Any advice for a first time home buyer with limited finances?

Question

I'm a first time home buyer (25 YO) and I'm 100% sure that I want to buy a house when my current lease is up. I have already pre-qualified so I know what I can afford.

My problems/questions/issues:
-VERY limited upfront finances available (concerned about having enough for ernest deposit and closing costs)
-Uncertain as to realtor or go it alone (concerned about commission costs)
-If going alone, any advice?
-How to choose a mortgage broker (if you shop, does every broker run your credit everytime? Don't want that!)
-How long is the process?
-Any other advice you want to offer!!

I really don't know where to look for this info, who to trust, etc - hope to find someone here!

Answer 1

There are a ton of ways to buy a house with no money down -- you'd be smart to look for a Realtor and a mortgage broker that understand all of the options out there, and who can explain them to you in a clear manner.

When you use a Realtor, they will get paid by the seller. Generally, when the seller lists their home, they agree to pay somewhere between 2-6% in commissions to a Realtor or Realtors. The Realtor who lists the house usually gets 2-3%, and the Realtor that brings the buyer (you) usually gets another 1-3%. Those commission costs will be included in the cost of the home. If you can find a home that's for sale by owner, you might be able to buy it for less than a comparable purchase with Realtors involved, but that's no guarantee. A good Realtor should be able to help you understand the process and minimize the stress that YOU have to deal with directly.
It's a good idea to interview at least 3 Realtors that are familiar with the area where you want to buy. You can decide who is the best fit for your needs, and they will hopefully make the home-buying process smoother than if you do it on your own. You might want to look into a "Buyer's Agent"; most Realtors are a transaction agent, which means that they don't have any contractual, financial responsibility to you -- they're working just to make sure the transaction happens. A real buyer's agent will have a financial responsiblity to look out for YOUR best interests, so they may be a better choice when it comes to negotiating, etc.
All that said, the experience and personality of a Realtor is more important than their certifications -- make sure to interview other people that have worked with them to get an accurate picture.

As for choosing a mortgage lender or broker, you can use many of the same techniques listed above to find a good mortgage professional. You should definitely shop, as different brokers or lenders may have different ways to meet your needs. Contrary to what another person said in earlier post, you have a 14-day window where you may have as many as 20 credit inquiries for the same purpose without hurting your score.
The best thing to do is to interview several brokers. When you find a few that you like, find out your credit score, and ask each of them each to give you a GFE (Good Faith Estimate) and to outline their recommendations for you based on your score and your needs. Make sure that the GFE's are all provided on the same date, as interest rates can vary from day to day. Ask each broker to include an estimate of ALL fees, not just the broker or lender fees. You can compare the GFE's by looking at each individual line (they're numbered for reference) -- that will give you a clearer comparison than just looking at the bottom line number.
Once you decide on a broker, tell them that you'll commit to them as long as they come through on what they promise. If they change what they're offering, make sure you get a good explanation for WHY the change occurred (some brokers will try the old "bait-and-switch", but sometimes there are legitimate issues that forces changes late in the loan process).

Searching for the right house at the right price can take a while; remember to stay within the price range that you can afford, and remember that there is no "perfect" house. Even if you get emotionally attached to a house, don't be afraid to let it go if it doesn't make sense financially. There are lots of houses out there, and there will always be another one that you like!

Finding a house can take anywhere from a week to a year -- all depends on how picky you are. Actually BUYING the house (putting in a contract, getting the financing, and closing on the sale) will usually take somewhere in the range of 30-45 days (during which you and/or your spose will probaly go crazy from nervousness and uncertainty; that's why it's especially important to find a Realtor and mortgage broker that communicate well with you and with EACH OTHER).

Remember that this transaction will probably be the biggest financial decision/transaction you've ever made. That said, a good or bad experience won't make or ruin the rest of your life. Keep everything in perspective, expect that there will be some things that don't go right, and enjoy your search!

If you have further questions, feel free to respond to me directly through Yahoo Answers (no personal information allowed in posts)

Answer 2

You can get into a home with, literally, zero down. Have your realtor negotiate seller credits that will cover all your closing costs, including the setup of your impound account for taxes and insurance.

Definitely go with a realtor. They are paid by the seller but represent, and have fiduciary responsibility, to you.

You may call several mortgage brokers. Running your credit report multiple times does not hurt your score if it's for the same thing (i.e. a mortgage) and within a 30-day period. But, what I like to do is just have it run once and then get your "mid score". (That's the middle score of the 3 reporting agencies.) Then, you can give that number to the other brokers and they can base their offers on that. Then, when you pick a broker, they'll have to run it again but at least it will have only been run a maximum of twice then.

