What Should A Buyer Do First Thing Out of The Gate

The first thing a buyer should do is get a pre-approval.  This is going to help you so much in knowing what price range to look in and when you see something you really
 like you will be ready with your pre-approval to go along with your offer.  This is a very important step and not one to miss.  Before touring properties you need to do this otherwise it is only going to disappoint if you find after the fact that you are looking in the wrong price range.  You may be delighted to find out that you can afford more than you had thought.  Also a good loan officer will do much more than a pre-approval for you and it can be done over the phone.
  • February 10 2011 - Needham
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Answers (22)

Profile picture for HARP 2.0 Washington
A pre-approval is very important but I'd say is not the first step. Lending guidelines have become far more strict but at the same time there are many first time home buyers out there that do not truly know what they are getting into whether good or bad. Once they get pre-qualified it becomes a mad dash to finding a house, getting mutual, loan approval and closing. As a buyer you need to be as knowledgeable as you can in the entire home buying process because it is such a huge life decision. Education is key.

Best thing to do is find a quality home buying class in your area so that you can learn the in's and out's of the entire process of buying along with the most important part when you close...owning the home. Ask around and see where others have gone for classes. Happy shopping.
  • February 10 2011
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Profile picture for the_country_hick
Right idea, wrong direction.

The first thing a buyer should do is figure out how much they can afford for all housing costs out of their budget. This MUST include all taxes, insurance, and repairs. DO not forget that with housing costs come utilities like electricity, heat, & a/c. Sooner or later things will break. That must leave some money for those anticipated repairs that WILL happen. A smart buyer would remove 20% of their income for repairs, savings, and retirement. Whatever is left is the most that can really be afforded. Then getting pre-approved could be a good idea.

The problem is that lenders do not see your real spending habits. They could allow you to borrow much more than you can truly afford to pay.
  • February 10 2011
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Profile picture for ChrisLuna
The first thing a buyer needs to do is get pre-approved for a loan from a reputable bank or loan broker... By doing this, a buyer will have a better understanding on what price range they qualify for, how much the monthly payments would be, how much closing costs would be, what impound accounts are, etc. 

In addition to being pre-approved, you are ready to make a bonafide offer on a home that you absolutly love! Therefore, you dont miss out on any opportunities in possibly getting the home you like. Sellers obviously wouldn't take a buyer very serious if they aren't pre-approved for a loan and are "just looking"...

If you're a buyer who is in the market, you should absolutly get pre-approved first to find out which price range you should be targeting for your purchase.
  • February 10 2011
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The question I am asked the most by first-time home buyers--really, almost all buyers!--is "What should I do first?"

I want to make it as EASY as possible for my buyers so I tell them the TRUTH!

#1 Make SURE you qualify to buy and find out how much a lender is prepared to lend to you. Then you'll know what price range to look in. What could be more soul-destroying than looking at houses you can't buy?? Ask your buyer's agent to recommend a lender or a few lenders to talk to. Make the phone call.

#2 Work with an agent you like. This sounds overly simplistic, but who wants to work with someone they don't feel some sort of bond with? Do you want your agent to work with your interests in mind, to be on your team? Then let the agent act as your specified buyer's agent. In North Carolina, all agents are working for the seller until you have a buyer's agency agreement with them. Put your agent on your team from the start.

#3 Are you looking at foreclosures? Then #1 is REALLY important. Usually, you can't make an offer unless you have a pre-qualification letter from a lender. So go to the bank FIRST, then start looking. Foreclosures are almost always sold AS IS: you should have inspections but understand that no repairs will be made. Realize you might have some work to do after you close.

#4 Your buyer's agent should be helping you buy a house, not selling you a house. Make sure that is happening.
  • February 10 2011
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Don't get the cart before the horse.  Before looking at homes, meet with a skilled loan officer and find out which loan type is best for you and what is the maximum amount you can borrow.  Do not use online mortgage calculators as a substitute for meeting with a loan officer. 
  • February 10 2011
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Profile picture for wetdawgs
Well, I must be a conservative fuddy duddy because I would start even earlier.

