Tips for First-Time Homebuyers

Home-price adjustments in markets around the country have opened doors of opportunity for many renters. If you are transitioning from renter to homeowner, the prospect of making such a large investment may be exciting, while at the same time overwhelming. But it doesn’t have to be. Here are six common mistakes to avoid.

1. Not understanding the homebuying process. Educate yourself. Find a homebuyer seminar that you can attend or research online. The U.S. Department of Housing and Urban Development Web site (www.hud.gov) has an entire section devoted to homebuyers with common questions of first-time homebuyers, mortgage and home-buying programs information, downloadable tools such as a wish list and home-shopping checklist, tips on selecting a real estate professional, etc.

2. Not asking questions. There are many facets and intricacies to the homebuying process, so although you may gain a basic knowledge, you will still have questions. Don’t hesitate to let your real estate professional know that you are new to the process. Make sure you choose a sales professional who is willing to spend time with you and walk you through the entire process. He or she will expect you to have questions at each step—from house hunting, to making an offer to the closing. Remember, this is one of the largest financial transactions of your life, so you want to have a clear understanding of what’s going on.

3. Buying on impulse. Don’t feel pressured into making an offer on the first home you see. Buyers, especially first-timers, may be impressed by the first two or three homes they view. Look at a good selection. List the positives and negatives about each home. Narrow the prospects to three or four and then return for a closer look. When you decide to make a bid on a property, work with your real estate professional to get all of your questions answered before making an offer. But don’t wait too long to make an offer. The longer you wait, the greater the chance other prospective buyers may place offers, making it harder for you to negotiate a good deal.

4. Looking outside your price range. Before beginning your home search, consider getting pre-qualified to so get an idea of how much you may be able to borrow. Use this information as a starting point in determining your price range. Then take into consideration other factors that will affect your monthly budget once you are a homeowner, such as property taxes, homeowners insurance, utilities, private mortgage insurance (PMI) and maintenance.

5. Not planning ahead. Think about personal changes you are planning in the next five to seven years. For instance, are you starting a family, and if so, is the home large enough and will it continue to be? If this will be a starter home or if you think you’ll be relocating in a few year, you’ll probably want to pay closer attention to appreciation and resale value. If a double-income is necessary to qualify for financing and to make your payments, do your plans foresee an income sufficient to continue making payments?

6. Failure to focus on location. Don’t just focus on the house. Examine the community. Does it suit your lifestyle? Is the area safe, well-maintained, close to work, stores and schools? Find out about zoning and what new construction is planned on vacant land in the immediate area. Also consider the property marketability when it’s time to sell.

Above all, remember knowledge is key. No question is a silly question. Your real estate professional can be an invaluable asset throughout the process. Making smart home buying decisions will make the home-buying process less scary and your first home purchase a rewarding experience.

Your Good Faith Estimate

Once you and your lender has established a loan program that fits you, it’s time for him/her to get the ball rolling on processing it. You will need to submit a loan application for your lender to properly start the process. Within three days of taking your loan application, your lender is required by The Real Estate Settlement Procedures Act (RESPA) to prepare a Good Faith Estimate of your closing costs. A good faith estimate is a lender’s best approximation of your closing costs.

Closing costs are extra costs needed to sufficiently close your new home purchase. Costs include, lender fees, escrow fees, title fees, taxes, insurance, possibly your first month’s mortgage payment and some other fees. Both buyer and seller have different costs that need to be paid. Specific costs are normal for each. Some of the buyer costs can be shifted to the seller when negotiated in the contract by a professional realtor. The actual closing costs are presented to the buyer and the seller at closing on the HUD-1 Settlement Statement.

The Good Faith Estimate from your lender is often a range of charges which are the lender’s best approximation of the lending fees. Each lender has a different system and therefore different lending fees. The Good Faith Estimate lets you know approximately how much money you will need to close for the loan.

Green Tip

Did you know that the average household receives 1.5 trees’ worth of junk mail annually? If you’ve ever wondered, as you tossed the unsolicited catalogs and direct mail materials directly into the recycling bin, if there is a way to stop this waste of paper, fuel, printing, etc., there is. Simply log onto https://www.directmail.com/directory/mail_preference and opt out of direct mail lists at no cost.

The Real Estate Market

The real estate market IS an Emotional Roller Coaster. In general, the market has its ups and downs. Smart money investors and buyers invest in real estate all the time, but their timing is very crucial.

The chart depicts an average cycle of how the real estate market works. Reading from left to right, Optimism depicts a flat market. This type of market can be related to around the year 2000. The housing market was fairly average, homes were selling and prices were staying even (no decrease or increase). If buyers purchased at this time, there was a slight possibility of making money in the future.

But this is where the problem starts. Most buyers assume that when everybody is starting to buy, then it must be a good time in general to buy homes. This drives the prices up and causes a decrease in inventory. You can see people getting Excited and Thrilled about the market. All this excitement eventually has to come to a peak. At Euphoria you can see that the market has reached a plateau. This type of market can be related to around the year 2005 when we reached the height the our market. Buyers who purchased during this time have taken a terrible risk. If they plan on selling in the near future it is almost certain that they will be losing money.

