Learning Center Article

Article: The Right Time to Buy Your First Home

There are many real estate market forecasts and predictions available - however the bottom line is that if you want to buy your first home--there is no wrong time. This is because the motivation to buy is not determined by regional market conditions or by location, but rather by your personal needs. Industry opinions, economic reports, and investor speculation do not sway or predict when a particular individual will be ready to buy.

For the great majority of people, the most compelling reasons to buy a home are based on individual circumstances and personal needs. Some of these factors are:

Family needs and desires for children/parents/in-laws/couples
Convenience to home, work, school, social activities
New work situation
Sense of achievement or fulfillment
Freedom and independence
Sense of security and privacy

Even though there are many changes in the market, both up and down--people still need and want to buy homes. This desire to buy a home is deeply rooted in the fabric of our national consciousness. The intrinsic value of homeownership--defined as worth based on perception of value--gives far more satisfaction than ROI calculators can quantify.

Today, there are many different loan programs with flexible terms to fit all buyers. There are city and county down-payment assistance programs to assist in buying a home. There are condos and manufactured homes to close the affordability gap. For future buyers with blemished credit, there are many debt reduction and counseling programs to help gain a fresh start.

How do you make the leap to become a homeowner?

First, you must determine that you want to buy a home. Sounds simple, yet many people find that getting started is the hardest part. There are perceived obstacles in the minds of many would-be homeowners: Do we have enough money for the down payment? How can we get out of our current lease? Where can we afford to live? The goal is home ownership, and there are many steps to reach the goal. You may not be financially ready yet, but you need to ascertain where you are NOW in relation to your goal.

Get your finances in order

Accurately determine your financial situation and check your credit to determine where you fall as a borrower. Look at all of your available assets for your down payment and examine all of the finance options available to you. If you have some credit blemishes, take the time to make timely payments to your creditors to present the best financial picture to your home lender. Make sure that you have a track record of stability in your employment history. Postpone any major purchases such as cars, motorcycles, or large appliances until after you close escrow. Your actual home purchase may still be 12-18 months down the road, but you can still prepare for it now.

Get pre-approved for your mortgage

Accurately determine your financial situation and check your credit to determine where you fall as a borrower. Look at all of your available assets for your down payment and examine all of the finance options available to you. If you have some credit blemishes, take the time to make timely payments to your creditors to present the best financial picture to your home lender. Make sure that you have a track record of stability in your employment history. Postpone any major purchases such as cars, motorcycles, or large appliances until after you close escrow. Your actual home purchase may still be 12-18 months down the road, but you can still prepare for it now.

Get pre-approved for your mortgage

Once you've cleared the financial hurdles, talk to your lender or broker to find out how much you can afford to borrow along with the expected out-of-pocket costs you will need to incur for the closing. This will include the required down payment (if necessary) along with funds for closing costs, which can run 3-4% of the purchase price. Pre-approval also allows you to shop for a home with an accurate price range. If you are buying in a seller's market, you may want to search for homes that are considerably below your approved price range, so that you can have the most room for negotiation.

Find a credible licensed real estate agent

Look for an agent that can work with you based on YOUR needs and your schedule. Check references of previous clients and make sure that he or she is responsive and available to you. You may not know exactly what you want in terms of a new home, and your agent should work with you to determine your needs and help you find a property that meets your immediate and future needs. Your agent should be familiar with the area where you plan to move. Check with family and friends for successful agent referrals. Ask them how satisfied they were with his/her services and if they would use them again.

Become an informed and practical buyer

Once you determine where you would like to live, determine what factors are most important for your family. Calculate your new commute time and research school information for your children. You may want to consider the proximity to a place of worship and shopping in the area. Make sure to evaluate the surrounding factors that are most important to you, along with factors that are least important.

Find a home that works for you

Check out the floorplan to make sure that it meets your needs. Envision yourself along with your family, living in the home. What are the key points of consideration for your home? If you spend a lot of time in the kitchen, then you want to make sure that the kitchen can accommodate your habits. If you will be working from home, make sure that your home office setup will work. Make sure that all of your telecommunications and electrical needs can be met. Is the backyard adequate for your family? Do you need a garage? Are you willing to make major repairs to the home? Does the style reflect your taste? Can the home grow with you over the next 5 years, 10 years or 30 years?

Make the offer

Once you have located a property that meets your needs, make an offer based on the listing price, along with comparables information and market considerations. Your agent can work with you to determine the best price, along with any contingencies for the sale. Some strong purchase offers include:

Short contingency removal periods
Short escrow periods
Increased cash deposit
Love letter from buyer
Pre-approved letter from lender with guarantee for purchase price

It is good to get an independent home inspection, so that you can know what the potential pitfalls and future maintenance needs may be. Your offer may be accepted as-is; you may face a counter-offer from the seller, or you may be rejected. In a seller's market, you may find yourself bidding with several other buyers for a single piece of property. Work with your real estate agent to determine what is customary in your area. This is when his/her negotiation skills really come in handy!

Once your offer has been accepted, you will enter an escrow period, where all of the title research will be handled, funding requirements met; tax and title transfer paperwork managed. Prior to the close of escrow, you will sign all of your finance paperwork, and pay your remaining deposit and closing fees. After funding is complete, the title company will record the new purchase deed with the County Recorder's office, and you will officially "close".

Congratulations! Now get ready to move! Make sure to connect your new utilities (and disconnect your old service) along with mail forwarding.

Everyone wants someplace to call their own, and whatever your financial picture, there is always a way to purchase a home. The purchase of a home can be a lifelong achievement, but one that is truly a worthy accomplishment.

About the Author: Cecelia Taylor writes for San Diego Real Estate Authority. (http://www.sandiegorealestateauthority.com) Find detailed descriptions of over 85 communities in the San Diego real estate market; compare average real estate prices in these communities and more; search through the MLS listings yourself, find a realtor to take care of the search, or any combination therein; track mortgage rates, or determine the value of your home.

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