to buy.
The housing bubble break also left many foreclosed-upon homes lingering on the market. While these can be great opportunities, ERA Martin has financial words of warning regarding these homes. “So many of these foreclosures and short sales that we see on the market seem like great deals, but really won’t work unless the buyer can pay cash, or put down a lot of money,” says ERA Martin Realtor, Joni Martin Williamson. “For many loans, especially those for first time buyers, or loans that have very low down payments, the house has to be in good condition.” This is a drawback when considering a cheaper “fixer upper” foreclosure that has stood vacant or was not cared for well in its later years.
Once you have decided on a house, your realtor will draw up a contract and enter negotiations with the seller on your behalf. With a signed contract in hand, you will secure your financing and have the house inspected and appraised. Your realtor and/or lender can help you choose an appropriate, reputable company for this. When all is green-lighted, you will set a closing date, gather your closing costs, and settle on your house.
Ensuring you have a reputable title company is also important. They will research the property you plan to purchase to ensure there are no liens or claims against it. After the title search, the title company will work with your realtor and lender to ensure all closing paperwork is complete, will conduct the closing between you and the seller, and will record your deed and mortgage with the county after closing.
Even if you’re still in the early stages of home buying it is still a good idea to speak with a realtor. They can show you what is out there right now, refer you to a reputable lender, help start the process of selling your existing house, and assist you with choosing a title company for the escrow process once you decide to take the leap and put a contract on the house you wish to purchase.
According to the U.S. Census Bureau, as of January 2015 the median home cost in the United States is $294,300. You will most likely never spend that amount of money for the purchase of any other single item. Researching and learning about the home buying process and recruiting a solid team of real estate professionals will ensure the cash spent (and the occasional fit of nerves) is well worth it.
Christina Williams is the Marketing and P.R. director at Junior Achievement of the Eastern Shore, a 501(c)3 nonprofit dedicated to teaching age-appropriate financial literacy, workforce readiness, and entrepreneurship to over 6,000 local K-12 students annually. Through enthusiastic volunteers and charitable donations from individuals and businesses, Junior Achievement of the Eastern Shore continues its mission to making a difference in our future communities today. www.easternshoreja.org.
