Here are the basic tactics for getting a high credit score:
1. Always pay your bills on time.
2. Keep your credit card balances at zero, or at least very low.
3. Make more than the minimum monthly payments.
4. Negotiate to remove negative items from your credit report.
5. Borrow great credit from a relative or close friend.
3. Save for a down payment & closing costs.
When buying your first home, you'll need some money for a down
payment as well as closing costs. This applies to previous home owners as well
as first time home buyers. Lenders want to see that borrowers have a vested
interest in the property. If you've put your own money into the property, you
will be less likely to walk away from the property leaving the lender to clean
up the financial mess. Additionally, if the lender does have to repossess the
property, even though the property will be selling at a discount due to
distressed circumstances, the lender should still recoup its losses. Your down
payment is a safety cushion for the lender between what the house would sell for
at auction and what is owed on the property.
It is very important to start saving immediately. Set aside a
certain amount every pay period and stick to it. Learn to live on what remains. Also, nearly all states have created agencies and programs for first time buyers, and
provide state funding through those agencies. We include specific contact information for those agencies as well as descriptions of the progrmas offered. As a first time buyer,
it is very likely that you could get down payment help from an agency in your state. Please see our page
Home Buyer Programs for a state by state directory of contact information and descriptions of the various state programs that are offered.
4. Keep detailed records of money spent.
First time home buyers (and everyone else for that matter!)
should develop a sound budget. To gain control of your money and how you spend
it we recommend that you keep track of every single purchase, no matter how
small, for a period of one month. At the end of this period, categorize this
information to see the exact breakdown of where your money is spent. With this
information you'll be able to easily see where there is room for improvement in
your budget. The important point to stress here is to live within your means.
Live frugally. The more frivolous spending that you eliminate from your budget, the
more you'll be able to save. And the more you save, the quicker you'll
reach your goal of becoming a first time home buyer.
5. Develop a financial plan.
When constructing a house, builders use a set of blueprints as a
detailed plan they follow to accomplish the goal. In like manner, first time home
buyers need a financial plan to follow in order to achieve the goal: buying your
first house and moving in. To buy that first house you should set a goal of
saving 20% of the purchase price to use as the down payment. There are programs
that will allow you to put less than 20% down, including mortgage insurance
where you can purchase a home with a down payment of 5% or less.
We cannot stress enough that the first time buyer needs to
develop a financial plan and stick to it. -
6. Establish a relationship with an agent.
Any potential first time home buyer would benefit greatly by early on
establishing a relationship with a real estate broker that specializes in
working with first time home buyers. As with any profession, the range of
expertise will vary from agent to agent. Shop around until you find one that you
are satisfied with. Remember to inform each prospective agent that you are a
first time home buyer, as many agents have their specialties. Some agents like
to work only with real estate investors. While some prefer to specialize in
waterfront property. By declaring up front that you are a first time home buyer,
you won't be wasting time trying to develop a working relationship with an agent
that specializes in commercial property.
Your agent will be your link to all the property in your area
that is currently for sale. Agents can provide a treasure trove of information
on the entire buying and selling process, including local sources of
payment assistance. As a first time home buyer, you
definitely want the help of a professional agent.
7. Study market values.
When buying your first home, you will not want to pay more for a house than the
house is worth. Along the same line, you will likely want to find a great deal.
The only way to find a great deal is to study the market values in your area.
Over time you'll development a mental database of comparable properties and get
a sense for which properties are overpriced and which ones are under priced. Your
first home will likely not be your last. The average American sells her home and
moves into another every 7 years. As a first time home buyer, you will benefit
greatly when it is time to sell if you purchased a home for less than what it is
worth. This instant equity that you received upon the purchase will boost the
profit and cash to you when it is time to sell.
When you get further along in the process of buying your first
home, and you've found a home that you want to make an offer on (step 13), we
highly recommend that you get an instant appraisal. The cost for a full appraisal is $29.95 and for a simple comparison it is $9.95.
This is thirty dollars well spent in our opinion. Having an unbiased statement of value before you make an offer will arm you with useful facts to
use in the negotiation process and prevent you from spending more than your
first home is worth.
