Do’s and Don’ts for First-time Buyers

If you are a first-time buyer, you don’t have it as easy as you would have had it a few years ago. First-time buyers need to be especially savvy to get a great deal and stay in solid financial shape. A recent Realty Times article offers some do’s and don’ts to help you out.

At the very least, a first-time buyer needs to understand the local housing market, what he or she can afford and how he or she can secure a loan and a home that is a good fit for his or her lifestyle. This will most likely be the largest financial transaction you have ever made, so it is critical that there are no mistakes. Intimidated? No need – follow a few steps and you can transition into cautious and informed.

Coldwell Banker recently released a list of do’s and don’ts for first-time buyers, helping them to change that feeling of intimidation into confidence. The list includes many things that first-time buyers often stumble over; being aware of the pitfalls will help you avoid them.

• DO browse for housing information. Online sites such as HouseHunt.com offer great information on markets, listings and housing costs. You can do a lot of research to understand the average cost of housing in your area, the condition of the market and other general advice and information. The better informed you are, the more likely you will be to succeed.
  
  
• DO know your credit standing. Your credit worthiness is of the utmost importance in today’s market and your ability to secure a loan will depend upon it. Obtain copies from the three major credit bureaus for free every year from AnnualCreditReport.com. Do this well before you are looking to secure a loan and you’ll have a chance to erase any errors and improve any blemishes.
  
  
• DO consider a loan pre-approval. Getting a pre-approval commitment from a lender does not mean that you ultimately have to get a loan from that lender, but it will help you be a more attractive buyer, since it shows that you are serious and makes the process quicker. It will also give you a good idea of what you can afford and will help you stay within those limits.
  
  
• DO form a professional dream team. In today’s tough market, it is especially important to have experienced experts who can help you stand out from the competition and avoid pitfalls. Consider partnering with a real estate agent, attorney, mortgage broker and home inspector to get the most out of your home search.
  
  
• DO separate wants from needs. Make a list of what you want versus what you need, and you will know where you can compromise so you can stay within your budget.
  
  
• DO buy to fit your lifestyle. Your first home probably will not be your last, so understand realistically how long you will be there and buy based on that expected duration. You will also need to understand what your home will be used for so you can buy appropriately. Are you planning on starting a family? Will you be working from home? Will you need to take care of an elderly parent or family member? All of these things are considerations that will help you narrow down your home choices.
  
  
• DON’T fall in love on first sight. This may work for your love life, but it may not for your first home. Don’t fall for the first home or neighborhood you see. Keep an open mind and shop around, taking time to find something that fits your needs.
  
  
• DON’T buy more home than you can afford. Lenders may still loan you as much as the maximum you can afford, but you probably want to stay below that so your home doesn’t become a prison. It is much better to live with a comfortable mortgage on a smaller or less glamorous home than struggle with paying a mortgage that is at the top end of your means. The down payment, mortgage, closing costs, taxes, insurance, utilities, homeowners’ association fees and general maintenance must be within your income and savings range. Otherwise, you may find that your home is the only thing you can afford; say goodbye to meals out, vacations and movies.
  
  
• DON’T view your home as part of your portfolio. Homes appreciate and depreciate unpredictably, so don’t plan on buying a home and turning a quick profit, especially in today’s market. Most homebuyers need to be able to stick out the market’s ups and downs. Buy because you want a roof over your head, not because you want a savvy investment.
  
  
• DON’T try to predict the market. You won’t be able to pinpoint the bottom of the market until the market has started to look up again. Focus on your personal needs, not market trends, when you are timing your home purchase.
  
  
• DON’T sign up for a confusing loan. Shop around for the best mortgage and read all of the fine print. You can also ask your mortgage broker to help you understand all of the terms and provisions. Don’t be afraid of asking questions if you’re confused. You should also try to go traditional when at all possible. Creative, exotic loans are what got many people in trouble recently. Focus on the best loan for your lifestyle and you won’t go wrong.

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