10 Things a Buyer MUST Know (Part 1 of 2)
In today's market, where daily changes are normal and expected, it is necessary for buyers to understand what it takes to buy a home. There are at least ten things you must know in order to be a knowledgeable buyer. Here are the first five of those ten things. The next five will be included in my next post.
1. Admit you don't know everything. Sure, this sounds harsh, but just because you read daily articles about the market or look everyday online at the interest rates, it doesn't mean you know more than the professionals who are working in this market each day. Loan requirements, for example, have dramatically changed from where they were even six months ago (or for that matter, six days ago). The housing market can be completely different from one area of the city to another so articles that deal with the general market are often not helpful. Many buyers have some idea of what the market is doing, read several articles about the subject and use the ones that support their opinion to show that they are experts. But if you aren't actually working in this business you probably don't understand all of the rules, changes and nuances.
2. Understand that you must have a down payment. Gone are the days of 100% financing. Unless you can obtain a VA loan, which still supports 100% financing, you'll have to have a down payment in order to buy a home. If you can qualify for an FHA loan, you'll need at least 3.5% of the purchase price. If you get a conventional mortgage, you'll need more money for a down payment. Many buyers insist that they can get a loan with no money down and get frustrated when they are told that they can't. Buyers should start saving immediately so they'll have enough money for a down payment.
3. Know that you need money for closing costs. Like having a down payment, buyers don't realize that they will need to have money to cover closing costs. Sometimes sellers are willing to pay closing costs, but buyers cannot count on that. Buyers should save money for closing costs while also saving for a down payment. If a seller ends up paying the closing costs then the money intended to cover those costs can continue to be saved or can be used to make improvements to the home.
4. Credit scores will impact your ability to get a loan. Credit scores are more important than ever. Lenders are taking a much stricter approach to credit scores. Do your homework in advance. Have your credit report run and review it carefully. If there are items that are incorrect try to get them modified or removed. If you have excessive debt or a seriously delinquent debt, have a plan to pay those down and stick with the plan. 
5. Get preapproved for a loan. All of the desire to buy a home will be worthless if you can't get a loan. Don't even think about looking at homes without getting preapproved for a loan first. Underwriting guidelines are so strict these days and change so often that you cannot overlook this vital step. Speak with a bank or loan broker and submit a loan application. Be completely honest on the application about your assets and debts. All of the information you include will have to be verified. When you submit an application, your credit will be run and the information on the application will be used to figure out if you can obtain a mortgage. If you cannot you'll be able to figure out what you need to do in order to buy a home in the future (like improve your credit score, pay down debt, etc). If you can get a loan, you'll be able to understand how much you can afford and what your monthly payment will be so that you're looking at homes in the correct price range.
Stay tuned for the next five things you must know....