By Kara Thompson, Special to the AFRO,
Purchasing your first home is a daunting task, but it’s also one of the best long-term investments you can make. The Mortgage Bankers Association regards homeownership as a major asset that helps families obtain, grow and pass down wealth from generation to generation.
However, the homebuying process is not an easy one to navigate, and succumbing to common buyer blunders can prevent you from closing on a home.
This week, the AFRO spoke with local real estate professionals from Baltimore and surrounding areas for tips for purchasing a home.
Read below to see their advice!
- Check your credit
Although many people think that the homebuying process begins when you decide to purchase a home, it actually begins much sooner than that. Have you checked your credit?
A good credit score is key to making sure you can get a loan in order to purchase your home, according to Shalynn Mills-Arasanmi, a broker and realtor with Integrity Home Team.
She recommends that you look into your credit score and start working on improving it at least nine months before starting the search for a new home. Establishing a credit card and making small purchases –even if it’s just paying for gas– can ensure your credit score is stable when it comes time to purchase a property. It is crucial that you keep a low balance and pay the bill on time!
Krystal Leonard, a realtor from Harris Hawkins & Co., also emphasized the importance of credit when purchasing a home.
“There is a minimum credit score that lenders require, but the important part about the credit is the debt to income,” she said. “Debt is not bad, but it’s not something that we can ignore because we need for the lenders to be able to approve you for handling a new loan.”
Keller Williams Realtor, Jazmin Owens said many first-time home buyers overestimate the credit score required to qualify for a mortgage. According to her, it’s possible to obtain an FHA loan with a credit score of 580, but she said it’s best to have a score of 620 at a minimum. Owens recommended that all first-time buyers work with a credit repair company to clean up their credit reports.
Create a budget and begin keeping track of your expenses. Good money habits are essential to homeownership and sustainable financial health. Look at your bills each month and compare that to your income. What percentage of your pay goes to food, car notes and gas, rent and electricity? How much can you afford, while also balancing your other bills?
- Get pre-approved for your mortgage
Before you even start browsing for your home, it’s crucial that you get pre-approved for a mortgage from a lender. Pre-approval allows you to determine what price points you can afford, so you don’t waste time shopping out of your budget.
- Budgeting for earnest money deposit, down payment and closing costs
These are the most common fees buyers typically consider when purchasing a home. You should be prepared to pay an earnest money deposit (EMD), which demonstrates your seriousness about buying a home, within a few days of a signed and accepted offer, according to Owens. The EMD can range from three to six percent of the purchase price. If you’re a first-time home buyer, there are a multitude of grants and programs available to help you afford your down payment, according to Owens. The EMD includes things like your lender, title and attorney fees, as well as mortgage insurance potentially.
- Educate yourself on what the market in your area
Depending on where you live or where you’re looking to buy a home, prices for homes can vary widely. Prices can also fluctuate over the months, and the market can shift from benefiting home buyers to benefiting home sellers.
“In the Baltimore area we’re seeing a shift in the market,” said Brittany Campell, a realtor at Harris Hawkins & Co. “Education of the homebuying process is going to be the biggest key to success.”
Campbell said that when it comes to market trends, “partnering yourself with an educated agent who can really guide you through” is important.
Real estate agents who know how the market works can be essential in helping you to figure out a good time to buy, which leads to the next tip!
- Do your homework on the neighborhood
Although a property may seem like your dream home, it’s important to remember that when you buy a house, the neighborhood comes with it.
Broker and owner of Conway Real Estate, Missy Conway, said it’s vital to do as much research as you can on a neighborhood to understand what it has to offer in terms of school districts, amenities and commute times. It’s also important to look at crime. Depending on your community, it’s possible that there may be neighborhood covenants or homeowner association (HOA) fees and regulations that are important to keep in mind before you buy.
Old school wisdom suggests driving past your prospective home at night and on weekends to get a feel of typical neighborhood activity.
- Shop around for a good real estate agent
“Some people just automatically go with the realtor that they know which is perfectly fine,” said Jadaya Cason, a realtor at Harris Hawkins & Co. “But I always tell people– interview around. There’s nothing wrong with interviewing other real estate agents to see if they are knowledgeable, and if you know you guys would be a good fit working together.”
Researching realtors in your area can help you find the best one to suit your needs for your home purchase. They can help make the home buying experience much easier for you by guiding the process from beginning to end.
- Look for lenders that are more localized to the area you want to buy in
When it comes time to figure out where you are getting your loan from, there’s a difference between a national lender and one that is local. While it’s good to figure out the pros and cons of each, localized lenders have the inside knowledge about the local market that might be a great help to you.
“They’re on top of what’s happening in the local real estate market here in Maryland, they’re more familiar with Maryland or Baltimore County or local county programs versus somebody that’s out of state,” said Cason.
- Manage your expectations
“It’s very easy, especially for a first time home buyer, to want the Taj Mahal for $250,000,” said Campell. “So you have to be able to know that for under $250,000, there are only certain homes that you’re going to be able to buy, and that’s not a bad thing. You have to be able to manage your expectations and understand what your mortgage payment will value.”
Essentially, ensure that you’re being realistic. Make a list of amenities that you want your new home to have, but understand that you might not get all of them.
- Understand all the paperwork that goes into the homebuying process
Purchasing a home comes with a lot of documents that must be signed in order to officially be homeowners. This paperwork can be overwhelming and contain a lot of information, but it’s crucial to understand what it says.
“A lot of people prepare for just homeownership. They prepare just to buy– but not the process of homeownership,” said Leonard.
Leonard said that the documents can help new homeowners navigate situations like “what happens when things stop working?” It is important to have a sound understanding of documents like insurance policies, warranties and the power they hold.
- Do a full inspection of the property
Once you’ve found a property you like, it’s important to ensure that it is structurally sound and ready for you to move into, and won’t have any issues down the line. Mills-Arasanmi recommends doing a full inspection of the property, but at the very least a structure and termite inspection.
Leonard also recommends this step.
“Take a look and see exactly what’s going on with the property” so you know if there is any damage or repairs that need to be done.
Without getting a home inspection, buyers may find cracks in the foundation, encounter structural issues, experience plumbing problems or discover other defects to their property after purchasing their home, according to Owens.
Whether you’re buying a home to live in or a rental property, it’s important to know every single detail about your property before you close. Getting your home appraised allows you to confirm that you are paying the current fair market value, according to Owens. It can also inform you how much equity you have in your home. Both home inspections and appraisals will require you to set aside extra funds
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