Advice for First Time Home Buyers

Advice for First Time Home Buyers - couple reviewing finances

Buying a house for the first time can churn up all kinds of emotions. From exhilarating to nerve-racking, it’s an experience that you will need to be prepared for. We’ve put together some advice for first time home buyers to make your purchase run as smoothly as possible.

An important step is to go see a lender. It’s easy to miss this step when you’re wrapped up in the excitement and anticipation of your first home, but meeting with a lender, or multiple lenders, to find the best financing option for you is vital to the process.  (If you don’t know where to start, we have a list of reliable lender contacts)

Having a lender allows first-time homebuyers to have good negotiating power right from the start. Your lender can go over your credit history and provide you with helpful advice on how to handle any issues that may hold you back from purchasing. If your credit is good, lenders will pre-approve you for a home you can afford. This gives you the advantage of knowing just what your price range truly is and will help manage your expectations. A lender can tell you exactly how much you’ll have to put up for down payments and closing costs which allows you to present the best possible firm offer for a home you like.  This is very attractive to sellers, especially in our current market.

Once you’re pre-approved, you will know the following:

  1. The maximum price you can afford. This will allow you to make a firm offer as well as move quickly on a house that may get other bids.
  2. How much money you need for down payment and closing costs.
  3. How much the seller will need to help with closing costs, if necessary. Discussing closing costs from the beginning can ensure you don’t lose the home during negotiations.
  4. If you have any credit issues and how you can resolve them.
  5. If you have been pre-approved for the loan. This is very attractive to sellers.
  6. That your paperwork has been submitted and processed. Therefore, you will not have lengthy waits for the bank to evaluate your credit, etc. when you’re ready to make an offer on a house.
  7. How long it will take for final approval of your loan.

You now know what you can afford, what you can offer, and what you need to negotiate from the seller. As a first-time homebuyer, you’ll have the facts and be ready to purchase your home. 

Now comes the fun part, shopping for your dream home!

We’re here to help first-time homebuyers. Contact our team today and we’ll walk you through each step of the process. We look forward to introducing you to your first home!

Make the Leap from Rent to Mortgage!

Make the Leap from Rent to Mortgage! (chalkboard rent to buy)

If you have been saving for a down payment and dreaming of owning your own home, you may feel like you’re ready to make the leap from rent to mortgage. You’ve been looking at your budget, and your future, and want to build equity in a home of your own. That’s the American dream!

The Columbus Team knows that the leap from rent to mortgage is more than just exchanging one payment for another. We want you to be prepared for both a lender’s evaluation of your financial readiness and the very real expenses of homeownership. That way, you can relax and enjoy the process of choosing and buying the home of your dreams.

Mortgage readiness checklist:

  • Budget for a rent/mortgage payment that is about 25% of your monthly income.
  • A great credit score allows banks to offer you lower interest rates on your mortgage, so it’s important to have the best score possible. Dispute mistakes, make on-time payments, and try to pay down balances until you are using only about 30-35% of your available credit. Don’t cancel your oldest accounts, as that shortens your history.
  • A down payment can affect your bottom line for years. If you put 20% down, you won’t be required to add mortgage insurance to your monthly payments but as little as 5% down is possible for purchase.
  • Debt-to-income ratio is another factor lender’s look at when evaluating your financial health. Paying off a small loan or getting your credit cards down to 30% of the total credit available can make you a more attractive lending risk. Ask your favorite lender what they look for, so you can prepare.
  • Factor taxes into the equation. Mortgage payments consist of payments to principal, interest, taxes, homeowner’s insurance, and other costs. Take a look at your favorite neighborhoods and find out the amount each homeowner pays per $100K of home value.
  • A condo can be the perfect home for many, just remember to add the HOA fee to your monthly expenses.
  • Set aside a certain amount for your home repair fund. You won’t have a landlord to call for fixing a clogged drain, broken appliance, or a leak in the roof.
  • Homeowners also mow their own lawns, shovel their own snow, and more. A small fund to purchase tools and supplies to care for your new home is wise choice!

What Does a REALTOR Do When I’m Buying a Home?

What Does a REALTOR Do When I'm Buying a Home?

You know your Buyer’s Agent searches homes for sale on the internet, schedules appointment to see them, and drives over to the viewing, right? So, aside from that, what does a REALTOR do?  Why should you engage one?

REALTORS do so much more for you than simply searching for homes based on your criteria and driving you over to see them!

Here’s some of the many hats your REALTOR will wear during your real estate journey:

Location expert. As your Real Estate Agent, we will listen closely to your needs and desires when it comes to your dream home and your ideal neighborhood. The Columbus Team knows Central Ohio, and we can help you identify neighborhoods that meet your expectations, and we have tools that allow us to search for homes that match your list of must-haves.

