You have decided you want to stop renting and are ready to buy your first home and now you're wondering, “Where do I start?” This is one of the top questions I hear from potential first-time buyers as well as one I see over and over on real estate websites such as Trulia, REALTOR.com, Zillow, etc.
It's easy to understand why; there's so much information out there it's difficult to separate the valuable from the worthless or simply outdated.
Step One: Get Approved For A Mortgage
My advice is to start by speaking with a local mortgage lender and ask to get pre-qualified. This will at least give you some idea of whether you’re ready to get a mortgage or if there's some work you'll need to do first, to improve your credit or if you've just relocated to the area for some time to elapse in your new job. It will also give you a good idea of how much you can afford as well as what this would equal in terms of monthly payments.
Remember: Just because the bank is willing to lend you a certain amount doesn’t mean you must borrow that amount. As a first time buyer, I would advise you to seriously think about spending between 10-20% less than you may qualify for. Ask the lender you're speaking to how close your credit score is to meeting their criteria for a better rate. There are buyers who, with very little effort, can move themselves up a notch. If you’re one of those buyers this could save you many thousands of dollars in terms of the interest rate you can get as well as the fees a lender might charge you. It's information worth having.
Remember you're not committing to a specific lender now nor are you shopping rates; you're just trying to get a good sense of what you can afford and the loan programs you're likely to qualify for. Not every lender is a good fit for every buyer, and a good REALTOR can speak with you and point you to lenders that may be able to offer you a better deal. At least when you sit down with a REALTOR you'll be able to tell them that you've spoken with a lender and have been pre-qualified for a loan up to (fill in the blank with the $ amount), and let them know whether you're qualified for a conventional loan, an FHA loan, or some other form of mortgage.
Step Two: Find A Good Real Estate Agent Or Broker
Now you’re ready to sit down and interview some REALTORS to find an experienced Buyer Broker who will help you locate, negotiate and close on a home. A good REALTOR will be able to talk with you and help you figure out what's really important to you, whether it's a certain location or a school district, or having a larger lot, or perhaps a townhome community with lots of good amenities and people who may be demographically similar to yourself in terms of age or some other factor. There's no one right answer; we're all different, but the more you speak to the agent, you'll be able to start solidifying your own thoughts on what really matters most to you. Often after this initial conversation, you realize you need to make some changes to your parameters. Don't sweat it, it's a natural part of the process and a good Buyer Broker understands this.
How Many Agents Do I Need To Interview?
There's no set formula for how many agents/brokers you may need to interview. Sometimes the first one you meet is a great fit while other times you may need to interview several. Don't let anyone pressure you into signing a Buyer Broker agreement at the first meeting. You need to feel comfortable with them and honestly, they should not be unduly anxious to have you sign an agreement until they've earned your confidence.
How Long Should I Work With An Agent?
Most agents want you to sign an agreement for 6-12 months. I don't recommend this. As a buyer, I would not sign an agreement for more than 90 days at the most. As a Buyer Broker, I only sign agreements for 2 weeks and only after having gone out with a prospective client a couple of times to make sure that I feel we're a good fit for one another. My feeling is and always has been that I don't need a contract to begin with; either I will earn a client’s confidence or I don't deserve their business. I don't expect my buyers to buy a home within two weeks nor do I feel the need to trap them into a long-term commitment. My buyers can always extend their Buyer Broker agreement with me or, if either of us decides we're not a good fit, then neither of us is tied into a long-term agreement. I would caution you that if the broker you’re speaking with won't accept a 30-90 day agreement, that's reason enough to keep looking. I've written about choosing a great REALTOR before.
I hope this information proves useful and I wish you all, “Happy House Hunting.” If you're in the market for your very first home, you'll need a real estate agent that you can trust. Contact our team online or by phone at 919-659-5173 to set up a meeting with us and learn more about how we can put our expertise to work for you