1.  Get finances in order - have responsible use of debt/credit so FICO score is in the stratosphere.

2.  Save up a hefty down payment.   Want to avoid PMI?   Aim for 20% plus closing costs.  (Or, at minimum 3.5% plus closing costs but you'll pay PMI at that point).  

3.  Save up a hefty house emergency fund.   Houses need constant TLC.  3 to 4% per year is not outrageous.

4.  Save up an emergency living kitty - what happens if you lose your job six months after buying?  Do you have a six month emergency fund at your disposal?

5.  Then and only then start things such as preapproval.   I would recommend everyone play with the "what can I afford" type calculators as seen on the Zillow mortgage tab, and read read read voraciously to understand the lingo, what lenders can do for you, and when agents can do for you.

6. Then, when stick one's toes out into the muddy waters - realize not everyone in a profession is equivalent.  you are paying these people huge bucks for their services, so interview them rigorously and get references.

At that time, perhaps some of the other suggestions will kick in.
  • February 10 2011
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Profile picture for dacolan
"Don't get the cart before the horse.  Before looking at homes, meet with a skilled loan officer and find out which loan type is best for you and what is the maximum amount you can borrow."

And once they give you that #, throw it out. Run the #s yourself using your own personal budget and common sense, and thoroughly educate yourself on all the responsibilities and costs associated with owning a house.

I hope more buyers read Dan's earlier post. And then re-read it. He nails it for buyers looking to protect their own personal financial well being.
  • February 10 2011
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Profile picture for dacolan
Didn't see wetdawgs post before hitting 'Submit.' How much better shape would this economy be in if there were more conservative fuddy duddies among us? That is a some of the best advice a new buyer will get.

  • February 10 2011
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Why do I ask questions?
So I can answer them!

I HATE these false question BS posts...
  • February 10 2011
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You do want to get approved for a loan that is an important part for sure. You also want to look at what timeframe you plan on living in the prospective home to make sure that based on what the local conditions are you can sell your home in that time frame and come out well. The other item of importance is to make sure that you are prepared for the other costs of owning a home not sure the monthly payments.
  • February 10 2011
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Profile picture for abematar
It is critical to make sure that you know your credit score and how much you can afford. Typically, a mortgage payment is made up of 4 items:

1. P - Principal
2. I  - Interest
3. T - Property Tax
4. I - Insurance

When you talk to lenders to get pre-approved, they typically want to see 35%-40% DTI (Debt to income ratio), and some lenders push it to 45%.   So if you make $10,000 a month gross income, your combined monthly debt can't exceed at best case scenario $4,500.  This $4,500 will include PITI for the home you are planning to buy as well as any car payment, credit card payments, etc... So it is very important to understand this, so you do not go by a new car before getting pre-approved as it will lower the amount of loan you can get on a house.

Also, the Interest rate affects the payment.  So the better your credit score, the lower the interest rate and lower your payment.  There are many companies out there that can help you clean up your credit and increase your credit score so you can get the best deal on a rate.

After you get pre-approved and you know what you can afford, concentrate on the areas you are interested in and work with a Realtor that can assist you with all aspects of the home search.  There are many deal that happen off of the MLS, so working with a good agent is very important. 

Happy Shopping!!!
Abe
  • February 10 2011
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Profile picture for sunnyview
I think the first thing that a buyer should do is to sit down down with a good monthly budget calculator here and a good qualification calculator with the standard ratios here.

