Millennial Generation: First Time Buyers
by Janice Melanson
29 Thursday January 2015
A lot of first time buyers, who are also called the "Millennial Generation" start the process on the internet. As a matter of fact 90% of all home searches begin online. Its a place to start, a bit overwhelming in my opinion. Don't rely to much on the internet. Talk to a lender, a real estate agent
Are you prepared? Owning a home is a lot of responsibility. Do you have a financial plan? (can you still save with your new mortgage?) Talk to a lender, get preapproved. What can you afford? Most buyers underestimate the cost of actually purchasing a home. They think they have the down payment they are ready to buy. Your typical closing costs run between 2-4% of purchase price. Add that to 3.5% down payment (FHA Loan). Once preapproved consider shopping in a lower price bracket, what would happen if someone lost a job or you decide to start a family?
Once you find a home and negotiate a contract, Lets talk about the cost of inspections: General building, water, sewer, pest, radon etc.. some financing requires certain inspections. They are not cheap.
What's your plan? If you plan on staying for 30 years than a fixed rate is your best option. What if you have a 5, 7 or 10 year plan? You might be better with an adjustable rate (locked for 5, 7 or 10 years).. If you think you might go longer than 10 years, stick to your fixed rate option.
You don't need a real estate agent! You have the internet. You can only go so far alone, we know what you don't and we want to help you. Your purchase should be as enjoyable and smooth as possible, not stressed and frustrating. That is where we come in, we will be working behind the scene's to make it happen.
Questions for your potential agent: 1. Do you specialize in the area I'm interested in? 2. Do you really want to work for me?
EDUCATE YOURSELF: "ITS A HUGE PURCHASE"
Lets talk appraisal: Your lender will be doing an appraisal to find out the value of the home. You will be paying for it. How much will a lender lend? Its based on appraisal.
What happens when the appraisal comes in low, yes it is a problem. You have four options: 1. renegotiate with seller. 2. bring extra funds to closing (we all have that laying around). 3. find a different loan structure. 4. find a new home (it happens).
What are the three types of lending: 1.fixed, 2 adjustable, 3. interest only.
Here are the 4 biggest error I see. 1. spending the maximum, 2. not knowing the importance of a high credit score (680-720 good rates) (620 lowest possible, higher rates) 3. wrong mortgage product (30 yr fixed with a 7 year plan) 4. not getting preapproved early enough.
For all the first time buyers going FHA you should keep in mind we run into three problems. 1. condition of the property, FHA requires property to be livable from day one (not livable with chipped paint, broken window) Solution: 203k streamline loan. 2. Appraisal comes in too low, only resolution is to renegotiate the price. 3. Debt to income ratio is too high (above 31%) Solution, ask your lender to run your loan through FHA's total automated underwriting system...
These are just a few of the things you will be dealing with, the list is long and can be tedious. Buying a home should be listed with the happy events like getting married, having a baby. Lets talk.