The first time you approach a task is usually the toughest. That's because you are most unfamiliar with a situation the first time you go through it. The same is true for purchasing a home. First time home buyers sometimes have the most trouble with purchasing a home because of their inexperience.
Here are five steps to help first time home buyers purchase their first home successfully.
Step One - Prepare your financial statements
As a first time home buyer should spend at least the six months prior to purchasing a home getting your financial situation in order. This means checking your credit report to make sure that there are no blemishes. Paying off collections and other debts to improve your chance at obtaining and affording a mortgage is also an important step to take as a first time home buyer. It is important that you take a good look at your budget to determine how much you can comfortably afford to spend on a mortgage. It is not a good idea to stretch your money too far.
Step Two - Get pre-approved for a mortgage
Once you have done the work to clean up your credit report and pay off your minor debts, you, as a first time home buyer, should get pre-approved for a mortgage through a lender. When a lender pre-approves you for a mortgage, you are given an estimate of the amount of mortgage you will be approved for based on your credit history, debt, and income. With this pre-approval amount, you have a price range that you can use to shop for a home.
Step Three - Choose your broker/agent carefully
The real estate broker you choose will play a major role in the home shopping process. Not only should you choose an broker that is reputable in the market, you should also make sure that you feel comfortable communicating with the broker. It is helpful to work with an broker that has experienced working with first time home buyers. You don't have to be best friends with your real estate broker but you do need to get along with this person. After all, you will be working together for the next three to six months. Work with a Buyer's Broker.
For a broker to be considered a buyer's broker, an agreement must be made between the buyer and the broker. Without such an agreement, the agent could end up representing the seller in a real estate transaction. In most states we now have what's call "Limited Dual Agency." Under this legal theory a broker can represent both the buyer and the seller. I, for one, don't see how this is good for either the buyer or seller. If you as a buyer want to use a Broker, get a Buyer Broker Agreement signed. You can download one free of charge here.
Step Four - Narrow down your selection
Many first time home buyers have difficulty making a decision about a home to purchase. After several days of home searching you may find yourself with several houses to choose from. This can make it difficult since you've probably forgotten many of the houses since visiting them. You should narrow down your selection of houses as you go. As a matter of fact, it is a good idea to only have three houses in mind at any given time. Weeding out the houses will make the final decision much easier.
Step 5 - If you must settle, do so within reason
Finding your dream house as a first time home buyer might be somewhat of a stretch, especially if you are limited by financial reasons. You might have to lower your expectations slightly to purchase a home. That doesn't mean that you have to choose the house from hell. Instead, make a decision to sacrifice some of the things you desire in a home that can be added later.
Finally ...
Being a first time home buyer can be a rewarding process, especially if you have the knowledge you need to make an informed decision. The next step will be to buy an investment house. There's no better way to create wealth and produce positive income. Did you know that if you have a strategy of buying a home every two years and moving into the new home that you can retire in less than ten years?
Think about that for a second. If you're 25 years old you can retire at the age of 35 on an annual income equal to $100,000 per year, or more, tax free. Sign up for my free Real Estate Investment Newsletter! Email me at DonLoyd@DonLoyd.com
Posts
