Home Buying

Buying a house for the first time!

Part 1 of 3…

So, you’ve been thinking about buying a house and the process seems overwhelming and like a big black box. If you are wondering what steps you should take, start here.

Step 1Finances

This is the biggie for most people. You need to take a look at your financial situation and figure out if you are in a position to take this step and if NOT, make a plan to get there.

Know your FICO score!

This is the score that lenders use to determine your credit worthiness. It’s a combination of the 3 scores given to you by the credit agencies. You can sign up for a free service like Credit Karma and see where you are at a given time. Some lenders will accept credit scores as low at 620, but most want 640 or higher. And if your score is on the lower side and you can easily clean it up, it’s to your advantage to do that first – lenders charge higher interest rates to those that have lower scores, so your loan will cost you more.

Down Payment.

If you have been in the military, chances are that you are eligible for a $0 down payment mortgage. The VA mortgage is really the best deal out there – look for a video on that soon because if you have served this is definitely a benefit that you should be taking advantage of.

For the rest of us, the minimum down payment is typically 3.5% of the cost of the home. So, if you were to buy a home at the average price in the Twin Cities ($280,000) your down payment would be $9,800. In MN, you may qualify for downpayment assistance of up to $15,000 depending on where you live and other qualifications.

I did another video on my YouTube channel about FHA Loans, and also one covering a mortgage offered by Habitat for Humanity that has incredibly good terms for first time buyers. Check the link below this post to see my YouTube channel.

Closing Costs

This is the area that I think is often underestimated or not planned for.

You should be planning to have about 3% of the price of the home available to apply toward closing costs. These are separate from your down payment and while we are often able to get sellers to contribute to closing costs it’s not always the case. You’ll want to have this money available.

If you have it and the closing costs are covered by the seller – more to the good to you because you start your life in your new home with a nest egg to use for emergencies or things that you’d like to add. You don’t want to buy a home and then be “house poor”.

Find an agent

Did you know that the SELLER pays our fee?

Agents advocate for you and guide you through the process.

That’s right – you get the benefit of someone knowledgeable about the market, who knows how to navigate these transactions, works to make sure that you are protected, and you do not have pay their fee!

Things that you should consider as you decide who should help you with what is likely the largest purchase you will make –

  1. Is this their full time job or are they trying to squeeze it in around their other job and commitments? You want someone who isn’t doing this as a side gig, it’s serious business.
  2. Do you feel comfortable with them? Buying a home is also very personal and often can be stressful if there are extenuating circumstances, pick someone that you feel you can trust to be in your corner.
  3. Look for recent reviews or testimonials from other clients.
  4. Are they a solo agent or are they working on a team? If it’s a team, they usually have a lead agent that primarily handles sellers and then they assign buyers to other members of the team. So you may be passed around to a lot of different people in that situation vs working with a solo agent where it is a very one-on-one relationship.

Get preapproved!

good to go!

Preapproval means that the bank has decided that you are worthy of a loan after actually looking at your credit. It’s a step beyond “prequalified”. You will know what you can afford to buy and won’t look at places that are out of your range.

Having a piece of paper that says this is critical to getting your offer accepted by the seller. Sellers do not want to take their property off the market only to find out that you are unable to buy the home.

This is another benefit of finding an agent to work with – we are in the business and working with loan officers is our daily business. We know who is responsive and works on our client’s behalf (and who is not).

Agents want the best outcome so they will help you find a lender that will help you get there. They are NOT paid by lenders, there is no “kick back”, or any financial benefit to send a client their way. Agents benefit by having happy clients at the end of the day.

Have a question or are you interested in getting information about another topic? Are you thinking of buying a home in the Minneapolis area? I’d love to hear from you!

Tap an icon below or leave me a comment!

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