Tips For First-Time Homebuyers » Considering Your Options » Shopping And Buying » What to Expect the First Year » First-time Refinancers or Sellers

Shopping and Buying

Don’t become a victim of the first-time homebuyer’s blues. Use the information provided below to help as you buy your first home.

Get Pre-qualified

Getting pre-qualified for a mortgage loan shows you where you stand financially. A pre-qualification is based on your current income, debt and savings. Pre-qualifying is used to estimate the monthly house payment you can afford; it does not guarantee you a loan. Getting pre-qualified is an extremely useful and important step to take as you begin the mortgage process.

If you’d like to get pre-qualified now, visit our online Pre-qualification tool. There’s no obligation, and it’s safe and secure.

Choosing a Mortgage

There are many different types of loan programs available, and these fall into one of two categories of loan: fixed-rate and adjustable-rate.

Fixed-Rate Mortgages: A standard fixed-rate loan has a fixed interest rate, a fixed monthly payment and is fully amortizing--that is, you pay off the loan completely--over a given number of years (for example, 15 or 30 years). A portion of each monthly payment covers the interest on the loan. Another portion reduces the principal balance. Regular payments systematically whittle down the amount you owe until the loan is paid in full.

Adjustable-Rate Mortgages: Adjustable rate mortgages (ARMs) have interest rates that go up or down with the economy, which could change your payment amounts from year to year. ARMs help lenders cover the cost of lending money in a changing economy by transferring a portion of the interest rate risk to you. In exchange for sharing the risk, you’re offered an initial interest rate that’s often substantially lower than the interest on fixed-rate loans.

For an informative preview of the most common types of loans available from Freedom Mortgage, view our Finding the Right Mortgage comparison chart.

Avoiding Common Mistakes

First-time homebuyers are both inexperienced and eager to get going, and sometimes that combination creates mistakes. To help avoid the most common mistakes, read through the list below.

• Buying too fast. While it’s understandable that buying your first house is exciting, be patient. If you enter into a contract on a house that seems wrong for you, in most cases you’re stuck with it. Know what you want and try to find the closest thing.
• Buying too much house. If you buy a house that’s more than you need or can afford, you’ll find it difficult to afford furnishings, home improvements and the inevitable emergency repairs. Buying above your means also creates unnecessary stress within the family.
• Choosing a mortgage without comparison shopping. There are countless types of mortgages available today, and it is well worth your time to figure out which type of mortgage will best suit your finances.
• Unwilling to compromise. Almost no homeowners find a house with 100% of the things they want. It’s OK to compromise—especially on the small things that can be changed later on. Make a list of the things you won’t give up and accept some compromise on the rest.
• Skimping on the inspection. You can never predict when a real, professional inspection might end up saving you thousands of dollars and years of homeowning headaches. Why take the chance?

The Right House

Before you look at a single house, be clear in your own mind about what type of house you want, and in where you want the house to be. It will save you the endless visits to the “wrong” houses, and could even prevent you from realizing too late that you bought the wrong house.

Create a list of the most important things you’re looking for in a house. Do you like to fix your car on weekends? Make sure you look only at houses with a garage. Do you often host dinner parties? Make the quality of kitchen and size of the dining room a priority. Do you have children who’ll be attending public school? Investigate the neighborhoods with the best schools.

Only you know what’s important in your life. Keep those requirements in mind as you shop for a house so you can buy a home that will serve your needs for years to come.

Smart Negotiating

There’s one key quality that will make you a better negotiator: preparation. Once you decide that you’d like to make an offer on a house, you should know as much as you can about the neighborhood and the house itself.

Real estate agents have access to a listing called the Comparable Market Analyses (CMA). CMAs show the recent selling prices of properties similar to the one in which you’re interested. This information is priceless to the purchaser during the negotiating process. Please note: If you don’t work with a real estate agent to find a house, you may not have access to a CMA.

If at all possible, try to find out what’s motivating the sellers to sell. The reason may help you decide if you should negotiate aggressively.

Finally, be realistic. You may create unnecessary tension or even rejection if your first offer is too low and unrealistic. You may lose your chance to negotiate altogether.

The Closing

Closing is the final step in the home buying process. At the closing, you’ll settle all the financial details associated with the purchase and receive the title to your new home. There’s not a standard closing process that’s followed in all areas of the country. Most closings are conducted by a closing officer of a title company. The closing officer makes sure all necessary documents are signed and verified and that the money from the sale is properly distributed.

After you’ve signed all the necessary documents and paid your closing costs and down payment, the closing is finished and you can start enjoying the benefits of homeownership. Congratulations!