Once you find a house, the process can be as quick or as slow as you and the seller decided. It can be as quick as 3 weeks or as slow as 90 days. Depends on everyone's needs.

As for other advice, start with the Mortgage Broker. Then you'll know before you even start looking at homes what you can afford. No fun falling in love with a $600K property when you can only afford $450K.

Watch out for Option ARM loans. They are fully adjustable. (Although a new breed has started to come on the market that has a fixed rate period.) Interest only is not a bad way to start to help with the monthly payments and you'll want to make sure you have a loan that's fixed for, at the minimum, 2 years. The risk, in this case, of an interest only loan though is that your house will not appreciate and may indeed depreciate. What happens then is that you'll be done with your fixed rate period so your interest rate will become fully adjustable and probably much higher. Your home will be worth what it was when you started or even less. That will make it extremely difficult to refinance into something fixed. Best case scenario is that it appreciates enough to get you to an 80% loan-to-value ratio and you can re-fi with a much better rate than you've got now. With the market today though, I'd get that fixed rate for as long as you can. Longer term though means higher rate but at least you don't get surprises down the road. And the longer you've got that fixed rate, the longer the property has to appreciate. As with stocks, it's not timing the market that makes you money most often, it's time in the market.

If you're buying in California, I'd be happy to help you. You can reach me at [e-mail].

Answer 3

I know here in AZ new homebuyers are using a grant for the down payment. It's a government grant that pays 25% down and closing cost. Do a search online for grants...I forget the name of the grant..it's something american dream first time homebuyer grant,,,I have many friends doing it. It's good to have a realtor but you could go for sale buy owner and find a home like that but a realtor can help you negotiate with them the sales price to get it lower and if there are other issues with the home to get it fixed things like that. Mortgage companies will pull your credit each time. Call a few up first and ask what they charge for points...each point is 1% of the loan amount...then ask what other fees they have. Make sure you get a Good Faith Estimate from the people who first pre-qualified you and you can compare that with other Good Faith Estimates. The process is about a month but 3 months with the grant.

Answer 4

Check out what your state offers for first time home buyers. NY has first time home buyers downpayment assistance as well as special mortgage rates depending on your income. I think each state may vary, but you may want try to get in a 20% downpayment to avoid a PMI charge in additional to mortgage payments. Closing costs are also roughly about 6% of the PP so you may want to make sure you include that when you calculate things also.

Realtors are helpful since they often know about deals taht aren't open to the general public. Ask around for a referral to make sure that you find one that you trust.

Remax.com has some good tips on picking a realtor, and buying homes. They also have a renting credit program which helps out with downpayments.

Bankrate.com has some good information about mortgages also.

Answer 5

look into a neighborhood gold program. you can finance all or part of you down payment.

another good place for info...
http://www.hud.gov/buying/comq.cfm

Also, even if you don't have children or plan to have them in the future, make sure the local school district is good. When it comes time to sell your house you will get more $$$ for it. To find this info, try a google search for "your state school report cards"

Another hint... if your not handy, don't get into an older home. If you don't want to mow the lawn EVERY weekend, get a condo.

Take your time. It is important to have a great realtor. They can help you find a mortgage broker and a home inspector. But when it's all said and done, you are left with the house. Make sure it's the right one for you. :) Good Luck!

Answer 6

As a first time buyer, you can typically get a good rate on a new home. Often only 5% down. Some costs can be rolled back into the loan. They will often offer all the services needed at competitive rates, because they want to sell you the home. Most escrows are 30 days from the time you sign.

Answer 7

FHA loans are designed for first time buyers who can't come up with the huge down payments. They are part of the HUD program and your monthly cost on a home will be much lower than regular financing if you qualify for the program.

Answer 8

Go wit a Realtor, century 21st is good. If you have limited finances, then you should buy a family house(two floors). You can rent top/bottom floor, and that should pay the whole house. Once paid, you can get the house you want.

Answer 9

First, check your credit right away. Then interview several reputable lenders and ask about any 1st time buyer programs.
Once you have a firm understanding of how much house you can afford then let the real estate search begin.

I hope this helps and good luck!

Answer 10

The only thing you need to do is take your time. I used an agent, and it took about 6 months. I looked at dozens and dozens of homes, and got discouraged many times (my wife cried on several occasions) but in the end we found the place we were both looking for and it turned out perfect.

Don't give up & don't settle for anything.