Getting your financial “house” in order is critical. Typical down payments range from as low as 3% up to 20%. Your lender should discuss the pros and cons of different loan programs. However, many buyers with enough money for a down payment find themselves unable to apply for a mortgage because of low credit scores.
Many buyers confuse what they afford with the amount the lender is willing to lend. The lender may lend you $300,000 but after you add up mortgage, interest, property taxes and insurance ask yourself whether you can afford to live on what’s remaining in your account?
First-time homebuyers (and often veteran) buyers begin house hunting assuming they can get a mortgage and hit the wall when the lender denies their application.
To begin house hunting on the right foot, make an appointment to clear up hurdles and obtain a pre-approval letter from the lender. If you don’t have a lender, your Realtor® can pass along some names.
Single-family, condominium, high rise, attached, detached, multi-family, duplex? Depending on circumstances and goals some first-time buyers may want to rethink what type of property really meets their needs.
For most buyers, a home or a condo meets all the requirements. However, for some a property that can be converted to produce rental income in the future or accommodate aging family members may propel you to look at different types of housing.
Your Realtor® can be a wealth of information about real estate prices and trends but, ultimately, choosing a neighborhood is your decision. If security is high on your list contact the local police and/or sheriff to discuss the crime rate in the area. A variety of links to local schools and school rating information is available. Access to public transportation (good luck outside of Cincinnati center), highways, hospitals, shopping, and family are part of the neighborhood selection process. Bottom line- if neighborhoods don’t matter then the number of available properties increases- but that is a decision that buyers and not their real estate agent should make.
“We can always move” is a short-sighted buying philosophy. Purchasing a property that you know will be too small in a year may not be the wisest choice. Market conditions change, jobs change and being stuck in “too small” to grow home is awful. Try to buy a home that you can “live with” for several years and lower the frustration level down the road. I can still remember total embarrassment when visiting parents walked through a home we were about to buy and pointed out- lack of closet space, unworkable (but cute) kitchen and a 2-car garage almost large enough for 1 car.
In the end, we were glad that we didn’t buy that home but found one more suited to our long-term needs.
The Realtor® you select will be representing you! Ask for recommendations from friends and family, hit open houses to “agent hunt” and don’t feel obligated to work with somebody you don’t like. You need to feel comfortable with your agent. Most agents I know spend a great amount of time with buyers -starting upfront with the buyer’s consultation detailing the ins-and-outs of the process, filling out the required paperwork and most importantly, laying out expectations. It’s very important that you make time to sit and discuss everything before you begin looking at homes or condos.
In a seller’s market-one where there is a shortage of homes for sale and buyers are losing deals in bidding wars- looking for a house requires a flexible schedule and the ability to make a fast decision. In a seller’s market, a well-priced home hitting the market Friday morning may already have a contract by Saturday.
House hunting during a normal market, buyers may have a day (or two) to schedule a visit and may be able to take a few hours before deciding to write a contract.
House hunting takes a lot of coordination. Agents, need to set appointments and arrange their schedules to meet you. Calling your agent every few hours as new properties hit the internet is not the best way to handle house hunting. Also, calling the listing agent to see the property and then asking your agent to write an offer isn’t a good way to go.
During the buyer consultation take time to discuss the best way for you to coordinate and schedule visiting newly listed properties so nobody gets frustrated.
Currently, in Cincinnati, many areas and neighborhoods are short on homes for sale and considered as a “seller’s market”. Your first offer may be your only chance of success as competition can be stiff in some price ranges. In fact, a good first offer in any type of market is a good idea. The less you negotiate reduces the chances for another offer to arrive or for either the buyer or seller getting upset with nit-picking and walking away.
Strong offers don’t always mean the highest price. Sometimes accommodating delayed closings or occupancy, accepting less than perfect condition or something as simple as allowing the sellers to remove granny’s mirror or flowers from the garden can cinch the deal.
A strong first offer is the best step to concluding a successful deal.
The best deals are when neither party is thrilled because everybody gave up something to make the deal work. The arm pumping, high fives and chest-thumping is great for tv and movies but rarely happens in real life.
Some buyers demand that sellers to literally rebuild a home after a home inspection. Inspections are important but today many sellers are paying for and sharing pre-sale inspection reports with potential buyers. Nobody is going a perfectly good roof or furnace just because the buyer wants a new one. On the flip side, sellers need to have some flexibility even in a seller’s market. Broken appliances and furnaces need to be repaired or replaced.
Buyers and sellers need to take a step back to understand why the other side is requesting money, repair or replacement. Many first- time home buyers cannot afford to do anything for a couple of years and home warranty programs paid for by the seller often cover many of the issues. But buyers requesting money toward closing costs and/or points as well as a lower sale price may have to pay for the warranty program themselves.
Finally, buyers, who have obtained a mortgage to finance the purchase, need to have proof of home owner’s insurance to close. The owner’s insurance covers the structure and contents of the property against damage and theft. It’s a no-brainer and the lender forces buyers into covering at least the structure against loss.
Title insurance is also required by the lender but only covers their share of “mortgage ownership” on the property against title problems. Just prior to or at closing buyers are offered the opportunity to purchase title insurance (one-time fee) covering them against any title or deed issues that went undiscovered prior to their purchase of the property. For example, the property you are buying was built 40 years ago and at some point one of the previous owners sold without getting the proper signatures from all the owners. Nobody catches it until one of those people appears and wants the property back- an owner’s title insurance policy covers your legal fees to clear up the situation. In short, for a variety of reasons, purchasing an owner’s title policy is the right thing to do.