Buying San Diego Real Estate

Tips for Purchasing Your First Home in 2011

If it's your New Year's resolution to own your home vs. rent, what are you waiting for? The process of buying your first home is an exciting experience, though admittedly it can also be emotionally and financially stressful. That is why before embarking upon this adventure, you need to ensure that you are ready mentally, financially and willing to compromise. For example, a dream home in a dream neighborhood is a noble aspiration but, sometimes this dream needs to be balanced with a home in a community that is more affordable, or some alternate solution. Additionally, you should plan on living in your new home for 3-5yrs, or maybe longer because it will take that long to gain equity and make back the money you laid out for the property.

Most people will be aware that property prices have fallen in many real estate markets and interest rates are historically low right now. These two factors make purchasing your first home slightly more affordable.

Here are some tips to guide you through the process of buying your first property:

1: Get your Credit Score

In today's economy mortgage lenders will want to see your "Credit Score." They calculate the interest they offer you based on your score. If you have a good credit score (like 720 or 740 and above) you will pay the lowest mortgage rates. Borrowers with a credit score less than 620 might not even qualify for a mortgage until they can improve their score. Borrowers with no credit history will also be declined. In order to build a good credit history it will take between 6 months to 2 yrs. Apart from the credit score, lenders will also look at your income and assets, your debt-to-income ratio, your patterns of saving and your job stability to judge your mortgage qualification.

2: Calculate your Housing Budget

Every potential home owner should calculate a simple budget. The mortgage lender will tell you how much you can borrow but the budget will show how much you can actually afford. Financial experts recommend that homeowners spend around 30% of their gross monthly income on principle, interest, homeowner insurance and taxes. A further 1% may be required for condo or homeowner fees and maintenance costs. Your budget should show income and expenditures and allow you to see how much you can afford to comfortably pay on a mortgage bill.

3: Stop Spending and Start Saving

After performing the budget calculation start saving the difference between the mortgage bill estimate and your current rent each month. This allows you to adjust to the increased cost of housing expenses, while also increasing your savings at the same time.

4: Meet with a Lender

It is worthwhile becoming pre-approved for a mortgage to save time and heartache. Now that interest rates are so low you may be pleasantly surprised to find you can afford a larger mortgage. Your lender will be able to guide you through the variety of loan options. They should also be able to tell you have much cash you need to make a down payment and to cover closing costs.

5: Find a Reputable Realtor

A realtor is a helpful presence during negotiations as they can offer advice on the value of different homes and neighborhoods. Besides being experienced and honest, your realtor should have a good idea of what you are looking for. Being able to trust your realtor is very important when buying your first home.

6: Narrow Your Priorities

It is important to compromise when choosing your first home. You may not be able to have the type of home you want (i.e. a house with a view) in the neighborhood you most prefer. It may be an either or case.

7: Select A Neighborhood

Aside from the property, you are also investing in a neighborhood. Some neighborhoods retain their value better than others in a downturn. This is where you need to work with a realtor to find a neighborhood that is suitable for your needs and is also a sound investment.

8: Don't Expect to Haggle

If you are serious about a house make a realistic offer. Some sellers will negotiate but others will not. A trustworthy realtor can guide you through the process to ensure a fair deal.

9: Get a Home Inspection

Don't buy a home without first having it inspected. The inspection is not just about finding things wrong with the property. You can also learn a great deal about home maintenance and what to expect when repairing systems and appliances as the owner.

10: Finalize the Details

Keep in regular contact with your realtor and lender after the contract has been signed. This ensures all the financing and insurance matters have been completed. A good realtor should have a checklist to ensure everything is completed prior to settlement.

The Bottom Line

Approached properly, buying your home can be both an emotionally and financially rewarding experience. It is important you undertake good research, keep within your budget and make use of trustworthy professionals who will assist you through the process.