First Lessons in First Time Buying

by : Drew Hartanov

First time buyers can find it confusing to enter the world of house buying. The first thing you think you should do is to find a house, right? Wrong. If you pursue this route, the house could be snapped up from under your nose while you struggle to find financing.

Consequently, even if you are not in the market for house buying yet, you may wish to meet with a bank or a mortgage broker (called the lender) and find out how much money they will assess that you can borrow. If you have a regular bank account, try the bank first. If you get stuck for financing, sometimes a real estate agent can advise on brokers in the area.

Probably the single most important thing in getting a loan is a credit rating. If you have no credit history then you can go to a bank and ask for a secured credit card. They will ask you for a deposit of say, $500.00 and this will be untouched by you as it will sit there to cover any unpaid balance to the bank.

If you have a credit rating with a few bleeps on it, try and sort them out or have a good explanation as to why they are there, otherwise you will not be buying a house.

Once you have a current credit card, use it every month and make a payment on it every month, always on time. After your visit to the bank, you may be surprised to find that you do not have enough income for a very big loan, or you may find that if you save a little more down payment you will be ready to start looking.

Some lenders will allow you to buy a home that has a suite already in place and they will count in part of the rental income as your income (usually only a part of it though!).

Most people these days browse the Internet first and get a feel for neighborhoods, prices and what type of house they would like. Once you have found the home you would like to buy, in a price range you can afford, contact the real estate agent of your choice and ask for a viewing.

If and when you find a house that you like, you may decide to put an offer on it. This will require a modest down payment, to show your good intent. Now at this time, there may present a situation which many first time buyers are not prepared for.

If the house is listed to represent true market value, then it would follow that you put down your 5%, they add their 95% and the costs are met. All that is left is for you to pay the legal closing costs, which are fairly standard and can usually be estimated beforehand. Simple.

Simple - but: a problem will arise if the house inspection turns up some damage in the structure or condition of the home. They may say that it detracts from the value if you have rot in the garage, and will deduct $4,000.00 from the amount they will give you.

You are now short $4,000.00. Your real estate agent will try and help you over this one by approaching the seller to see if they will repair the garage rot in order to make the sale. Or perhaps they may be willing to pay your closing costs so that you can 'top up' the loss created by this garage rot.

The seller will not want to lose the sale either, so he or she may be willing to help you financially so that all parties can complete the sale. Your real estate agent will negotiate a deal for you, if it is at all possible.

If you find all this confusing, think of it as a learning curve - it is a lot easier the second time around!