8. Get Pre-approved for a mortgage.
Not all lenders are created equal: some will be very efficient
and helpful in dealing with the first time home buyer, and some will not. However,
getting pre-approved for a mortgage is an important step in the first time home
buying process. With a pre-approval, your offer will carry more clout with the
seller, and you'll be in a position to close on the purchase more quickly. This
is important to many sellers. Offering a quick closing is also a powerful tactic
in negotiating a discount off the purchase price.
9. Decide your needs and wants within your budget.
Builders, brokers, and bankers all know that the
typical first time home
buyer has a tendency to be overly enthusiastic; they've all seen it
repeatedly. As a first time home buyer, you'll need to be aware of this
temptation and really focus on making choices that fit within your budget.
Everyone would like 5 bedrooms and 5 baths in their first home, but not everyone
can afford such luxuries. When you buy your first home, you'll be taking on a
major financial commitment. There will be lots of incidental expenditures. As a
first time home buyer, those incidental costs can really add up and strain your
budget. Be careful not to overspend on the house that you choose.
It is important to spend ample time on steps 4, 5, and 8. These
steps will help you know and understand your budget. Once you know your budget
and the price range of homes your budget will allow, you'll be able to shop for
the right home. Again, avoid the trap that most first time home buyers fall
into: don't stretch your budget beyond what it can handle.
10. Shop for the right home.
With the exception of moving in, shopping for the right home will
likely be the most exciting step for first time home buyers. By this time you
should have already established a working relationship with a real estate agent
that specializes in working with the first time home buyer. You should already know
your budget and how much you can afford to spend on your first home. At this
point you'll need to narrow all this information into a specific format for your
agent to use to suggest certain homes to visit. Start with the price range. Let
your agent know how much you are qualified to spend. Then list amenities that
you desire such as number of bedrooms, and additional items such as a deck,
fireplace, whirlpool tub, etc. If you are hoping to purchase your first home in
a certain area, or within a certain distance from work, let you agent know that
The more information that you give to your agent, the more time
can be saved by everyone. Your first home may not have everything included that
you could possibly want, so decide which items are negotiable, and which aren't.
Let your agent know. The more homes that you visit, the more knowledge you'll
develop regarding property values in your area, and which homes you like and
which homes you don't in your price range. However, being a first time home
buyer, you'll need to understand that your agent gets paid on commission
(usually paid for by the seller). Therefore, your agent will not want to spend
the next 3 years showing you 500 different properties without you actually
making a purchase. Likewise, you would not want the agent simply showing you one
home in your price range then pressuring you to make an offer.
An ideal world for the agent would be one sale for each time she
shows a home. On the other side of that same coin, an ideal world for the first time
home buyer would be the opportunity to look at several hundred homes or more
before ever making an offer. The ideal world doesn't exist for either the agent
or the first time home buyer. Reality will be somewhere in between. You'll want
to look at a reasonable selection of homes in your price range. That will be a
good compromise for both the agent and the first time home buyer.
11. Learn about the elements and terms of a sales contract.
As a first time home buyer, by definition you've never been a
party to a real estate purchase and sale agreement. You'll need to do some
studying to learn the elements and terms of a sales contract. Here is a short
list of the basic elements of a real estate contract:
Acceptance: How much time the seller has to either accept the
offer or to provide a counter-offer.
Closing: A future date by which time the
closing will take place.
Description: A legal description of the property as well as the
Deposit: How much initial money is included with the
contract and who will hold it.
Financing Contingency: A clause that states
the entire contract is subject to the purchaser being able to obtain a mortgage
loan of X amount, by a certain date. First time home buyers should make sure
their agent includes this clause in the contract.
Home Inspection: The
contract can be contingent upon a satisfactory home inspection to be done by a
qualified professional within X number of days.
Inclusions and Exclusions:
Some items in a home are not considered part of the real estate, but are instead
personal property. Refrigerators and washing machines fit this category. This
clause should state exactly what is included in the sale, and what isn't.
Insurance: Who will insure the property until closing.
Price: The amount of money the buyer will be paying to the seller.
Date: The date on which the buyer will receive possession of the property.
