Friday, October 31, 2014
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5 signs that you're ready to buy a 1st home

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Buying your first home takes stamina, desire and commitment not only to navigate the complicated and time-consuming purchase process, but also to learn the ropes of being a responsible homeowner.

Maybe you've dreamed about buying. Or perhaps you've researched for-sale homes online, tried to calculate how much you can afford to spend, or peeked inside a few open houses.

But are you really ready, emotionally and financially, to step up your game and make your move? Here's a look at what mortgage and real estate pros know about who's good to go and who needs more time to prepare for homeownership – five ways to know if you're ready to buy your first home.

PLAN TO STAY: Buying a home might seem like a no-brainer if your mortgage payment would be less than the rent you're paying.

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  • But that comparison doesn't account for other costs of homeownership, including down payment, mortgage-related fees and home maintenance and repair expenses, said Ed Conarchy, a mortgage loan originator for Cherry Creek Mortgage Co. in Gurnee, Ill.

    With those factors considered, short-term homeownership rarely makes sense.

    "When you buy a home, you should know you're going to stay for a minimum of five to seven years, and longer is better," Conarchy said. "If you try to do everything you need to do to make that house yours and then you turn around and sell it after three years, you're not going to break even."

    If your employment situation feels secure and you're prepared to stay in one place for a while, you might be ready to buy.

    GET PRE-APPROVED: Very few people have enough cash to buy their first home without a mortgage. Rather, most need financing to afford today's home prices.

    Realtors know that all too well, which is why many won't spend much time with would-be buyers who haven't had a serious talk with a mortgage professional.

    As Jay Dacey, a mortgage broker for Metropolitan Financial Mortgage Co. in Minneapolis, explained, "A good Realtor will ask you what your criteria are and set up a search through the MLS for you, but a good Realtor is also going to say, 'The next step is for you to contact a mortgage professional and make sure you're pre-approved.' "

    The loan approval process is no different for first-timers than it is for experienced home purchasers, Dacey added.

    READY, SET, FLEXIBLE: Timing is another crucial element in homebuyer readiness, said Amy Butterworth, an associate broker for Gibson Sotheby's International Realty in Boston.

    A time frame that's too long doesn't make sense. But neither does a time frame that's too short. For example, if your lease doesn't expire for many months or you need to move within 30 days, buying a home might not be practical for you right now, Butterworth said.

    The ideal situation is to be ready to buy and able to wait, especially if your housing market is a hotbed of multiple offers.

    "There's no place in the market for a buyer who's hesitant," Butterworth said. "But they can't only be ready and raring to go because there will be disappointments – that's just how the market is right now. You have to go into it with realistic expectations."

    SAVE UP: Saving a sizable nest egg is another important milestone for would-be homebuyers, said Ken Pozek, a Realtor for Keller Williams Realty in Northville, Mich.

    That's because you'll need savings not only for your down payment, but also your emergency fund, moving expenses and home maintenance costs.

    "A lot of people forget that there is a lot of maintenance with owning a home, especially if you've been used to renting. From a financial perspective, (it's important to) make sure that even if you're emotionally ready or excited to buy, that you have nest eggs set up as well," Pozek said.

    Examples of home maintenance chores include mowing lawns; trimming trees and hedges; shoveling snow; exterminating termites, rats or other pests; clearing out rain gutters; cleaning major appliances; and washing windows, walls and doors.

    Even if you do a lot of the work yourself, you'll still need to buy supplies and equipment.

    GET REAL: First-time buyers often believe buying a home will be easy. Giving up that misconception and being realistic about the time, effort, money, stress and hassle involved is an important step toward being ready to move forward.

    "Most first-timers think buying will be a perfect scenario where it all happens like it does on HGTV. They see three houses. They pick one, and it all works out beautifully," Pozek said. "That never happens, unfortunately."

    Instead, prospective buyers who are successful understand that, as Pozek added, they "might run into some bumps, but the end product is going to be a home they love."

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    ABOUT THE WRITER

    Marcie Geffner writes about housing and mortgages at Bankrate.com. Visit Bankrate online at http://www.bankrate.com.

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    (c)2014 Bankrate.com

    Distributed by MCT Information Services

    Marcie Geffner Bankrate.com (MCT)