First Time Home Buyer Steps

Are you a first-time Home Buyer in the South Florida Real Estate market (Boca Raton or Delray Beach) Here are steps to take to help you decide whether you're ready to take the plunge.

1.) Do some reconnaissance . . . of comparable homes' selling prices in your area. Do a quick search of actual multiple listing service, or MLS, listings in your area on a number of websites, including the National Association of Realtors.

2.) Get an idea of what you can afford, by using a mortgage calculator to figure out if you made a purchase today what your cost would be.  

3.) Don't forget to factor in taxes and homeowners insurance. In some areas, what you'll pay for your taxes and insurance escrow can almost double your mortgage payment.

4.) To get an idea of what you'll pay in insurance, pick a property in the area where you want to live and make a call to a local insurance agent for an estimate. You won't be obligated to get the insurance, but you'll have a good idea of what you'll pay if you do buy. For an idea of what you'll pay in taxes, check your local property appraisers website. Just remember that exemptions and the intricacies of local tax law can create differences between what a homeowner is currently paying and what you can expect to pay as a new homeowner.

5.) Learn about your closing costs, the upfront cost of settling on your home shouldn't be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items like homeowners insurance or homeowners' association fees. 

6.) Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28 percent of their income on housing costs. Go much past 30 percent and you risk becoming house poor.

7.) Find a reputable Realtor in your area and sit down for a consultation about the real estate climate. Do they believe prices will continue falling or do they think your area has hit bottom or will rise soon? 

8.) Think of your future plans, long range. While a buying a house is a great way to build wealth, maintaining your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there's no landlord to turn to, mentally and financially prepare yourself for the new responsibilities that accompany homeownership.  

Tips to prepare for your house hunt: 

A.) Examine your credit 

Right now, blemished credit or the inability to make substantial down payment can put the kibosh on your homeownership plans. That's why it pays to look at your creditworthiness early in the home-buying process.

B.) Organize all your documents

Collect pay stubs, bank account statements, W-2s, tax returns for the last two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have them ready to show to the lender. This may seem like a lot, but in this age of tight credit, don't be surprised if your lender needs a lot in the way of documentation.

C.) Find a Lender and get Pre-Approved-- Getting pre-approved for a mortgage helps you bargain from a position of strength when you are house hunting.

D.) If at first you don't succeed - keep trying . . .

If you can't find a bank willing to lend to you -- and in the current tight credit market, it's possible you won't -- consider getting an FHA loan. The Federal Housing Administration has a program that insures the mortgages of many first-time homebuyers. As a result of this guarantee, lenders who might otherwise feel queasy about your qualifications will be more inclined to lend to you. As a bonus, the FHA only requires a 3 percent to 3.5 percent down payment from first-time homebuyers.