Saturday, December 29, 2007

Finding the right house for you--part one

There are many lists on how to hunt for a house and how much house you can afford. I will take you through my experience that although atypical, helped land me a home that satisfied my budget, my requirements and my priorites.

I first attempted to look for a place to own in 2003, thinking that condos were the best fit for my budget. To learn more about the homebuying process, I attended a first-time homebuyers seminar hosted by my credit union. Using the information from the seminar, I meet with a credit union representative and received a prequalification for $135,000, a lot more than I imagined. I was looking at places around $100,000, contacting a realtor via e-mail and asking about condos in my price range. Then I just realized how overwhelming the amount of debt was and decided homeownership was not for me.

My second attempt at house hunting was driven by my untenable apartment situation. My downstairs neighbor had been replaced by a family that was up until the late hours of the night (usually past 11PM and many times even later) talking loudly, letting their small child run around (sometimes screaming) and just being insensitive to their neighbors. One time, I went downstairs to tell him to turn his television down and he had to turn it down before answering the door! The resident manager sent these insensitive neighbors letters notifying them of the complaints but I never noticed any behavioral changes.

Before my frustration boiled over, I did want to refresh my memory about the homebuying process. So I attended a free first-time homebuyers seminar hosted by my credit union. The seminar included presentations from a realtor, a home inspector and a credit union representative. The importance of a home inspection, the usefulness of a realtor and the variety of programs available for mortgages were among the topics covered. I attended this seminar in November 2005 and was struck by the graph the realtor showed. She said the market was switching to a buyer's market with more homes available, the graph reflecting the greater number of homes available versus buyers compared to even a year before. She also mentioned that November to January were off-season months for house buying. That piqued my interest because I knew I had a limited budget and wanted to minimize competition.

My next step was to learn if the purchase price I was considering was affordable and my financial situation healthy enough for a mortgage. Therefore, I met with one of my credit union's mortgage specialists and went through the mortgage preapproval process. The difference between a preapproval and a prequalification--a preapproval says the financial institution will lend the individual money; the prequalification says the individual is a good prospect for a mortgage. Your buying position is stronger if you are preapproved for a mortgage so I highly recommend having this in hand before looking at houses. The preapproval is good for at least three months so no need to get it renewed immediately. However, if you are just looking into the possibility of buy a home, a prequalification will give you some idea what a financial institution may lend you.

I had a particular payment in mind including taxes, escrow and PMI as I did not have a 20% downpayment. My purchase price and my monthly payment matched up well and there was a first-time home buyers program that would allow me to buy a home with a 3% downpayment. With my preapproval in hand, I approached my next step: finding a buyer's agent.

Part two of finding the right house for you covers how I chose my buyer's agent, what I wanted in a home and how the search started.

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