Profile picture for gmartin6

First time buy, where do I begin?

I am 25 yrs old and IT consultant in NoVa. I have little credit, not bad, and make over $70K annually. I feel like I should take advantage of the market now and look for a place for myself. I am single and not sure what to look for (condo, townhome,etc). I want to stay around the area and want to know what my options would be. 
  • January 10 2012 - Springfield
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Answers (20)

Whether you are a real estate professional or buying a home yourself, you are going to run into these terms and you need to know the difference because it can save you plenty of time, money and gray hair down the road. The purpose of either one is to determine if a buyer can qualify for a loan and if so for how much; BEFORE they go out shopping for a home. Not the other way around! In this constantly changing market it is unwise to assume one will qualify for a loan so it is imperative to see where a buyer stands financially to determine the next course of action for all parties involved.

We have all heard the horror stories about a buyer getting a call from their lender the day before they are scheduled to close to find out they cannot get approved. Unfortunately this still happens all of the time because there are still loan officers out there that are not capable of properly pre-approving a client. The problem is the average person is not familiar with how to distinguish a competent loan officer from an  incompetent one. Just because your loan officer works at a big bank it does not mean he/she is the best mortgage professional for you.

There are many talented mortgage professionals that work for large banks, credit unions, mortgage banks and mortgage brokers. You just have to take your time finding the one that is best for you.

In the meantime, I want to explain to you the difference between a Pre-Qual and a Pre-Approval so you know what to look for and what to ask your lender.

Pre-Qualified

A Pre-Qual is really just an educated guess by a loan officer of what the client might qualify for based on information given verbally. In many cases no application is taken and no income/asset documents are reviewed. This is "window shopping" so to speak and provides a "rough" idea as to the buying potential of a client.

Pre-Approved

Now we're cooking with gas! A Pre-Approval is a much more in-depth determination of a client's ability to buy and takes a little more time to complete. Once a client decides on a lender they will be required to complete a full loan application (1003) so the lender can pull a credit report on the applicant(s). The credit report will allow the lender to determine what program(s) the client qualifies for. These days FHA & VA require at least a 620 and Conventional requires a 680 or better (we can go down to 640 on Conventional). From there the client needs to document their income by providing their last 2 years of W2's, last 30 days' worth of pay stubs and last 2 months of bank statements. If they have other assets like money market accounts, 401k, stocks and bonds that can be used as reserves (the more the better) then we need the most recent statement showing the balance, full name and account number.  If the client is  self-employed/1099 then they need to provide the last 2 years of full tax returns (1040s) with all schedules. Depending on the overall strength of the file we may also opt to order a preliminary verification of employment and rental history which will be done during processing anyway.

These documents will allow the lender to determine if the client meets the minimum credit/income criteria for any given loan program as well as qualifying income. The qualifying income will allow us determine debt ratio and how much house the client qualifies for. Once all of this information is gathered we submit the application to an Automated Underwriting System (AUS) like DU/LP that will take into account all of the clients credit, income, assets, employment/rental history, loan type, down payment, etc.

The AUS will give us a premiminary loan determination/automated approval that confirms the applicant's buying ability. This conditional loan approval gives a detailed list of items needed to supplement that application and is the blueprint for how the underwriter will base their final loan approval on. At this point we can determine how much money the buyer needs for down payment and closing costs so the realtor knows how to prepare/negotiate an offer.

Finally, the lender can provide a Pre-Approval/Commitment letter reflecting in either a loan amount or sales price a buyer has been Pre-Approved for as well as a down payment required.

So that's the basic difference. A Pre-Approval means a lender has taken the time to review documentation that will support a final approval so long as certain conditions are met. A lender has spent time to figure out what those certain conditions are and made them clear to the client. A Pre-Qual just barely scratches the surface.

Food for thought

The Pre-Approval process is the most crucial part of the loan process. Why? Over 65% of loans turned down were for reasons that could have been addressed during the Pre-Approval process. An experienced lender will have a detailed checklist to go over before issuing a pre-approval letter for a client to avoid obvious pitfalls before they are ready to shop for a home. The point is to diffuse any bombs before they go off. If a lender has provided the client with a Pre-Approval/Commitment letter based on just a credit report and phone call (or less) they are doing it wrong. Find another lender that can provide a comprehensive Pre-Approval. Better yet, call me.

