The National Association of REALTORS® (NAR) forecasts that mortgage rates will continue to edge down throughout the year. This optimistic outlook may motivate those who’ve been thinking about buying their first home to take steps to make it a reality.
“A lot of factors go into the decision to buy a first home,” says Sarah Cole, board chair for the Greater Milwaukee Association of REALTORS® (GMAR). “Affordability is key but there are other signs that can help first-time buyers know when the time is right.”
Ready or Not?
Several financial and personal markers indicate that a first-time buyer is ready. Financial stability is critical. Having a steady and dependable income and a good amount of savings are key.
Besides having enough for a down payment, reserves should be on hand to cover the additional costs of buying a home,” says Cole. “There should be enough to cover home maintenance and repairs, as well as expenses for six months should unforeseen accidents or crises arise.”
A solid credit score and manageable debt signal that a buyer is in good shape to move forward. Cole adds that a buyer’s personal life should reflect stability. That means no major life changes on the horizon. First-time buyers should likewise give some thought to the location and type of home they’d like to purchase.
Find a REALTOR
The home buying process is complex and even more so for a first-time buyer.
“Once the decision to buy a home is made, finding an experienced REALTOR® should be the first order of business,” says Angela Walters, a broker with EXP Realty.
There are a few different ways to find an experienced and knowledgeable REALTOR®.
“To start, first-time buyers could get a referral from a family member or friend. They could also search for REALTORS® online but be sure to check their experience and review testimonials from previous clients,” Walters says. “Meeting in person or talking over the phone helps determine who’s the best fit.”
Find a Lender
It can be daunting for a first-time buyer to find a lender, and REALTORS® can help with that.
“From years of experience, REALTORS® know numerous lenders and what they specialize in,” says Walters. “Some lenders are better suited than others for first-time buyers’ particular needs and a REALTOR® can point them in the right direction.”
Cole usually suggests buyers consider a few different lenders, using one or two names provided by their REALTOR® along with a couple names from family and friends.
“Have a conversation, either in person, on the phone or Zoom,” Cole says. “Determine who has the best rate and use the first conversation to get a ballpark on what a downpayment will look like.”
First-time buyers can use an online mortgage calculator to give them an idea of what their monthly payment might be. Based on numbers, they may need to adjust their expectations of what they can afford or increase or decrease their budget.
After selecting a lender, it’s time to supply financial information. Buyers can make this step more manageable by gathering all of the documents before sitting down at the computer.
Recommended Documents
According to the National Association of REALTORS® (NAR), lenders typically require the following documents:
- W-2 tax forms for the last two or three years for each person signing the loan.
- At least one pay stub for each person signing the loan.
- Account numbers of all credit cards and the amount of any outstanding balances.
- Two to four months of bank or credit union statements for both checking and savings accounts.
- Lender, loan number and amount owed on installment loans, such as student loans and car loans.
- Addresses where every person signing the loan has lived for the last five to seven years, with names of landlords if appropriate.
- Brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV or stocks or bonds not held in a brokerage account.
- The most recent 401(k) or other retirement account statement.
- Documentation to verify additional income, such as child support or a pension.
Start the Search
Buyers should work with their REALTOR® and set aside time for their search. It’s important to know that in a competitive market time can be of the essence so being flexible and available to see a listing on short notice might be necessary.
“This is the time to clearly define what buyer’s must haves and wants are,” says Cole. “Knowing for certain how many bedrooms and bathrooms are needed, and whether a one-story or two is preferred, are good places to begin to narrow it down.”
Cole adds that things like a fireplace, finished basement or patio may seem like must haves but usually fall in the want column.
Once these criteria are set, REALTORS® make recommendations and include additional options so buyers have a variety of homes to consider.
“I tell buyers to drive through the neighborhoods, especially during rush hour, to assess proximity to the freeway and to get a feel for the traffic,” says Cole.
She also suggests buyers evaluate proximity to other destinations like the grocery store, pharmacy, clinics, work and schools. Since more and more people are working from home, thinking about Wi-Fi connectivity and internet speed are additional considerations for homes located outside of the city or in smaller towns.
“The real litmus test is whether buyers can envision themselves living there,” Cole adds. “If they can, and if the home meets their expectations, it’s time to head indoors for a closer look.”
Making the decision to buy a first home can seem intimidating, but a REALTOR® can help guide the process. By remembering to keep the goal in sight, new buyers can soon enjoy the many advantages of homeownership.
The REALTOR® Advantage
A REALTOR is a member of the National Association of REALTORS®, is committed to a Code of Ethics and has the expertise to find the right home for everyone. Look for the “R” to determine if your agent is a REALTOR®.
Locally, the Greater Milwaukee Association of REALTORS® is a 5,500-member strong professional organization dedicated to providing information, services and products to help REALTOR® help their clients buy and sell real estate. Visit gmar.com for more information.