Thursday, December 13, 2012

Getting Ready to Buy your First Home: A True Story



Getting Ready to Buy a First Home: A True Story

Last year a young couple called me about a rental listing I had on the market. I got together with them and showed my listing which turned out to be a little bit more than they could comfortably afford. We got to talking, and I learned that they were both recent architecture school graduates and planning on getting married in the spring. They hoped to buy their first home sometime soon but were not too sure how to begin the process. I wound up helping them lease a teeny, (and to honest, pretty rotten,) storefront property that was not entirely converted to a living space for one person, let alone two. They agreed to lease the "apartment" and follow my plan for a year to get ready to buy their first home.

This past September, I had a listing appointment with a client/developer for whom I regularly list properties.  He had a great three bedroom/2 bath that was perfect for my young couple, and in their price range.  I immediately called them to see it.  They were able to make an offer at once (because they were completely ready,) and they wound up buying their first home!  I am so proud of them!

You can do it too!
This past September, I had a listing appointment with a client/developer for whom I regularly list properties.  He had a great three bedroom/2 bath that was perfect for my young couple, and in their price range.  I immediately called them to see it.  They were able to make an offer at once (because they were completely ready,) and they wound up buying their first home!  I am so proud of them!

You can do it too!
 Here is what I told them to do:
1.                            Rat Hole Your Money.
The idea was that by renting a cheap apartment and being very frugal for the year, my clients would be able to start “rat holing” their savings.  Unfortunately some time after I made this comment, they spied a huge rat just outside their apartment.  Every time they thought of the rat, they thought of me – probably not a good thing, but it did help to remind them what their goals were!  They also decided to have a modest wedding and even received a few monetary wedding gifts that they were able to save and add to the pot.
Just so you know; to qualify for a conventional mortgage, ideally you should have 20 percent of the purchase price saved as a down payment. There are other loan options for first time home buyers and any mortgage banker or broker can help steer you in the right direction.  Also, factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
2.                           What can you afford?
While generally, you can afford a home equal in value to between two and three times your gross income,  it is always a benefit to get pre-qualified to see where you stand and gain a realistic understanding of what you can be comfortable with in the long-run.  A good dose of financial realism will help guide you in your search so that you don’t start looking at properties that you won’t be able to afford in the long run.
3.              Wish upon a star.
Start investigating neighborhoods.  Drive around and get a feel for them when you have time.  Study the architectural styles, types of homes, proximity to things you use and need and your comfort level with the neighborhood’s safety and amenities.  Then make a wish list.  What are the most important things a home must have?  I think the neighborhood search is important to do first so that you don’t get hung up on something like a screened-in porch when the architecture in the neighborhood you’ve chosen doesn’t support that style.
My couple smartly chose an edgy neighborhood that had recent high-end commercial business development, restaurant and shops close by.  On their wish list, they added bicycle parking, architectural details, proximity to public transportation, and enough space for a home office.
4.             Get your credit in order.
Actually I was recently at a continuing education class and was reminded of the importance of checking your credit.  It is extremely important to obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.  Really, this is something everyone should be doing annually, especially if you have a very common name like mine.  It is possible that someone else’s bad decision could wind up on your credit report!  I am always wary of some other Chris Smith out there who hasn’t paid his Home Depot credit card bill!  It is fairly easy to fix this kind of problem, but only if you know about it!
5.             Calculate the costs of homeownership.
This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.  A lot of first time home buyers are not aware of these details and they are important added expenses.  Be sure you are prepared for all of the aspects of home ownership expenses and you won’t be surprised down the road.
6.             Call Chris Smith (504) 231-2004!
Let’s get started!  There is no need to rent a teeny apartment to prepare!   I can help get you on track for a future purchase and help find just the right home for you when the time comes.  Give me a call!  I am happy to help!