For more details on the Pre-Approval process please feel free to contact me at your convenience.
  • April 10 2012
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Profile picture for Cindy Quinton
The WORST thing you can do is run out and get a lender or realtor. You MUST educate yourself before you even begin shopping for a realtor or lender, much less a home. I can honestly say I have gotten more bad, innaccurate, and at the very least conflicting advice from lenders and realtors than I could have imagined.

Until you know about the market and the process you simply can't choose a good one. For instance right on this page you have already recieved misleading advice from one of the "calll me" crowd. Just so you know here is what www.myfico.com says about making multiple mortgage applications:

"Hard inquiries are inquiries where a potential lender is reviewing your credit because you've applied for credit with them. These include credit checks when you've applied for an auto loan, mortgage or credit card. Each of these types of credit checks count as a single inquiry. One exception occurs when you are "rate shopping". That's a smart thing to do, and your FICO score considers all inquiries within a 2 week period for an auto or mortgage as a single inquiry"

Look at both sides of the idea that "We don't make any money until we close the deal for you." That is the truth, but that doesn't mean the lender or agent will close the best deal for YOU.

So from someone who has been there and done that, educate yourself. The awesone realtor and lender that you will then pick will relish their well-informed client. So visit and read every site Tug of War mentioned, but I would add www.myfico.com in general and especially these two pages:

http://www.myfico.com/LoanCenter/Mortgage/Step1/MakeReady.aspx

http://www.myfico.com/crediteducation/questions/New-Home-Credit-Score.aspx

Have fun and good luck!
  • January 28 2012
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The first step is to make a call, realtor or lender. Any qualified lender can walk you through the steps to qualify for a home. But the trick is to find a lender that has access to 1st time buyer programs and understand how to use each program to give you a bigger bang for your buck. FHA, VA or a local program could save you thousands of dollars. A lender and realtor will work together to serve and assist during the process of finding and financing your first home. Jeff Thomas Mortgages in Virginia
  • January 28 2012
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Profile picture for hpvanc
Start at the library and then the internet.  Know what is really happening so you can tell when agents are misleading you, both before you pick one and in case you pick one that still tries to mislead you or talk you into doing something you don't want to do.

Be an informed consumer, make the agent, if you choose to use one for convenience, assist you with your due diligence and coordinating the timing once you are in contract.  Verify everything said and/or implied.
  • January 27 2012
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  • January 27 2012
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There are many reasons NOT to buy a home - and many reasons why you should. Are you wondering if now is the time for you to become a home owner? In this ever changing real estate market only you can decide what is best for you. But how you you decide? I recommend learning as much as you can about the process & market conditions.

That is why I offer a 1st Time Home Buyer Boot Camp seminar that covers every step of the home buying process to help YOU decide if now is the right time for you to become a homeowner. This seminar takes about 30-45 minutes and is offered on both Saturdays & Sundays. A light lunch will be provided and a lender will be on hand to answer any questions you may have. [promotion removed by moderator]

Heather Embrey

[contact information removed by Zillow moderator]
  • January 27 2012
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The best way to start the process is to talk to the right people first. Start with finding a good realtor, or a good lender. If you have friends or co-workers that have recently bought they are a usually a good resource. If you don't know anyone who can provide a good referral, there are tons of agents on Zillow who would be willing to help you, but the quality can vary greatly depending on who you pick. Make sure that whoever you choose is competent enough to answer all of your questions, and is someone who you can trust.

Realtors usually have a good lender contact and would be happy to refer you to a lender who they are confident in. Whatever you do, DON'T go to LendingTree.com or any site that sends your loan application to multiple lenders, this can hurt your credit enough to be an issue because of the multiple times your credit is pulled.

Most people our age tend not to think about the long term wealth building factor of finding the right home. In general if a client is unsure of the lifestyle they want (condo/townhouse), I usually recommend looking at starter townhouses with good floorplans. In our area these are easier to resell and since you aren't shelling out for a condo fee monthly more of your money goes towards building equity and bolstering your financial future. That being said, a condo in a highly desirable area might be better for you if you work in DC or just can't stand a commute.

