Are you thinking now might be the time to step out and explore the possibility of buying your first home. Congratulations! You will seldom find a real estate market like we are experiencing in Colorado Springs and you will definitely benefit from the very low interest rates that are available right now.
Before you start to look for a home, be sure that you won’t be considering moving from that home for at least 3-5 years. You might be scratching your head right now but you need to realize that it takes about 3-5 years to build up enough equity to recoup your original investment costs in a normal economy. You probably have read or heard that real estate prices in our area have dropped anywhere from 14-17% since June 2007 and that interest rates are at historically low levels. These indicators mean this is a perfect time to buy an affordable home.
And now, 10 tips that will make buying your first home a pleasurable experience and one that you will want to repeat.
1. It is important to use the services of an experienced real estate broker when you make the decision to purchase your first home. Often, if you ask around you will find that your friends or family members can recommend a real estate broker that is both reputable and knowledgeable about the local real estate market. You need to feel comfortable that your Broker will be your advocate and explain every step of the buying process to you with patience and understanding. Talk to a reputable lender.
2. After choosing your Realtor, the next most important step is to choose a lender that is reputable and reliable. You might be tempted to use an internet lender because they often offer unbelievable rates and yes, the deals and rates are unbelievable. Ask your Realtor for a recommendation of 2-3 lenders. Make an appointment to meet with each of the lenders face to face. Let them know that you are a first time buyer and want to know what loan programs are available for first time buyers. The lender will ask you questions about your job history, how much money you have to put down, what you have as debts, and what you have as assets. A reputable lender will spend the time you need to explain the different loans available and explain the cost of purchasing a home.
3. Once you have decided on a lender, you will want the lender to check your credit and credit score. Lenders determine your interest rate and how much you qualify to borrow (your debt to income ratio) as they review your credit report. A FICO credit score of 720 or higher will help you obtain the lower interest rates. The FICO credit score is determined by how much credit you have and if you pay your monthly obligations on time.
4. The lender will tell you how much loan you can qualify for and then you need to take the time and make a budget to determine how much you can spend for housing. The lender may tell you a payment amount that is higher than you want to spend. If you have a budget you won’t be swayed to spend more for housing than what you can realistically afford. Get in the habit to save money.
5. Once you know what you want to spend for your monthly mortgage payment, start saving the difference between what you are paying for rent and what your monthly mortgage payment will be. In may only be a few months before you close on a new home but in just those few months you will have initiated a habit of saving that will benefit you for the rest of your life.
Watch for the remaining 5 tips for first time home buyers in our next weekly blog.