First-time Home Buyers - Mastering the Basics of Real Estate

By Brian Everstine

RISMEDIA, Sept. 10, 2008-(MCT)-Annie Corrington has a to-do list for this year. Included in it are learning to tango, finishing her degree and obtaining a motorcycle license. But the biggest and most intimidating goal for the 27-year-old is to buy her first house.

Real estate and mortgage professionals say they see many like Corrington-first-time home buyers intimidated by the process and who might not know everything about buying their first house. In today’s economy, with a treacherous market, the most important thing for a new buyer to do is to get educated.

“There’s a lot of options for me to get a gem in the rough or something in my price range that can build value over the next few years,” Corrington said.

The To-Do List

The process starts with finding out what buyers can afford, and that is where many first-timers are led astray, said Di Inman, president of Serenity Mortgage Inc. in Tacoma.

She said she recently helped a man who used a website that calculated what he could afford, and the result was far off base, higher than he could actually pay. Consumers need to do research and find out exactly how to improve their credit to be approved for a loan. The first check on any first-time buyer’s to-do list is to visit a lender and find out exactly they can afford. The next is to visit another. And possibly another. Different lenders have different ideas and different ways of interacting with customers, Inman said.

The market has changed. Early this year almost anyone could get a house they couldn’t afford. Now, the market is adjusting, and there are more harsh requirements to being approved for a loan, including a stronger examination of credit, demonstrated proof the buyer is able to make the payments and enough money in the bank. That means more lenders have to say “no” to some new buyers.

“(I’ve seen) a lot of people who come and ask if they can buy,” Inman said. “I am doing a lot of counseling these days. I’m an uncertified financial counselor.”

The counseling comes because many do not understand what the market now requires of first-time buyers.

“The buyer needs to make sure they understand from a lender what that buyer needs to do to be able to buy a home,” Inman said. “Do they need to save more money, do they need to pay off a bill, do they need to stop opening new accounts? Things like that.”

Karen Orr, owner of Touchstone Lending Group, said today’s market reminds her of what it was like 10 years ago.

“For a while there no one had to get ready, no one had to have money in the bank, no one had to have the down payment,” Orr said. “Everyone got used to that. Obviously that wasn’t a good way for things to be. It was a little too lenient but now we are back to the basics.”

Someone with great credit can start paying 3% down, Inman said. As credit worsens, the payment increases drastically. Someone with poor credit could have to pay 20%, or not receive a loan at all.

Orr said if a buyer has the credit and can afford the down payment, the market is better than it has been, and it could become harder for buyers soon.

“Because interest rates are so low right now, you have a good chance at getting a monthly payment for so low,” she said. “It is a great time to be a first-time buyer in that home prices have dropped and interest rates are so low.”

The average price for a home in Pierce County during July was $255,000, down more than 9% from last year. August statistics are not yet available.

As of last week, 7,880 homes were on sale in the county, a 4% drop from last year, according to statistics provided by Windermere Real Estate.

There are options available for first-time buyers. The federal housing tax credit for first-time buyers, enacted this summer to stimulate the housing market, offers a $7,500 loan for a first-time buyer to help pay a down payment. But the program expires Oct. 1, so those in the market now might be the only ones who benefit.
Options are there, but the biggest hurdle is being properly prepared, Inman said.

Corrington went out last week to check out homes a little lower than the median, about $200,000. She’s young and this is her first time buying, so she knows she won’t stay in the house long.

Also, she’s not that worried about location for her commute to her job as a human resources manager at a major home improvement store. The most important aspect of a potential home is if it has a fenced yard for her two dogs, Toby and Daisy.

She is excited, but nervous. Buying a home is the biggest investment Corrington will have ever made, she said.

Heidi Hurst, a RE/MAX client service specialist, showed Corrington her options, small homes from Puyallup to Tacoma’s North End. Corrington is one who has done it right, Hurst said, because she is prepared.

After looking at almost a dozen choices, Hurst saw Corrington show “the face”- the moment when a buyer finds his or her new home-at a house Thursday.

Corrington is preapproved for a mortgage. The two are making an offer and trying to get the seller to pay the down payment because “it is that kind of market,” Hurst said.

“As a buyer, you know the house when you walk into it,” she said. “There’s not an agent who can talk you into anything. … It’s a process. It’s an adventure.”