Experts offer advice to potential first-time homebuyers

With a hot housing market, historically low mortgage rates and special programs incentivizing first-time buyers, experts say now is a good time to consider buying a home. But the process can be a bit overwhelming if you've never done it before.

'I often hear three major fears (from first-time buyers),' said Skogman Realtor Margie Jenkins. 'That they're either going to pay too much, might miss something or don't want to buy a lemon. ... It's a huge investment, they don't want to make a bad choice.'

To help ease some of the pressure, experts offer a few tips to get started.

DO YOUR RESEARCH

The first thing to do is ask yourself some important questions: Is homeownership right for you? What does your budget look like? What can you afford? Have you researched the market? Do you know where you'd like to live and in what kind of property? These questions and more can point you in the right direction.

PRE-QUALIFY

Before looking at homes — and inevitably falling in love with one — most experts advise meeting with a mortgage lender to make sure you're qualified — especially in a market where a home could be sold in a matter of days.

If you want to make an offer on a home, it's best to have your preapproval letter in hand, especially when you might be competing with other offers, said Nathan Seyfer, a University of Iowa Credit Union mortgage loan officer.

'If you find that perfect house, you'll be able to jump faster if you take that initial step to get your finances down,' he said. 'The preapproval letter is kind of your golden ticket for agents to take your offer seriously. By having your homework done, you have a leg up on other offers on the table.'

To get that letter, a lender will need to see 30 days of pay stubs, the last two years of tax returns and W-2s, two months of checking, savings and investment statements and your credit score.

In addition to helping you get qualified, loan officers also can help you figure out what you can realistically afford, which Seyfer said is often 'more than they realize.'

With rates around 4 percent on a 30-year fixed mortgage, 'you can afford more home now,' he said. 'You have more buying power and get more bang for your buck.'

If you don't qualify, perhaps due to debt-to-income ratio or a low credit score — a credit score needs to be in the mid 600s to qualify — a loan officer may be able to help get you where you need to be financially, or point you to another professional to help, such as a credit restoration company.

'Lots of things play into that (credit) score,' said Kathy Heggabo, director of inside sales at Heartland Credit Restoration.

'A lot of people have student loan issues, medical bills, cellphone or Mediacom bills — never knowing exactly who has their bills or where they're supposed to pay or what's going on — even identity theft things,' she said. 'Those are the kinds of things we clean up. ... Some really good people get behind and we just have to get them back on track.'

On average it takes Heartland six months to 'clean up' someone's credit and get them the best possible rates, which is why learning your credit score should be something you're doing early on, before getting too attached to a home.

FIND A REALTOR

If you are financially ready, have answered some basic questions and come up with a wish list, meeting with a real estate agent may be the next best step.

It is possible to buy a home without an agent, but hiring a professional will take some of the pressure off and help guide you through the process, especially considering a Realtor's services are free until you buy or sell a home, Jenkins said.

An agent's professional expertise and access to additional resources can help narrow your search, point you to other industry professionals, help you negotiate, understand legal terms and eventually close on your home, among other things.

'We're here to help take away some of the pressure and anxiety,' Jenkins said. 'Some people feel like Realtors are just after the sale, but really we want you to be happy in the long run so you come back to us for your next house or refer your friends.'

SPECIAL PROGRAMS

Another thing to do before buying is researching special programs that you may qualify for.

For example, Cedar Rapids offers a First Time Home Buyer Program that gives qualified buyers up to $5,000 to put toward a down payment or closing costs. In order to receive the federal aid, buyers must be purchasing a home for the first time and meet the income, property and mortgage requirements, as well as take a HUD-approved homebuyer education course.

'There are a lot of different studies and validated planning documents that most people can afford to pay for the monthly amount of a home, but it's the down payment that prevents a lot of people from purchasing a home or delays them from being able to do so,' said Jennifer Barton, the city's homeownership program coordinator.

'For some folks it's just not realistic to be able to save up that much money in a realistic amount of time,' she added.

This year the program was given enough funds to support 15 to 16 applicants, which already are mostly filled up, Barton said. However, additional spots will open again in the fall.

GET IT INSPECTED

Although it is not required by law in Iowa to have your home inspected before purchase, it is highly recommended by most professionals to do so to make sure everything is up to snuff.

'You're going to spend a lot of money (on a home), so paying someone $250 to do a home inspection is a very inexpensive insurance policy and gives buyers a chance to negotiate on the front end that could save them thousands of dollars,' said Allen Witt, owner of Trusted Inspect.

When deciding who to hire, don't look at price only, Witt advised. Instead, look at an inspector's qualifications, certifications and ask for referrals. Doing a search on the Better Business Bureau and the American Society of Home Inspectors website can ensure inspectors 'adhere to certain standards,' he added.

Witt also advised buyers — especially first-timers — attend the entire inspection to 'learn about details they would never otherwise know about.'

Homebuyers often look at a home from a '30,000-foot level,' Witt said. They might look at the street value or how it feels, but they 'don't dig into any of the details,' he added.

'The inspector does that with laser focus — looking at different aspects you might take for granted or miss as a buyer,' he said.

TALK TO PROFESSIONALS

Of course, these are just some basic tips to think about before buying a home.

For further questions and advice, the best place to go is to the experts themselves. Most are willing to offer advice with no strings attached.

l Comments: (319) 398-8364; elizabeth.zabel@thegazette.com