They need to be honest with themselves about what their budget is and how much they feel comfortable spending every month on housing. Then they need to decide what type of loan they want. At that points, they can get their financial info together and talk to a lender.
  • February 10 2011
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Profile picture for Ted Wood
Find and hire a qualified & experienced buyer's agent. They are payed a percentage of the sale as directed in the sellers contract for the house you ultimately end up buying, so essentially there is no additional cost to you and it really is in your best interest to do so. They will then walk you through every single step in the buying process, from getting prequalified for a mortgage to making the offer, handling inspection issues, purchase & sale signing and everything else you need right through the closing! That is the purpose of a buyers agent, to guide you through the entire process and be your advocate all the way through.
  • February 10 2011
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Profile picture for spiderdawg
Research. Input likely addresses or mls numbers in Google. Narrow your location of interest. Understand the type of home you need. Discuss your situation with multiple realtors and get to know local banks. Choose a buyer's agent you trust and be patient. Take it one step at a time and you'll find the home you want at a price you can afford. Best of luck from a fellow buyer!
  • February 11 2011
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Once the person becomes a "buyer", then they have already thought about the whole home buying decision. I agree with everyone that says they should get pre approved. That is the first step for a buyer, period!! The world is an ever changing experience and technology just magnifies that aspect. The buyer must understand that they are going to be faced with many decisions and many different options. The home buying decision is most likely going to be the biggest and most financially impacted step in that person's life. Be a good realtor and guide them through the whole process one step at a time. Be careful, don't be pushy, be honest and respect all their decisions.. Good luck.
  • February 11 2011
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A preapproval is essential but buyers need to know that not all lenders are created equal.  Some make the home buying process very easy and some make it very difficult.  So, get the preapproval but don't lock yourself in to working with that lender.  Talk to a Buyer Agent and find out how they can represent your best interests during the process.  He or she will have worked with many lenders and can give you a referral to a lender that will have the best product for you and be easy to work with - as well as one who will give you a preapproval that is worth more than the paper it is written on.  The buyer agent can answer your questions from start to finish at no cost to you.
  • February 11 2011
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Talk to a loan officer first  to accurately find out how much home you can afford. This is not the same as using an online mortgage calculator as those figures are not every accurate.

If you do not have a loan officer, let your real estate agent refer one to you.
  • February 11 2011
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The first thing a buyer should do is ask themselves the question: "Am I truly ready to be a homeowner and am I responsible enough to make the comittment for the next few years or more".

Often times buyers decide to purchase their first home because it seems to be the logical thing to do-prices are down, interests rates are low... But, make sure it is the right decision and your decision.

From there, meet with a professional loan officer that has significant experience-5 yrs or more in the industry- to obtain pre-approval for a home loan.  Understand the numbers, how much your monthly payment will be and how it will affect your life.

Home ownership is a wonderful experience. Just make sure you are ready for it!
  • February 11 2011
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I agree that getting a pre approval is a very important step.  However, interviewing a buyer's agents and hiring one, may be a better first step.  A good buyer's agent will know what programs are available for different types of buyers, and they will have suggestions of lenders with each type of program.  The buyer may have a better chance of getting the best financing for their needs if they seek the advice of a trusted agent.
  • February 11 2011
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Profile picture for MichaelPRU
Lot's of good advice in this topic.  I especially like Wetdawgs' advice about being fiscally responsible.  A lot of first time home buyers don't realize the additional expenses involved in owning a home.  Once you've saved up some money for that along with a good down payment, get pre-approved (not pre-qualified which is not as meaningful) for a mortgage. 

Why is everyone so adamant about getting a pre-approval?  This is because the lender will review your finances with you and so you have an idea of what you can afford to spend.  Also, your offer will be taken much more seriously by a seller if you can show them a letter which essentially says you can get a loan big enough to buy their house.
  • February 21 2011
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First thing a buyer should do is attend a CHAPA approved first time home buyer seminar. You will learn about first time home loans that are offered by local Banks and not offered by some brokers. A buyer will begin to understand the process and the roles of the people they will meet along the way...Then with that education in hand, it is easier for a buyer to get a pre-approval and understand it!
  • September 30 2011
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Put your pants on.

Sellers will negotiate better in a pants on situation.

Alright, now you are thinking what should the second thing be...

Watch a minimum, but not maximum, of 5 HGTV home-buying episodes.

Become familiar with crucial sophisticated realtor lingo such as, "and this is the kitchen", and "here is the bathroom", and "you can just cover that up with some fresh paint" and "isn't this lovely?"

Good luck, and don't worry. Have you seen some of these other homeowners? Well, if they got through it, you'll be just fine.

  • September 30 2011
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