Market expert. We’ve spent years getting to know the Central Ohio real estate market. Using comparable home sales in the neighborhood you desire, we can tell you if a home is priced accurately, and give you advice on sales in that area. You can buy and sell with confidence, knowing you’re getting the right price.

Network connections. As an experienced team, we often know about homes coming up for sale which haven’t been listed, plus, once you’ve identified your dream home we can put you in touch with trusted service professionals from inspectors to contractors.

Advocate. As your agent, we represent your best interests in every transaction.  We are your long-term advocates.

Negotiator. In negotiations, we listen to what you have told us is important to you and represent your interests in the process. We help take the emotional component out of negotiations over price and repairs, so that you can simply get the best deal possible without making it a personal conflict.

Guide. We know the selling and buying process. We keep you and your home sale or purchase on schedule and moving forward.  We manage the contract process, from start to finish. From inspections to paperwork, whether buying or selling, REALTORS manage the details so you don’t have to. Experienced, we can also tell you where the pitfalls are and help you avoid them.

If you’re looking for an professional to guide you through a real estate purchase, an expert on the market, an expert on Central Ohio neighborhoods, and a large network of expert and reliable contractors, professionals, and real estate agents, contact The Columbus Team today!

Home Costs for Planning a New Homeowner Budget

Home Costs for Planning a New Homeowner Budget

Homeowner Budget

Why discuss a homeowner’s budget? Because there are expenses many first-time buyers don’t think of when talking to lenders about how much home they can afford. Your lender will discuss the mortgage payment (usually estimated to include your actual mortgage, property taxes, and can include mortgage insurance (PMI), and perhaps even your homeowner’s insurance bundled together), but they don’t often discuss the actual costs of buying, owning, and operating a home. We’ll help you plan your budget so that it includes most or all of the possible costs, so you can see more accurately how much home you can comfortably afford!

Home Costs, Recurring

Home Insurance. If this isn’t rolled into your mortgage payment, then your mortgage probably requires you carry a certain amount of home insurance. DO shop around for the best price, and see if you can get a better deal by buying car and/or other types of insurance from the same company for overall savings. Home insurance in Ohio starts around $1,000/year and can run much higher if your home has a higher value or is in an area where frequent claims are made.

Homeowners Association or Condo fees. If you purchase a condo, you’ll pay a monthly fee to help pay the costs of maintaining common areas and green spaces. Fees vary widely, so be sure to ask about monthly fees before you make an offer. If you purchase a home in a planned or gated community or in a neighborhood with an active civic association, you’ll pay a fee that could be as small as $10/year, or upwards of $300/month, depending on what is covered and what the association has voted to charge members. You may be asked to pay a one-time transfer fee, too. Membership may not be voluntary, so ask your REALTOR.

Property taxes. These are paid monthly, and are often paid in advance to your lender, who bundles the cost with your mortgage. If you have a mortgage where you are responsible for paying your property taxes separately, you’ll need to add the taxes into your monthly or annual bills. The property taxes on residential property are available to the public, and are often on the descriptions of homes for sale. If not, check with your REALTOR, they can find out for you. Bear in mind, that the tax cost may increase if the sale proves the value of the home has increases significantly since it was last purchased or assessed.

Lawn care and snow removal. Are you planning to mow, seed, and feed your lawn yourself? Do you enjoy shovelling snow and raking leaves? If you know you don’t have the time or patience to do these chores yourself, consider budgeting for professionals to do the work. Lawn care in Central Ohio runs from $60-300 per month, depending on the size of your lawn, and snow and leaf removal can be similar, depending on weather and the number of trees or length of the driveway on your property. Many contractors offer fast, accurate estimates that let you plan your budget before you buy your home.

Utility bills. Some costs, such as water, electricity, natural gas, and security systems are mostly the same from owner to owner, so asking about utility costs during the search and buying process will give you an accurate idea of the costs for those items. Others, such as cable, phone, and internet, are based on your preferences and product choices. You may be able to estimate those now, by what you already pay.

Home maintenance. It’s wise to budget savings for home maintenance and repairs. Some expenses, such as furnace filters, are a quarterly and regular expense. Others, such as replacing a broken water heater, are once in ten years, but are predictable based on a good home inspection. Planning ahead to have savings available for those planned maintenance and emergency repairs is smart, and saves you money over the long run.

Home Costs, Non-recurring

Closing costs. These are the fees you pay when you close on your home. They cover various services such as credit reports, appraisals, surveyors, and more. Closing costs are usually between 1-5% of the cost of your home. You can negotiate to have your seller pay them, but if they won’t, you’ll need to budget for them.

Utility fees. Most utilities charge a fee for starting service for a new customer, or switching that customer from one address to another. They tend to be small fees, but can add up when you have 5 or more. Check with local utility companies to see what their fees are and if there are ways you can reduce or avoid those fees.

