10 tips for first-time homebuyers

THE ORANGE COUNTY REGISTERApril 11, 2014 

With two daughters and a baby on the way, Carlos and Cinthya Jijon decided last year to buy a house for about the same monthly cost as a bigger apartment. But they couldn't find a home.

Supply was tight. And investors armed with fistfuls of cash outbid them every time.

Today, however, the Jijons are unpacking, settling into a one-story house in Buena Park, Calif. The auto parts deliveryman and the nurse made the transition from renters to first-time homebuyers.

The market is tough for first-timers such as the Jijons.

Statistics show that the number of first-time buyers is falling. A California Association of Realtors survey showed, for example, that about half as many first-timers bought houses in 2013 as in 2009.

But the Jijons persevered, taking an eight-hour homebuying course, learning about cash assistance programs, and getting loads of practical advice. They beat the odds, and they showed that it's possible to do so.

With the spring homebuying season now in full swing (March through June are the year's four busiest months), here are 10 tips for first-time homebuyers:

1. DETERMINE WHAT YOU CAN AFFORD

The first step is to meet with a lender, review your finances, and find out your budget and how much you have for your down payment.

"If they only qualify for a $300,000 house, they shouldn't be wasting their time looking at a $500,000 house," said Maritza Reyna, education manager for the Consumer Credit Counseling Service of Orange County, Calif.

Experts warn also not to shop for the most expensive home you qualify for, unless you truly can live with the payment that comes with it.

"Banks stretch," said Robert Ortola, an Orange County agent with Keller Williams Newport Estates and a speaker in an eight-hour Homebuyer Education course offered by the CCCS.

"It doesn't matter how much the banker will tell you you can afford," Ortola said. "Are you comfortable with those mortgage payments? Are you going to be house-rich and life-poor?"

2. TAKE A CLASS, READ A BOOK

One of the most common mistakes novices make, according to former loan processor and author Carolyn Warren, is to blab to an agent that this is their first time and that they really need his or her guidance. It's like wearing a sign: "Charge me more."

"You're saying to them upfront, I don't know what I'm doing. I'm uneducated," said Warren, author of "Homebuyer Beware" and another book on mortgage rip-offs.

It's better to do your research first, she said.

"Read a good book or two," she said.

3. SHOP FOR A MORTGAGE

Don't use whatever lender your agent recommends without doing some independent perusal.

Another classic mistake: calling 10 lenders and asking for their interest rates. A lender can't be held to those quotes, so "it's just going to lead you to the smoothest-talking liar," Warren said.

It's better to look up mortgage rates online, then call three or four lenders and mortgage brokers and ask them for a written list showing their fees.

"The lowest rate is no good if you're paying too much in fees," Warren said.

4. CHECK ON ASSISTANCE WITH DOWN PAYMENT

Before you shop, check to see whether you qualify.

"Don't assume your income is too high," said Karla Lopez del Rio of NeighborWorks Orange County, a housing assistance agency approved by the Department of Housing and Urban Development.

"These special programs, no one's going to tell you about it if you don't seek it out."

5. GET APPROVED

Getting a lender to approve a loan before you shop can make your offers more attractive, while avoiding deals falling apart because loans don't get approved during escrow.

Get required documentation for the loan process -W2s, tax returns, pay stubs, bank account statements. Find out from your lender exactly what you'll need to make it a smooth process.

And go to AnnualCreditReport.com to get your free credit reports from all three major credit agencies. Experts recommend you contact TransUnion, Equifax or Experian and pay $8 to $10 to get your credit score as well. (You don't have to subscribe to their monthly monitoring or other services.)

Follow the steps for correcting errors or repairing your credit.

6. PICK AN AGENT WHO'S RIGHT FOR YOU

Get referrals for agents from friends and family, then talk to each one. Look for someone with whom you can communicate.

"Interview them a few times," Ortola said. "You have to see how they communicate and how knowledgeable they are."

"Keep in mind that they work for you," added Reyna, the education manager for the Consumer Credit Counseling Service. "If you're not happy with that Realtor, you can fire them."

7. FIND A HOME YOU CAN AFFORD

Real estate columnist Ilyce Glink suggests making a wish list of where you want to live and what you want to have in your home.

But don't fall so in love with a particular home that you don't see its flaws, experts say. Move on if the asking price is unrealistic or the seller is unreasonable. Or if the bidding rises beyond your budget.

8. SCOPE OUT THE NEIGHBORHOOD

Your agent likely can provide local school ratings and area demographics. You can get crime reports from local police departments or their websites.

Then walk and drive the neighborhood, returning at different times of the day and different days of the week. Visit local supermarkets to see who goes there.

And talk to the neighbors. That's the only way to learn about the neighbor from hell, the incessantly barking dog or whether trains blow their whistles nearby.

9. MAKE A REALISTIC OFFER

Ortola advises first-time buyers to find out what comparable homes sold for, learn the true value of the property and make a realistic offer. A good agent will be diplomatic but honest if your offer is too low.

"In a seller's market, the buyer doesn't have negotiating power," Ortola said. "There still are cash offers out there. You might have to make 10 offers before you buy a house."

If the home is priced right, bid the asking price - or a little over, Ortola said.

You might, however, run into trouble getting a loan if your offer is higher than the lender's appraised value of the home. Lenders won't approve the loan if the appraisal is less than the loan amount.

10. FIND A GOOD HOME INSPECTOR

Talk to two or three inspectors rather than blindly accepting one your agent recommends. Get referrals from family and trusted friends to make sure you find someone working for your best interest and who isn't trying to help his or her friend, the agent, close the deal.

"A bad inspector can turn into a $15,000 plumbing problem," Lopez del Rio said.

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