You can get a decent townhouse in Springfield or along route 1 in Alexandria for under 280k that might a bit of work. In general I think the Huntington area of Alexandria is a good buy right now, you can get a duplex or a nice newer condo unit in the Midtown building in that range as well. It's very convenient to the last stop on the Yellow Line Metro for access to DC. Considering hiking out to Sterling or Centreville? You can get a very nice townhouse out there for under 320k that's move in ready. Inventory has been low over the holidays this year and you'll have better selections available after the playoffs and the Superbowl.

Most agents won't say this but depending on how single you are, you'll probably also want to consider how your new home would appeal to your potential significant other both with location and the actual home. If you're already in a committed relationship this is pretty easy to define, but sometimes bachelors loose sight of the "impress the date" factor and settle for a lower monthly payment, or look for a garage instead of a nice layout.

(And if you like my advice and want to work with me, I'm a pretty cool, smart, and a fun agent to work with. Just had to throw it in there.)

  • January 18 2012
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Profile picture for TopNJAgent
Recommend you approach your agent search in the same way James has uggested you interview your lender.  The resources you use will make a big difference to your success, especially for you as a first time buyer.  Incorporate questions about working with first time buyers - how many has she helped in the past 12 months and does she have testimonials/recommendations/reviews from them. Zillow has added reviews to their site, so you can start with agent profiles right here on Zillow to identify a short list of candidates.

Your agent will be able to recommend lenders as well as other resources key to the transaction. Remembering that we do not get paid unless the transaction closes, we place a high premium on resources that get the job done. 

Here is a link to a good resource that will answer many of your questions.
http://www.realtor.com/home-finance/buyers-basics/home-buyers-basics.aspx?source=web
  • January 12 2012
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Hi gmartin6,

Congratulations on your good job and your foresight into purchasing your first home, what an exciting time for you. I think you received some good information so far, and I have a few thoughts to add.
First, find a lender well versed in helping first time buyers. Interview them as if you were hiring a personal assistant, or a manager for you or your company. You will become quite close to the lender over the next few weeks and months, so this is quite important. The lender will cover with you the qualification process, the documentation necessary, and then, he/she will "show you the money" and go over the various loan options etc.
Once qualified and you have a good handle on your price range and payment options, you need to repeat the hiring process for a good real estate agent. This is also quite important, as again, you will be working very closely with this person to find your home. Try to ask friends, co-workers, family members for both loan officers and agents.
I do not recommend a condo in this market if you can afford a townhouse. Condos have become a four letter word over the past 3 or 4 years, and I think you will find you have the most options now and in the future with a townhouse or single family home.
I hope these comments help you in your search. Best wishes, Jim, American Bank.
  • January 12 2012
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Gmartin6,

If you are single AND plan to stay single, condo is ok.
However, IF you plan to start a family one day, townhome will probably make a much happier HOME :-) It is amazing how much space and freedom the little ones require, more than adults :-)

I represent buyers and sellers in Northern Virginia counties, enjoy working with first time home buyers and would be delighted to help you find a HOME that best meets your needs. Feel free to contact me directly.   
  • January 11 2012
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I would suggest meeting with a realtor and a loan officer--the latter will require a few documents to prequalify you. Once you have a price range to work with, the realtor can start a search for you. That will show you your options in terms of affordability and your search will get narrowed down. As you know condos and town homes are different life style choices. And you do need to factor in your commute to work as well. Great idea to take advantage of the current market and low interest rates. I have helped many clients with their first homes in NoVa and would be happy to do the same for you.
  • January 11 2012
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I agree with Tug of War in that you should do your due diligence in finding the correct realtor.  You definitely want to interview a few different realtors and make sure you ask how long they've been in the business and if they're even a full time agent.  There are a lot of weekend warriors out there that don't stay educated about the business.  Find out if they're on a team or if they have their own team.  When you are ready to find a realtor, who "KNOWS" the market and will help educate you on the market as well as the entire home buying process, please feel free to contact me.  Even if you just have questions about your own research, feel free to call or email.  
  • January 10 2012
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Profile picture for Dunes ..
Also....
Please do not forget to ask/inform yourself about some things like..