Homeowner purchases. Most homeowners discover the need for purchases to customize or maintain their home to make it functional for them. Blinds and window treatments, paint, and even medicine cabinets and mirrors may need to be purchased to make your home comfortable. A lawn mower, snow blower, gardent tools, and a tool kit are useful for maintaining your home, and you may end up adding a stepladder and other hardware store purchases to your list. You also might be surprised at how many trash cans, storage bins, light bulbs, and other supplies a new home will need as well. Some of these purchases can wait, such as a snow blower if you close in June. Others will be needed even before the move, such as paint to convert an office to a baby’s room, so add these expenses to your budget as needed for your new home and your schedule.

Home repair or alteration. If your purchase of your new home includes the plan to remodel the kitchen, repair a porch, add a fence, or change from electric to gas for heating or cooking, make sure that you include the cost of that change (or saving for that change) in your budget, especially if the change to the home is necessary to safety or basic comfort. DO consider having your prospective home inspected during the buying process by a licensed, professional home inspector so that you know exactly what repairs or changes you need to plan on budgeting. If the needed repairs are too large for your budget, you can begin your home search again.

Furniture and appliances. If the seller is planning to take their major appliances with them, you’ll need to budget for replacements. Are there more bedrooms or is there more space in the new house than your old one? Budget for furniture purchases to make those spaces useful and comfortable. While some rooms (a baby’s room) can remain empty until later use, you’ll want to make most of your new home usable right away. Your current furniture may not fit the spaces in your new home, this can create an urge to shop. Plan ahead, thoughtfully, so you are prepared for those expenses.

4 Myths About Homeownership

4 Myths of buying vs renting

According to recent studies, Americans have drastically shifted their approach to homeownership over the past two decades. People are renting in increasing numbers, and fewer are taking the jump into homeownership. From 2005 to 2015, the number of new renters soared by nearly 9 million, far outpacing the number of new homeowners.

People rent for a lot of reasons, many of them good: flexibility, convenience, love for the high-rise life. But we also know that many renters dismiss homeownership out-of-hand when it might be the best option for them. Here are the four most common myths about buying a house versus renting an apartment.

MYTH #1: Ownership Is More Expensive.

If you compare the overall price tag to your monthly rent, homeownership doesn’t seem all that affordable. But unless you’re buying a home outright and paying in cash, it’s not a fair comparison. In many cases, a monthly mortgage payment will be comparable to (or less than) monthly rent payments, especially since rents are increasing nationwide. In 2015, they jumped 4.6%, the highest increase in nearly 10 years. According to a recent study, it’s cheaper to buy a house than rent it in 42 states.

Plus, unlike a rent check, a mortgage payment establishes equity in your home. It’s also tax-deductible.

MYTH #2: Forget Saving Money.

You might think that after a downpayment, and mortgage payments, and furnishing, and repairs, and maintenance, and property taxes… saving money is a lost cause. But think of it this way: Every mortgage payment that pays down principal and interest is a kind of “forced savings account.” You have to pay it, so you do. But unlike a rent payment, that money isn’t vanishing into the ether (or, as it’s more commonly known, your landlord’s pocket). Assuming you don’t default on your loan and go into foreclosure, you’ll see that money again, in a different form. By establishing equity in your house, you’ll be seeing long-term value in the form of an investment. You’ll also be eligible for new lines of credit. It might take 30 years to pay it off, but it won’t be 30 years of checks down the drain.

MYTH #3: No One Will Give You a Loan.

After the housing crash, banks are a little more cautious about lending to new homeowners than they were in 2007. Still, it’s not impossible to get a loan if you have decent credit and some funds in reserve. Even if you don’t have the standard 20% down payment, you might be able to qualify for a new initiative from Fannie Mae and Freddie Mac. It backs mortgages with down payments as low as 3% for borrowers with credit scores of at least 620. That’s great news for young homeowners just entering the workforce.

MYTH #4: Home Ownership is for Old People.

According to the National Association of Realtors, over 35% of new homebuyers in 2015 were Millennials, making them the largest group of recent buyers for two years running. And the median age for Millennial homebuyers was 30. So it’s not just Gen X or Boomers buying houses. (In fact, Boomers are moving into apartments in droves.)

Homeownership is a huge commitment, of course, and it should take more than reading a blog post to convince you to apply for a loan. Before you make any decisions, take a clear-eyed and ruthless look at your finances, your plans for the future, and your willingness to be responsible for basic home repairs. If you think homeownership is for you, get in touch with The Columbus Team to set up a consultation. Happy house hunting!

This article was provided by Sam Radbil, a contributing member of the marketing and communications team at ABODO Columbus apartments.