Advice on Buying Your First Home

2. cautious first time home buyers that like to think over all of their options.

As exciting as buying your first home will be, don’t be the first type. If you are currently renting an apartment, I’m sure you are SO ready to get into a space that you can truly make your own. As tempting as it may be to make an offer on the first home you fall in love with, it is best not to rush this very important financial decision.

Most of my buyer clients see an average of 8 to 15 homes before making a final decision. Touring several homes allows for you to understand what you can get for homes at different price points, locations, and conditions. I’ve had some clients who initially thought they would be willing to take on a fixer upper at a lower price point and then realize after seeing a few homes that they would rather purchase a home at a higher price point in order to do less work.

Shop multiple, local mortgage lenders.

Often times first time home buyers think that getting the lowest interest rate is the most important factor when determining the best loan product. While getting a competitive interest rate is definitely a variable to consider, it is not the only factor. In order to help determine the best loan program for you, the Consumer Financial Protection Bureau put together the Home Loan Toolkit.  Review the free guide and make sure you jot down some questions to ask your mortgage lenders. No question is too silly! Their job is to help you understand all of the ins and outs of the different loan programs and help you determine the best fit.

It’s also worth noting that well-respected, experienced local mortgage lenders typically provide better customer service than larger banks such as Bank of America, Wells Fargo, etc. They also keep the process moving along and don’t delay closings.

• When Should You First Contact a Mortgage Lender? 2-3 months before your desired closing date. For example, if your lease ends at the end of August, you will likely want to have a closing date of mid-August to allow time to move into your new home. Prior to looking at any homes, you will want to speak with mortgage lenders to have an idea of your purchasing power. In this case, you would reach out to mortgage lenders at the beginning of June and then begin your home search right after!
• A Note About Credit Pulls. Many first time home buyers are concerned that there will be too many inquires on their credit and result in a lower credit score. As long as the lenders are pulling your credit within a two-week time span of each other, it will not be a hard hit on your credit.
• Understanding the Loan Estimate. Mortgage lenders want to earn your business. For this reason, some lenders will leave off third-party fees on the Loan Estimate (the sheet lenders send out with the full breakdown of fees, rate, and payments) so that their total closing costs appear lower than competitors. Some lenders under-estimate taxes and/or homeowners insurance so that the total principal, interest, taxes, and insurance (PITI) payment is less than competitors. My preferred lender, Amanda McCall with PrimeLending, has seen first-hand other lender’s quotes:

“They will leave off HOA dues, surveys, final inspections, etc. for new construction properties as well as under-quoting mortgage insurance.”

For this reason, it is important to make sure the lender includes the full picture of all of the costs. If you’re uncertain if a lender is providing you with the full picture, reach out to me and I’ll send you my trusted lender recommendations.

Understand dual agency and your agent’s position on the two types.

SC REALTORS® are required by SC Real Estate License Law to provide you with a meaningful explanation of agency relationships at the first practical opportunity of substantive contact. Prior to signing a Buyer Agency Agreement to work with a real estate agent to purchase a home, you are considered a customer. After you have a signed written agreement, you become a client. Once you are a client, there are different relationships that can take place during a transaction:

• Single Agency— when a real estate company represents one client in a transaction.
• Dual Agency— when a real estate company represents both clients in the same transaction.

Two Types of Dual Agency:

1) Disclosed Dual Agency– REALTOR® A represents her seller in listing his home at 123 Apple Tree Road. She gets a call from a buyer off of her sign. The buyer is not represented by another agent and wants REALTOR® A to also represent them on the home purchase. REALTOR® A represents both the seller and the buyer in the same transaction creating a disclosed dual agency situation.

2) Designated Agency– REALTOR® A works for RE/MAX Moves and represents the seller in listing his home at 1 Winners Circle. REALTOR® B works for RE/MAX Moves and represents the buyer who wants to purchase 1 Winners Circle. Both agents work for RE/MAX Moves, so this is a dual agency situation.

Understand that agents have a choice when it comes to dual agency. You do not have to agree to dual agency. I personally do not practice disclosed dual agency because it is a conflict of interest. My goal for my seller clients is to make them the most money for their home. My goal for my buyer clients is to get them the best deal. I cannot do both extremely well if I represent both parties at the same time. I am okay with designated agency, on the other hand because I am still able to represent my seller or buyer client fully while another agent from my office represents the other party.

Consider how long you will stay in your home.

This is one of the first questions I ask my first time home buyer clients. As a first time home buyer, it can be hard to know exactly how long you will stay in your home. However, this is an important factor you need to consider for a few reasons:

PMI upfront versus monthly payment. When you purchase a home with less than a 20% down payment (which is all of my clients), the lender will require you to pay Private Mortgage Insurance (PMI). PMI protects the lender in case the buyer defaults on the loan. Depending on how long you plan on staying in the home, it may make more sense to pay PMI upfront in a one lump sum at closing versus paying it monthly in your mortgage. Paying PMI upfront is best if you plan on staying in your home for a while and you would like to have a lower monthly mortgage payment.

Capital Gains Tax. If you sell your home in less than 2 years from when you purchased it, you will be required to pay capital gains tax on your proceeds. The government wants to take a percentage of your profits! This percentage you pay in capital gains tax depends on the amount you make and also on your marital status.

Consider oddities that could affect resale value.

You walk into a beautifully decorated home. Perfect price, perfect size, perfect location. You’re in love!! But have you considered the negative aspects of the home? It’s my job not only to negotiate the best deal for my buyer clients, but to look at the home itself with a critical eye. It is my goal to protect your largest financial investment and make sure that you won’t have any trouble selling later on down the road. Buying a home is definitely an emotional experience, but I am here to remain level-headed and to make sure you make a wise investment. Some factors to consider when looking at homes:

• Driveway steepness and length. Short driveways or steep driveways are typically a negative for many buyers.
• Lot placement and size. Does the lot have privacy or does it back up to your neighbor’s house? Can you stick your arm out of your kitchen window and touch your neighbor’s home because it’s so close?
• Road noise. Is your home the first lot in the neighborhood? Does it back up to a heavily trafficked road?
• High tension power lines. Are these visible from your home?
• Overall neighborhood appearances. Are the homes and yards nicely kept? Is there a sense of pride in the homes or do the neighbors leave junk in their yards?

Hire an agent you trust with a proven track record.

Do you have a friend that just started their real estate career? Most people do. We all have to start some where, but make sure that your REALTOR® has 10+ deals under their belt before considering working with them. A great agent will have excellent reviews from their former clients. Be willing to ask for email addresses/numbers from their former clients so you can hear first-hand about their experience while working with the REALTOR® you have in mind. If at any point you feel that your agent is not representing you to the best of their ability and/or you are dissatisfied with the process and would like to hire another agent to represent you, you can ask for a release to end the Buyer Agency Agreement. Many folks aren’t aware of this.

Big Picture

Purchasing your first home is filled with excitement but also a lot of uncertainty. Remember to consider the following when purchasing your first home:

• Look at a variety of homes. Don’t purchase the first home you see.
• Get Loan Estimates from several local mortgage lenders.
• Understand dual agency and your agent’s position on the two types.
• Consider how long you plan to stay in your first home.
• Consider odd quirks about the property that could affect resale value.
• Hire an agent you trust with a proven track record.

If you are looking for a REALTOR® in Greenville, SC who will go above and beyond to ensure you have the best experience when buying or selling a home, let’s connect. I am happy to answer any questions you may have and to sit down for a free consultative meeting to discuss your real estate needs!