The cycle takes a dramatic fall. Prices are starting to decrease and the number of homes for sale start to increase. For the most part, buyers start to feel Nervous, Fear, Panic and Despair. This type of market relates to the beginning of 2006. Since then, our market has been steadily decreasing in price. With the steady decrease in prices, buyers feel that if they had purchased between 2006 and now, they could possibly lose more money before the market turns around again.

Currently, 2008, we are getting very close to the Depression, the lowest point in our market. Where most buyers are feeling Despair about losing money, smart money investors know that this is absolutely the best time and opportunity to purchase real estate. Prices are low, inventory is high and the real estate market can only go back up.

The question we get asked all the time, “How do you know when we have hit bottom?” The simply answer is, you don’t! The only way we can tell we have hit bottom is when we are four months to a year down the road and the number of sales increase, inventory decreases and prices start to rise again. But by then, it will be too late!!! The Depression will have passed and the market will already have moved on to Hope and then eventually back to Optimism where it will start all over.

Smart money is investing now! The only way you’ll know when we have hit bottom, is when the market passes you on the way back up!

The Role of Your Lender

The role of your lender is an important part of the home-buying process. Among counselling you on various loan programs, formulating the best loan for you and dictating what price range of homes you should be looking at, they also need to be readily available when it comes time to make an offer. Your lender should also be someone you trust and can be up front with. Sharing your goals and being as accurate as possibly with your financial history/income will help the loan process go smoothly.

There are many factors that your lender weighs when considering the right loan for you. The major factors are how much money you have saved, how much debt you owe, your current income, and your credit (FICO) score. Other considerations that might influence your lender could be the likelihood of a significant change in your income, future financial goals, your ability and willingness to save, your spending habits, and how long you have worked at your current job.

Your lender provides the pathway to your mortgage by packaging information to showcase you to the underwriter. If your credit is tarnished, we along wth your lender, can help you clear it up. If your credit has been damaged, we can work with you to design a repair strategy and obtain a mortgage at a later time.

Westlake Village Average Price – May ’08

This is a comparison of average prices for the area of Westlake Village, CA, between 2007 and 2008.

Westlake Village
May 2008 List Price Sold Price Diff. LP/Sp % DOM
  $934,402 $892,199 -4.52% 98
May 2007 List Price Sold Price Diff. LP/Sp % DOM
  $1,293,529 $1,235,853 -4.46% 94
Diff. ’08/’07 % List Price Sold Price   DOM
  -27.76% -27.80%   4.25%

All information is gathered from the Ventura County MLS and is deemed reliable but not always accurate.

Thousand Oaks (West) Average Price – May ’08

This is a comparison of average prices for the area of Thousand Oaks (West), CA, between 2007 and 2008.

Thousand Oaks (West)
May 2008 List Price Sold Price Diff. LP/Sp % DOM
  $588,190 $566,188 -3.74% 86
May 2007 List Price Sold Price Diff. LP/Sp % DOM
  $559,688 $575,000 -2.66% 72
Diff. ’08/’07 % List Price Sold Price   DOM
  5.09% -1.53%   19.44%

All information is gathered from the Ventura County MLS and is deemed reliable but not always accurate.

Thousand Oaks (East) Average Price – May ’08

This is a comparison of average prices for the area of Thousand Oaks (East), CA, between 2007 and 2008.

Thousand Oaks (East)
May 2008 List Price Sold Price Diff. LP/Sp % DOM
  $663,975 $641,111 -3.44% 101
May 2007 List Price Sold Price Diff. LP/Sp % DOM
  $720,341 $707,407 -1.8% 73
Diff. ’08/’07 % List Price Sold Price   DOM
  -7.82% -9.37%   38.36%

All information is gathered from the Ventura County MLS and is deemed reliable but not always accurate.

Newbury Park Average Price – May ’08

This is a comparison of average prices for the area of Newbury Park, CA, between 2007 and 2008.

Newbury Park
May 2008 List Price Sold Price Diff. LP/Sp % DOM
  $769,865 $733,935 -4.67% 101
May 2007 List Price Sold Price Diff. LP/Sp % DOM
  $821,978 $801,064 -2.54% 57
Diff. ’08/’07 % List Price Sold Price   DOM
  -6.33% -8.38%   77.19%

All information is gathered from the Ventura County MLS and is deemed reliable but not always accurate.

Agoura Hills Average Price – May ’08

This is a comparison of average prices for the area of Agoura Hills, CA, between 2007 and 2008.

Agoura Hills
May 2008 List Price Sold Price Diff. LP/Sp % DOM
  $634,494 $609,170 -3.99% 79
May 2007 List Price Sold Price Diff. LP/Sp % DOM
  $745,261 $725,168 -2.7% 58
Diff. ’08/’07 % List Price Sold Price   DOM
  -14.86% -16%   36%

All information is gathered from the Ventura County MLS and is deemed reliable but not always accurate.