Utah First Time Home buyer: 10 Dos and Don'ts!
1. Do hire a real estate agent: Hiring a real estate agent won't cost you anything (in the state of Utah the real estate agents commission is paid by the seller) and it could save you a ton of money. A good real estate agent will not only make sure the transaction goes smoothly but that you don't get taken advantage of.
2. Do get a home inspection: A good Realtor will also recommend this to you. A home inspection in Utah will run you anywhere from $200 to $300 but it could save you thousands in the long run. A licensed home inspector will check all the components of the home and can detect things that can't be seen with the naked eye. I recently had a borrower whose inspector found Asbestos in the home he was going to buy. The repairs would have cost him thousands. Luckily he only spent $250 and moved on.
3. Do attend a first time home buyer workshop: In most cities in Utah you can find a home ownership workshop sponsored by either a local University or a local real estate professional. In most cases, these workshops are free and can give you some much needed insight into the world of buying a home.
4. Do establish a realistic budget: What you can afford and what you can qualify for can be two very different things, even in today's climate. It would behoove first time home-buyers to establish a realistic budget to see how much they can afford. In particular, they will need to analyze how much they are currently paying in rent and how much more they will pay for a mortgage (including property taxes and insurance), utility costs of a the new home, annual home repair costs, etc.
5. Do get pre-approved first: Most real estate agents will want you to meet with a loan officer to get pre-approved before they will take you out looking for homes. When you do meet with your loan officer, make sure to bring your last 2 years tax returns with W'2s, Last 2 pay stubs, and last 2 checking and savings account statements. By bringing these documents, the loan officer can give you an official pre-approval and not just a pre-qualification.
Don'ts for Utah First Time Home buyers
1. Don't rush into buying a home just to get the $8,000 tax credit: $8,000 is a lot of money but if you buy the wrong home which requires constant repairs, that $8000 won't last very long and you'll wish you took more time finding the right home.
2. Don't gamble with the interest rate if you are comfortable with the payments: When you finally have a home under contract your loan officer will give you the option of locking or floating the interest rate. My advice is this: Nobody knows the future of interest rates and if you are comfortable with the payments, lock it! Getting a little bit lower rate is not worth the risk of having to take a higher rate and a payment that is more than you budgeted for.
3. Don't do any repairs on the home until after escrow has closed: Once again a Realtor would never allow their buyer to do something so stupid, but I have heard of buyers that did extensive repairs and spent a significant amount of money on a home only to find out that the deal wasn't going to work out.
4. Don't try to time the market. The housing market is kind of like the stock market in that you will never be able to pinpoint the bottom until everything has turned up. How else can you pinpoint the bottom? Teal estate can be a great hedge against inflation but more importantly it is a home. Focus on personal lifestyle needs more than trying to time the market.
5. Don't get a loan from a company that advertises "creative financing"."Creative financing" is just a euphemism for "you are going to get screwed". Stick to the basic loan programs which are easy to understand and, more importantly, are affordable.
Develop a Realistic Budget
If you have taken all of the above steps and passed there is still one more test that you need to be aware of. You can always fall back on the eight hour test to determine whether you will be comfortable with a new mortgage payment. If you find yourself reaching for the Tylenol PM at 2 am, chances are that you will not be comfortable with your new mortgage payment.