How are the Schools doing? Budget Outlook/Enrollment up/down? Shortfalls, cutting back?..
How about the City Budget Outlook/Services to Roads ect..
How's the County Budget outlook?
Jobs?
Foreclosure Outlook/Impact?

These kinds of things always can impact Property value in a Community in the Best of Times and even more so in this Market/Economy
If it's gone/going/headed in the Direction of Bad to Worse then in 5-7years it may not have recovered or returned to where it is now...

Know your Market does not just mean know what sold for what right now or in the past...It means KNOW your Market, know as much as you can about everything in your Market

Good Luck

  • January 10 2012
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Profile picture for Dunes ..
The First thing you do IS NOT run out and just use any ol Lender/Agent....

Why? Because this is a very Large Business Transaction and the Selection of an Lender/Agent is an Important one for a lot of different reasons..

Select wisely and take the time to be sure you find the Best Lender/Agent for you...
Become informed..be smart with your money...if there is a good Deal be able to recognize it, if there is a Bad Deal be able to recognize it

Here are some places to start..Check out the info, resources, options you have available to protect yourself..to find what you are looking for..Good Luck


I would suggest you give this Fed. Gov. Site a look, it has all the Current Fed Housing Loans (FHA/Vet/USDA ect.) and you search for specific information, compare options, or take a short questionnaire to determine your eligibility for each program.....Fed Loans..Housing

I would suggest you read the 9 Steps to Homebuying on the Hud site as they are an excellent guide & Resource plus links to your Local Homebuyer Programs....
(Step 3 is interview lenders..Step 5 is interview RE Agents)..
Buying a Home

Check out all this information from the Dept. of Justice Web Site...
Competing Models of Real Estate Brokerage

Consumers Can Save Thousands of Dollars in Commissions

Competition and Real Estate... Real Estate Laws in Your State


You could also make use of the Fed Gov and Banks Sites they have created to allow the Public to view their Properties for Sale/Foreclosure/REO..Get a feel for Prices and different Options

Sites like...HUD Homes...Fannie Mae
You can find the links to all the Gov sites here...Link

Bank sites like....Bank of America...Wells Fargo
You can find links to Bank sites here...Link

For finding Public Records, Property Records, Tax Sales posted ect. you may find this Public Records Search Engine helpful...Check it out
Free Public Records Search Directory

You have options .. become familiar with them..Protect yourself
  • January 10 2012
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20% down still has loan level pricing adjustments with low scores. 
  • January 10 2012
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Profile picture for CORONA NICK
Save 20% and have no debt.... dont need to consult a LO for that...haha
  • January 10 2012
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Profile picture for lori14369
Any suggestions for a lender in the westchester county,NY area?  I too would be a first time buyer looking at a condo.
  • January 10 2012
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Your first call should be to a lender. That way your income and creit can be reviewed. And if necessary, a plan established to increase your scores. Once income and credit are sufficient the rest of the home buying process will be calculated. There is no way to buy a home if you don't qualify. Drop me a line, I would be gals to review your situation. A consultant in NOVA should have lots of options. Jeff Thomas Mortgagea in Virginia
  • January 10 2012
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Profile picture for B Mike West
The prudent way to start is to select a local loan consultant and determine what you can qualify for in the way of a loan and, of course, what you would feel comfortable paying in monthly mortgage payments. Make sure to consider taxes and insurance (HOA dues on condos).

A young single person may find a condo attractive, but the lenders do not like them and make the financing more difficult to obtain.  A single family home is the safest long term choice.

Once you have the financing figured out, select a local Realtor and start looking around. ALways remember location, location. location. The best of luck to you.
  • January 10 2012
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Your first move would be to speak with a realtor that knows the area very well and understands your position.  This way you can get an idea for what your options are.  I grew up in this area, know the market well and deal with a lot of first time buyers.  Feel free to call or email me at any time.  I can also recommend a great lender. 
  • January 10 2012
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