There are few milestones that are bigger in a person’s life, then buying their first home. It’s a decision that impacts not just their lives, but also their families. Making the wrong decision isn’t like buying the wrong item at Target that you can take back in 30 days. It’s something you’ll have to live with for years, if not decades.
This is why it’s so crucial for first time home buyers to understand the process and to understand what choices they’ll have to make.
In Eastern Iowa you have one advantage over first time home buyers in many markets. You have a lot of good opportunities whether you’re looking in Peosta, Dubuque, Asbury, Dyersville or any of the surrounding communities. There are excellent school systems in the area and not a lot of crime.
Also, you have more advantage because you’re in Iowa, then in many other states. Owning a home is cheaper than renting in Iowa. So, the time to buy is now.
There are, however, things you have to consider and here are some of the more important ones you’ll face.
Improve Your Credit Rating
If you’ve been thinking about getting a home for a while, then hopefully you’ve been working on improving your credit score from the beginning. This means paying off as many credit cards as you can and making all your payments on time. Remember the better credit rating you have the better your loan opportunities are. It doesn’t mean if you have a lower score you’re not eligible. Many people think that they need a credit score of 780 to get a loan. Yet, a recent survey showed that over half of all recent borrowers had scores between 600 and 749.
Robin McEnany, Loan Officer, Collins Community Credit Union, advises people to check their score.
“An excellent way to monitor your credit is by downloading two apps. Credit Karma will give you access to the credit report and credit scores of Transunion and Equifax. The Experian app will give you access to the third credit bureau. “
“Remember though these are consumer scores and they often report differently from lending scores. Still they give you an idea of what your credit score is and what you can do to improve it.”
Setting Aside Money for a Down Payment
It is a myth that you need 10-20% down payment in order to purchase a home. This is good to know since you may be working on paying off some of your debt. No money to low down payment options are available to homebuyers. “First time and even repeat homebuyers have many options to choose from,” said Robin McEnany, Loan Officer Collins Community Credit Union. “It is essential to speak with a loan officer who will listen to your home buying goals and lay out mortgage programs for you to choose from. Don’t hesitate to get a second opinion. Buying a home is the biggest investment you will ever make. ”
First Time Home Loans
One advantage for first time homebuyers is that there are some excellent programs available for you. Not only do they offer you favorable rates, down payment assistance but also require you to put little money down when you find your first home.
Get Pre-Approved For a Home Loan
Before you even start looking to get a home, you might want to reach out to some of the local mortgage lenders. This will allow you to know exactly what you can afford and in what price range you can search for a home. They can also answer any questions you might have about the lending options. Having a preapproval will make your offer more appealing when your Realtor presents your purchase contract to a seller.
Decide What You Can Really Afford
Once you know your budget range, sit down and really decide what you are willing to pay each month. Remember the mortgage is just one of the monthly costs you’ll be paying. Maybe you can afford the top of the price range, but you really want to be comfortable with what you’ll pay each month. Figure out what all the expenses are going to be and then add that to your monthly mortgage payment. Is that a number you’re comfortable with? If so, then begin looking for home in that range. If not, lower your price range.
Don’t Forget Closings Costs and Prepaid
One of the issues you should discuss with your lender is your closing costs and prepaid items. Closing costs can vary from lender to lender so it is important to shop around. Prepaid items include homeowner’s insurance and property taxes. Closing cost and prepaid items can be negotiated in the purchase agreement. Your Realtor can help you negotiate that possibility.
Shop Around For Homeowners Insurance
Another expense will be homeowner’s insurance. This can vary dramatically between agencies so get a few estimates. This might be something you have to wait on until you have your offer accepted, but you can start asking around before then. Again, there are many excellent insurance agents in the area who can help.
Meet With a Realtor
Now that you know your budget, it’s time to begin the home buying process. This means getting a Realtor. You might think you can do it on your own, but even experienced home buyers can be overwhelmed with all that is involved in home buying. A Realtor can also let you know immediately when a house that meets your requirements comes on the market. More importantly, they can help you with the negotiations that will take place.
Ask a Lot of Questions
Once you have a Realtor, feel free to rely on their experience and ask questions throughout the process. Not just about the home buying process, but also the communities you’re looking at. If you’re new to Eastern Iowa, then have them take you on a tour of the area.
Deciding on the Home Features You Want
One of the questions the Realtor will be asking is what features you want in a home. It could be a specific type of home style or a set number of bedrooms and baths. Have a wish list, but know you might have to make compromises along the way. Especially if you want one thing and your spouse or partner wants something different.
Plan For the Future
Whether you already have a family or are planning on one for the future, you want to make sure the home meets your needs in the future. You don’t want to move in and in a few years, find yourself cramped. Have something you can live with for a while.
Don’t Rush Your Decision
You have been waiting a long time to buy your first home, but don’t rush into deciding on a home to bid on. Take some time to go to open houses or to tour homes with your Realtor. Get a feel for the market. Only after you carefully weighed the decision should you talk to your Realtor about putting in a bid.
Don’t Procrastinate With Buying the Home You Want
Not rushing into buying a home is one thing, but if you do find the home you love, then talk to your Realtor about putting in a bid. Depending on the market you might want to get something in as quick as possible. Your dream home could also be someone’s else’s dream and by the time you bid their offers been accepted.
Be Prepared For Disappointment
It would be nice if you could find the home of your dream, that you can afford it, and that your first bid is accepted. This isn’t always the case, unfortunately. The seller may come back with a counter offer. Or worse, another buyer might have provided a better offer. It can be disappointing to lose out on a home, but it’s just a setback. It’s not the end of the world. Start the process all over again. You’ll find a home that you’ll love, but it can take time and there can be miscues along the way.
Having a Bid Accepted Is Only the Start
One would think the time to celebrate is when your bid is accepted. Yet, its only the start of the final chapter. There are inspections to be done and these could reveal issues with the home you weren’t made aware of. These could be small things that can be resolved before the closing, but it could be more serious. Or there could be issues that come up with the seller. Most likely, you won’t run into problems, but be aware that there could be some.
Read The Inspection Reports
As mentioned you’ll be required to get an inspection of the property. Your inspector will prepare a report that you should read, even if it comes back mostly positive. You might want to talk to them when they are completed and actually go over it while touring the home. Don’t be afraid to ask questions. Any issues you find in the home you need to have worked out before closing. When all is said and done, you’ll finally be moving into your home. Things have changed and now the money your paying each month isn’t simply going to a landlord. You’re building up equity in your home. And you’re free to decorate it as you please. It’s an exciting time.
If you’re looking into buying your first home in Eastern Iowa, then contact American Realty. We have offices throughout the area and agents experienced with each market. Meet with one of them to go over what you’re looking for a home and they’ll help you reach your goal.