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Health & Fitness

Anatomy of a first time Home Buyer

The process of evaluation is crucial when deciding between Renter or First Time Home Buyer.  Weighing the Pro’s and Con’s before looking at property in the Wayland real estate market or other townships allows the Renter the ability to make informed decisions.  For those that decide homeownership is for them, CONGRATULATION and welcome to what could truly be amongst your greatest investments.

Home ownership provides you the ability to paint, renovate or expand your home as you see fit, while providing the family a sense of stability and security.  By the way there are a few other perks to homeownership which may interest you including equity appreciation, capital gain exclusion, mortgage interest and property tax deduction just to name a few.

Although there are many way for the first time Home Buyer to begin the process of homeownership, it’s usually a good idea to have a plan in place that outlines your process. Here are some suggestions.

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1.  What information is needed?  Make available your tax returns for the past two years including W2′s, pay stubs, bank statements, 401k’s, IRA’s, and any other investment accounts.

2.  Did you check your credit score?  Check your credit scores from the top 3 credit bureaus TransUnion, Experian and Equifax. 

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Many first time homebuyers before looking at homes for sale in the Wayland real estate market ask the question “What type of credit score do I need to buy a house?”  Unfortunately the answer isn’t always clear, if you ask 12 different experts you may get 12 different answers but you should find some overlap in what they have to say.   In today’s credit market a credit score between 620 and 640 or above on the FICO scale, or 600 and above for FHA and VA should open some doors for you among lenders, according to the Home Buying Institute.

3.  Do you have enough for a deposit and down payment?  Do you have enough in saving for closing costs and lender required cash reserves, this could be between 3.5% and 20% of the purchase price?  As a first time home buyer you have several options including Federal Housing Administration (FHA) and Department of Veterans Affairs (VA). Note: VA allows 100% financing

Now you begin building your team out by working with a knowledgeable and experienced mortgage broker.  If you’re looking at Wayland MA real estate, there are usually several options available but none more valuable than a local mortgage broker you can talk to and work with face to face.

4.  Do you have an Pre-Approval letter?  It’s important to note that a pre-approval letter is not the same as pre-qualification letter which you can usually get by providing some general financial information over the phone or through a lender website.  On the other hand, the pre-approval letter comes with substantially greater lender review, including tax returns, W2′s, pay stubs, bank statements, 401k’s, IRA’s, and other investment accounts verification.  The pre-approval letter tells the Seller that you the Home Buyer is serious and prepared financially to make a deal on any homes for sale in Massachusetts.  Just as important the home buyer through such an extensive financial review is usually able to establish a level comfort in knowing an impartial and qualified third-party has reviewed and evaluated the ability of you the prospective homeowner of making reoccurring monthly mortgage payments. One thing to note is the use of the word “pre” in pre-approval, this mean not binding for the lender.  The Lender will want to include an appraisal of the home along with current employment status, interest rate adjustments if any and current credit card balances prior to closing.

The next member of your team is your Realtor, a trusted agent that will represent your interest above all others.  It imperative that you interview any Realtor before working with him or her to gain insight into their knowledge of property inventory in your desired area.  Additionally you want to know if there is synergy between you and your Realtor, since you will be spending time together and sharing some confidential information.  A good experience with your Realtor can lead to a long-term relationship and great resource for future real estate related questions and opportunities.

5.  Ready to begin house hunting?   Here comes the fun stuff.  You know your budget and you may even know all your needs and wants.  If not, it’s not a problem your Realtor will work with you asking a series of targeted questions to build out your Real Estate profile that should outline your needs and wants including but not limited to # of bedrooms, bathrooms, style of home, building square footage, functional backyard area, neighborhood, access to public transportation, shopping and much more.  Based on your Real Estate profile your Realtor will use their knowledge of the availability property inventory and put together an initial short list of properties for you to visit with them.  During your walk thru of these homes the informed home buyer will perform a pre inspection and evaluation of the complete property including potential costly repairs and the ability to renovate or expand the home to meet future needs. To learn more about pre-inspections and other related evaluations you should consider, please visit Real Estate in Massachusetts.

6.  Are you ready to make an Offer?  You found a house, which you would be excited to call home. Your Realtor will probably put together a list of comparable sales or “comps” of similar homes that have sold recently in the same neighborhood.  Based on your budget, the homes list price and comparable sales data you’re ready to make an offer.  It is highly recommended that you include financing and inspection contingencies within your offer on any of the homes for sale in Wayland

7.  Is there a Counter Offer or Acceptance?  In a Sellers market with competing offers, the Seller may counter your offer requesting more from you.  All you can do is put your best foot forward, but remember your comfort zone and don’t compromise your sanity.  This is where your Realtor a skilled negotiator maybe able to find solution and acceptance from the Seller on your behalf.

8.  Please don’t fortget about the Inspections!  It is HIGHLY recommend that you hire licensed professionals to perform a complete home, termite, lead, radon, asbestos and other inspections when looking at any of the homes for sale in MA.   Your Realtor can usually help provide you a list of qualified professionals.

9.  Lender will want an Appraisal. Your lender will require an objective assessment of the prospective home’s value since they will have a large stake in it. The lender wants to make sure that the home’s value is equal or greater than the amount of money they are lending.  New guidelines however prohibit the use of appraisal reports completed by an appraiser selected, retained or compensated in any manner by mortgage brokers or real estate agents.

10.  Ready for the Closing?  You’re on the home stretch but you have butterflies in your stomach.  First thing to remember is that you’re in charge, so don’t be afraid to ask questions. Stay in touch with you’re team ask your mortgage broker and realtor if there is anything they may need from you and not the day before closing but a week or weeks before closing.  Remember to ask for your loan documents before the closing date and have your attorney review them.  By law you have the right to review your HUD-1 or closing-settlement statement at least 24 hours prior to your scheduled closing.  The night before make sure you have two forms of photo ID and certified check if necessary.  Try to get a good night sleep.  Remember to bring with you to the closing that photo ID, certified check and the HUD-1 statement you received for review to see if there are any discrepancies once you get to the closing table.  If at all possible try to schedule your closing in the morning in the event human error forced a typo and the closing documents now need to be corrected by the lender.  Also make sure you have your closing scheduled well in advance of your rate lock expiration date.

11.  Its PARTY time!  Congratulation you’re a homeowner.

Please remember that the home buying process can vary dramatically.  These steps are intended to provide only a general outline into the process of becoming a home buyer.  You may vary, add to or subtract from this process, but it is highly recommend that you build your team of highly trained experts including but not limited to your Realtor, Mortgage Broker and Legal advisor in your home buying process.

ABOUT THE AUTHOR: Roger Martin is a Massachusetts Realtor with Century 21 Commonwealth.  Roger is a unique blend of both Realtor and licensed General Contractor with over 20 years of experience building Custom Homes , Renovation and Design.  Serving the Ashland, Brookline, Chestnut Hill, Concord, Dover, Framingham, Lexington, Marlborough, Natick, Needham, Newton, Sherborn, Sudbury, Wayland, Wellesley, Westborough, Weston and surrounding areas.

If you have questions, comments or suggestions for future articles or have interested buying or selling a home, please feel free to contact Roger at (p) 1.617.365.4311 ; (email) roger@realestateinmassachusetts.org or (blog) www.realestateinmassachusetts.org

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