Americans scouting for home find competitive, confusing market
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.
With the spring homebuying season in full swing (March through June are the year's four busiest months), here are some tips for first-time homebuyers:
• Determine what you can afford. The first step is to meet with a lender, review your finances and find out how much you can afford to spend on a home and how much you have for your down payment.
Experts warn 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. “Are you comfortable with those mortgage payments? Are you going to be house-rich and life-poor?”
• 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 they need guidance. It's like wearing a sign: “Charge me more.”
It's better to do your research first, she said.
“Read a good book or two,” she said.
• Shop for a mortgage. Don't use whatever lender your agent recommends without doing some independent shopping.
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.
• Check for down-payment assistance. Before you shop, check to see if you qualify for one of the down-payment assistance programs.
“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.”
• Get pre-approved. Getting a lender to pre-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.
Go to AnnualCreditReport.com to get your free credit reports from all three major credit agencies. Experts recommend you contact Trans-Union, Equifax or Experian and pay $8 to $10 to get your credit score as well. Follow the steps for correcting errors or repairing your credit.
• 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.
“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.”