Buying Your First Home 8 steps couples should take before making that purchase. BY BEN SALEM
Before you can unpack your moving boxes, be sure to go through this checklist and have your ducks in order.
“ You may not realize it, but your current bank could be your best friend! Ask if your bank has a home loan department. If not, change banks to one that does.”
Are the two of you really ready to buy your first home?
I often help newly-married couples negotiate the purchase of their first home. They are always enthusiastic after driving through preferred neighborhoods and singling out those homes they identify as fitting into their price range. They have saved a down payment, they say, and are ready to not only look, but present offers. It is then that I offer them the following adviceóa checklistóof eight practical steps to take before moving forward:
1. Check your credit rating. Many people donít realize that they will need a sterling credit score to buy a new home these days. There are many credit reporting services that will let you know what your credit score rating is. Be sure to read this complete guide to your credit. If you need to clean up any outstanding debt, do so. If there are mistakes on your report, get your service of choice to help you fix them.
2. Find a bank. You may not realize it, but your current bank could be your best friend! Ask if your bank has a home loan department. If not, change banks to one that does. Most banks like to support their customers.
3. Examine your budget. One of the first items of business is to make a thorough list of all those expenses that you have each month, except for rent. And, that includes discretionary spending, like meals out, weekends away, clothing purchases and so forth. Whatever you have left over should determine how much you really have for a house payment. That payment should never exceed more than one-fourth of your monthly income.
4. Look into the cost of taxes. Such costs can be included into your monthly payment, but often, first-time buyers donít realize that such inclusion of monthly costs could put them over the top in terms of what they can afford. If you opt not to include homeowner taxes in your monthly payment, decide how you will get the revenue to make those payments each year. Will it be by saving for them? Will it be from that work bonus you come to expect? Selling stock? Donít get caught year-end without enough money to pay that tab!
5. Call your insurance agent. Give them the price range and the neighborhood in which youíre looking so he/she can give you an estimate of what your homeowner insurance will be. Ask your lender to fold that into your monthly house payment, or if you pay it separately, make sure you put money aside monthly or yearly.
6. Prepare a personal financial statement. Many sellers want their potential buyers to be pre-qualified. Every buyer needs to show both the bank, and possibly the seller, a detailed description of their current assets and liabilities.
7. Contact your CPA. If you donít have one, find one! Your accountant can help you put your personal financial statement together and also advise you on the following: How much of a down payment you will or should need; whether you can afford that monthly payment; how to impound taxes and insurance, and how to help you get the most from the write-offs you will have as a homeowner.
8. Agree on what to buy. Many couples wait until they have begun to view properties to suddenly decide what type of home they want. This often causes squabbles. Better to sit down and come to an agreement or compromise on the choice you will make. For instance, do you want a townhome and she wants a single-family home. Is the friction over traditional versus contemporary? Is it something as simple as the choice between one or two-story? These issues donít need to cause problems, though they often can if they are not addressed before you begin to look. Best to sort them out before you walk over any potential threshold.
Ben Salem is a specialist in Los Angeles-area luxury residential properties and defaulted, real-estate owned (REO) properties. He ranks among the Top 1% of all agents in Los Angeles County and the top 10% nationwide. He teaches seminars and workshops on various aspects of real estate and is also the founder of REO for Nonprofit.org, where he leads a high-caliber network of experienced REO agents who dedicate their time to support homeowners facing foreclosure. Salem also works closely with the Black-Eyed Peas foundation, i.am.home. To visit his website go to: www.bensalemproperties.com.