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Top Tips For First Time Home Buyers


First Time Home Buyers

The Top 4 Tips for First Time Buyers

Economists predict a significant increase in the number of first time homebuyers in 2013, thanks in large part to record-low mortgage interest rates and homes prices that are on the rise, yet are still affordable. If you're among those thinking about taking the plunge, there are 4 tips you’ve got to take advantage of:

1. Know what you can afford

Everyone wants a big house with lots of high-dollar amenities, but not everyone can afford one. Luckily, in recent years, mortgage lenders have gotten much stricter about who they lend money to, and how much they're willing to give to borrowers. They learned their lesson after subprime loans caused the housing market collapse back in 2008. Hopefully, consumers have learned from the situation as well! So how do you know if you can afford a home that you like? Use two rules – one that relates to the overall price of the home, and one that relates to your monthly expenses. First, you shouldn't buy a home that costs more than 2 ½ times your gross annual income. Second, your monthly mortgage payment should not be higher than 28% of your gross monthly income. It's unlikely that a lender will approve you for a loan that you can't afford, but all too often, first-time homebuyers are relying on a pre-approval, and are shocked to learn that pre-approvals and actual approvals can be very different.

Looking back: Top housing markets of 2012

2. Don't rely too heavily on your pre-approval

A preliminary mortgage approval is usually done over the phone, and requires very little paperwork. It basically lets a borrower know what price range of a home he can afford. But when the time comes to actually receive a mortgage, your lender may end up rejecting your application, even though you were previously approved. Why? It's simple. Now that the lender knows you’re serious, it can ask for detailed documentation – like W2s, pay stubs, tax returns, proof of origin for deposits, etc. Once it gets more details, it may decide that you’re not a good candidate for a loan after all.

Local real estate info: San Francisco's real estate market

3. Picking the right Realtor

Now that you've determined the price range of home that you can afford, it's time to start looking through the current listings. Because it's your first time buying a home, you're probably going to hire a realtor to help guide you through the process. That's a smart decision, but all too often, prospective buyers hire the first realtor they talk too. Experts at the National Association of Realtors say you should take your time when hiring an agent, and you should ask your friends and family for recommendations. But remember, just because someone was perfect for their needs, it doesn't mean the same agent will be right for you. Take time to interview each realtor, ask them for references, and try to determine if they are going to be able to give you the attention that you deserve. Remember, all Realtors are dealing with multiple clients at once, but that doesn't mean that you shouldn't be able to reach them when needed. Realtors understand that you have a job, and can schedule showings after hours or on weekends to accommodate your work schedule. Be honest with your Realtor about the price range that you can afford, and what you're looking for in a home. The more specifics you give them, the more likely it is that they'll find a home that you want to buy.

Real estate outlook: First time home buyers outlook for 2013

4. Be patient

Buying a home can be an exciting time, but don't rush it. All too often, especially with younger first time homebuyers in their 20s, the thrill of home ownership takes over, and they want buy a home immediately. This is not a wise decision. Take your time to find the right home for you, not just the first one that you can afford. By following these four tips, you should be well on your way to finding the home of your dreams, and making it your home in no time!

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