12. Choose the right neighborhood.
It seems quite ironic that you should be thinking of selling your
house before you even buy your first home. But that is exactly what every first time
home buyer should do! There will come a time when you'll want or need to sell
your home. This may come out of a desire to upgrade your home, or maybe due to a
job relocation to another city. If you choose the right neighborhood when you
purchase your first home, you'll be rewarded with a higher value home that will
be easier to sell.
After you have determined the right city, for example
cape cod real estate or a bungalow in San Jose. Some items that a first time home buyer should look for when searching for a great neighborhood are: 1. Located in a good school district. Is there a particular school in your area that is a recognized favorite? If so,
you'll want to buy a home in that district. If this school appeals to you as a
first time home buyer, it will also appeal to the next first time home buyer who
comes along and wants to purchase your home from you in the future. 2. Is the
area improving or in decline? You'll want to consider that point carefully.
While an area may be acceptable to you now, if it is in a state of decline, by
the time you are ready to sell, the next first time home buyer may not find the
area acceptable. 3. Is the area close to many popular attractions? Being located
next to parks, beaches, lakes, mountains, and wilderness is important to both
the first time home buyer as well as the seasoned homeowner. Choose an area that
is convenient to popular locations. 4. Choose your neighbors carefully. If there
is an obnoxious neighbor right next door to the first home you plan to purchase,
think twice about it. Nobody wants to live next to an eyesore, nor do they want
to be kept up all night by loud, uncontrolled behavior from their neighbor. Do
your homework. Knock on doors if you have to. Find out what the neighbors are
like. If you follow these steps, you'll be a happy first time home buyer instead
of a disappointed one.
13. Submit your offer.
After completing the first dozen steps in this guide, the first time home buyer can
confidently submit an offer. If you've followed these steps up to this
point, you are well armed with the necessary info to purchase your first home.
Making your offer is an art, not a science. Dozens of books have been written
explaining techniques and methods of successful negotiation. Here are some basic
1. Know the seller. It goes
without saying that you want to purchase the house for as little as possible,
and the seller wants to sell the house for as much as possible. Somewhere in
between is the settlement range. Try to find out what the seller wants besides a
high price? A quick closing, or a delayed one? Does the home need some work like
new carpet, new siding or windows? Does the seller want to get this work done,
or would she rather not deal with the hassle? The more info you can gather, the
better position you are in to negotiate a win/win situation.
2. Determine what would be the best case and worst case
scenarios. Once you've done this, decide how much risk is involved. How bad do
you want this house? Are you willing to loose the deal to try to get your best
case scenario? Only you can answer that question.
3. Be professional at all times. The best negotiators remain
emotionally neutral throughout the negotiation process. By doing so, it is much
easier to remain professional. If you are insulted or upset during the
negotiation process, you'll likely make decisions based upon your elevated
emotions, rather than logic. Rarely will emotional decisions be correct. Try
your best to remain unemotional. This is particularly difficult for a first time
home buyer, as buying your first home is a very, very emotional event. However,
the more professional you are, the more likely you are to succeed in your
14. Arrange for a home inspection.
Even experienced real estate investors will depend on a qualified
home inspector. This should be doubly true for the first time home buyer.
Qualified home inspectors will examine in detail such items as roofing, heating
and air conditioning systems, structural integrity, siding, windows, plumbing
and electrical systems. Deficiencies in any of these components will be brought
to your attention in a detailed written report. We highly recommend that every
first time home buyer consult with a qualified home inspector. You should make
your offer contingent upon a satisfactory report.
15. Arrange for homeowners insurance.
All real estate owners should have homeowners insurance, and
the soon-to-be first time home buyer is included in this group. We recommend the
helpful, friendly staff of Insure Me.
16. Make your moving plans.
Congratulations! You are about to become a
first time home
buyer! You are now ready to make your moving plans. The easiest,
but most expensive option is to hire a professional moving company. Your agent
can probably recommend a few good movers. However, if you want to save several
thousand dollars, Gather a group of friends and have a moving party. You and a
dozen friends can really make short work of moving.
That's it. You are now ready to enjoy the fruits of your labor and planning.
We wish you many years of enjoyment in your first new home!
First Time Home Buyer Grant information can be
found at Wikipedia.
Click here for a
Real Estate & Financing Terms
First Time Home Buyer Programs and Resources in Your
First Time Home Buyer News, January, 8, 2013