How To Buy Your First Home in Today’s Economy

What if you *have to* buy a home right now?

It’s a buyer’s market, so how do you maximize your purchase power? Here are 13 lucky tips:

1. Make a list of what you must have in a home, and really stick to the basics. Focus on the number of bedrooms, bathrooms, floor plans, location, parking situation and price.

2. Distinguish between needs and wants. Take each item on your list, one at a time, and ask yourself, “Can I *live* without this feature if the home is perfect in every other way?” If you would still consider buying the home, then that item should be marked a “want” and not a “need.”

For example, if you like to entertain, but you find a house you like with a small galley kitchen, would you still consider making an offer?

3. Pick a Realtor to help you with your home search. Shortcut your search by researching useful info on the Internet, but nothing compares to working with a Realtor who guides you through the maze of details involved in purchasing your first home.

4. Find a Realtor who understands your local market. Every state has unique contract and title issues. Real estate attorneys can help you understand contract issues, but they won’t attend the building inspection with you or join you for the final walk-through. Without a Realtor, you’re on your own to sort through these details. Your inexperience can be very costly if anything is overlooked.

5. Identify properties that are in your price range

6. Shop for a lender and obtain pre-approval so you’re taken seriously when you submit an offer. A lender helps you sort through all the financing options. Once you’ve decided how much you can afford and which type of loan is best for you, call several lenders to compare rates and closing cost fees.

7. Negotiate each term of the contract

8. Know what you can afford before you start looking. Establish a budget and how much monthly mortgage you can afford, including real estate taxes and homeowner’s insurance.

9. Figure out how much you need for a down payment–and don’t forget to factor in $3000-4000 for closing costs. (If you don’t have the money for closing costs, you might be able to have the seller pay them…ask your lender or Realtor how this can be arranged.)

10. Pick a well known bank or mortgage company with a brick and mortar building in your town to be your lender. A lender must meet every deadline (such as the appraisal deadline) and actually show up on closing day with money. Low rates are not the only consideration.

11. Be prepared to write an earnest money check when you make an offer on a home. Earnest money shows ‘good faith,’ but it’s money you forfeit if you breach the contract. St. Louis-area sellers expect 1-2% of the sale price in earnest money which is applied toward your down payment and closing costs and will be subtracted from what you owe on closing day.

12. Shop for the best homeowners insurance rates. You’ll be expected to pay for one year of homeowner’s insurance upfront no later than closing day. Consider getting homeowner’s and car insurance from the same company…you’ll get a discount.

13. Ask for a home protection plan in your contract. A home protection plan can protect you from unexpected repair bills during your first year of home ownership.

Welcome to your new home. Becoming a first-time homeowner is exciting, so enjoy the process, despite all the details. You’ll feel a great sense of accomplishment when you’re handed the keys.

Karen Goodman is a Realtor© serving the St. Louis metro area. Her website focuses on information for homeowners, buyers, sellers and St. Louis residents, and features the latest housing market reports and MLS homes for sale in the area.