The Colony Group
May 11, 2016
Buying your first home is an exciting and daunting experience. As much as you prepare, inevitably, parts of the process are out of your control. Sound preparation and consistent engagement in the purchase process will help make the experience smoother and more enjoyable. How can you take steps to be prepared and engaged without adding complication to the process? Below are 4 ways to help in planning and closing on your first purchase.
Simply put, the home buying process starts with you. No one else will know what property fits your needs or objectives. A great starting point is writing a list of the most important things you want in the property. Think: price, location, size, features. No need to worry about the little things that can be easily changed.
When thinking about what you can afford, it is smart to seek advice from a financial planner to understand the cost of home ownership and how it will affect your cash flow and taxes. These costs include mortgage interest, real estate taxes, closing costs, and ongoing maintenance or homeowner association fees.
As you browse the real estate websites for possible properties, start to gather your financials for your mortgage pre-approval. Pull together your two most recent pay stubs, tax returns, and bank/credit card and investment statements. Save these files to have them handy.
To prep and be safe, save the files with your last name included in each file name and password protect all files that include your confidential info. As a security precaution, it is best to call the person to whom you are sending the documents to verbally share the password with them, instead of including it in an e-mail.
The search for the perfect home will have moments of excitement and letdown. Be prepared to look at many properties and don’t be discouraged if you don’t find everything you are looking for in the first property. Remember that patience during the search process is important. However, once you find a property that meets your needs, be prepared to act quickly, as the housing market can be competitive. Refer back to your original list of wants. If you want the property, make your best and final offer the first time. Remember, everyone wants a bargain, but, in real estate, you really get what you pay for.
When an offer is made, make sure to keep your lawyer in the loop. They will need to know what the offer price is and how much you plan to put as a down payment. If accepted, the lawyer will draft a contract and send to the seller’s attorney. Expect to wire 10% of your down payment as a contract deposit.
As your purchase agreement is being finalized, the bank will perform an inspection, appraisal, credit check, and request two years of tax returns from the IRS. All of these pieces are part of the bank working through approving your loan. Be quick and responsive when asked for signed forms and additional information. Access to a scanner is very helpful.
Banks can sometimes be slow paced, so make sure to be active in the entire process. Typically, you will work with a representative who then communicates with the bank’s mortgage team. It is important to be professional with the representative, even if there are many asks and sometimes a wait in hearing back from them.
A service that may help clients through the process is credit monitoring. It allows clients to stay on top of the property management, mortgage company, and law firm on processing your file and also helps work through any mortgage contingencies relating to your credit card history. Credit card companies may provide “dummy” credit card numbers on credit reports to protect the cardholder’s credit card number. To a mortgage underwriter, this can look like additional credit cards, instead of the masking of a current credit card. Focus on matching the credit card opening date, credit limit, and minimum payments to resolve the issue and provide quick clarity.
Regardless of how prepared you are, surprises will happen. Be patient and stick to the first step of knowing what you want. If you find a place that matches your needs, the wait can be worth it. By constantly communicating, following up quickly and efficiently, and being patient, you’ll know that you’ve done all you can. Once you turn the key to your new property and officially call yourself a homeowner, it will be worth the wait.