First Time Home Buyers Important Information

NOTE: It is important that you read the following page if you have never bought property before. It could save you lots of money and hours of headaches.

There are three main things that all first time buyers need to do before doing any house hunting. These three things may sound simplistic, but they are paramount if you don't want to screw up or make the costly mistakes that first time homebuyers sometimes make.

1. Get approved for your mortgage before you choose a house. No, I don't mean just talk to the bank, or get pre qualified. I mean get Pre Approved! When financing a home purchase, there are two things that need to be approved by your lender. One is you, and the other is the house. You get approved by your mortgage lender verifying your credit status, how much you make, your source of down payment etc. The house you buy gets approved by your lender by having an appraisal and inspections performed. Most lenders can usually go ahead and request all of the items needed to verify your credit worthiness before you choose your house. Once the lender has completed your approval process he will then be able to issue a loan commitment letter stating that you are approved for a loan, provided the house appraises for the selling price and it passes any lender required inspections. You may have to pay for the cost of a mortgage credit report up front when you apply for your loan, but it is well worth the up front expense. You will pay that fee anyway even when you apply for your loan after choosing your house.
   
   
2. Another good benefit of going ahead and getting your credit report up front is that you will know if there are any bogus, or other type items that need to be corrected on your credit report. Nothing like waiting until the last minute to find out you have an incorrect negative credit glitch, or some other item that will take an additional eight weeks to fix. This might be OK if you have not contracted for a house yet, but just try talking the seller into extending a contract for another two months so that you can have some time to get your credit report fixed. By the way, this happens a lot, and many times it is no fault of the buyer. Most people have to start looking at houses all over again after they get their credit report corrected.
   
   
3. The main reason to get pre approved is that it gives you a fantastic bargaining position when negotiating with a seller. Here's how it works. Your lender will need to be able to fax you or your Realtor a commitment letter stating something to the effect that the lender has committed to make you a loan in the amount consistant with the terms of your offer. (Provided you qualify up to that amount obviously.) You will then present the commitment letter along with your offer to the seller. When you make your offer this way, you will be making a "good as cash" offer. The seller and seller's Realtor will usually view this offer just as good as a cash offer because the seller will not have to worry about being in the same position as the seller in the previous example. In the example above the seller takes his house off the market with a contract and finds out at the last minute that the buyer needs eight weeks to get their credit fixed. They have lost marketing time and now have to put the house back on the market. In this event most other Realtors will think the house is still sold for a while until the word gets out. This could mean several months of weak marketing time for the seller. Even if you know you have perfect credit, the seller does not know unless you have proof from your lender. I have seen many homebuyers buy their house for much less using this win/win strategy.
   
   

Use a Realtor. This is very important if you have never bought property before. Some of the biggest problems I have seen have been as a result of buyers not getting the professional advice they needed. If you think you will save money by not using a realtor you might, but you're really only gambling, and the odds are not in your favor that you will save money. (If you feel lucky and want to gamble, you would be better off taking your down payment to Las Vegas and betting it all on Black at the roulette wheel!) Look for an agent who specializes in Buyer Representation, and ask for references from previous buyer clients. Using a Buyer's agent will usually be at no extra cost to you, since most sellers' agents will split their fee with a buyer's agent. Make sure your agent fully explains how they expect to be compensated before you enter into an arrangement with them. (More about how to choose the right agent later.)

Hire a professional home inspector. I will say it twice, Hire a professional home inspector. I have heard comments like the following be the prelude to a comedy of errors. "My father-in-law was a contractor and he is going to check out everything for us at no cost." " I am an Electrical Engineer and can check the electrical system myself, I'm not really worried about that other minor stuff." or "Oh we won't need any inspections because we are going to be remodeling the house." All of these quotes can be considered Famous Last Words. A professional home inspector will know what to check, document the problems to show the seller, and have insurance in the event he makes a mistake. Imagine going to the father-in-law in the previous example and telling him he needs to replace the burned out attic fan he missed on his inspection. Your Realtor should be able to give you the name of several inspectors to consider. Just remember one thing. Hire a professional home inspector.

There are many other ways to save money and avoid pitfalls. To obtain a concise, well-organized training guide that will teach you more fantastic money saving strategies click here.