Learning is achieving; I live by it. I get this question asked at least a few times a week – what are the steps in purchasing a home today? It surprises me that so many renters aren’t as knowledgeable when it comes to taking the steps to owning their first home. After asking clients and friends, I’ve realized that it can be an emotional decision and some aren’t quite sure where to start and may get intimidated by the idea of having ownership of a piece of property. Not everyone wants to carry this task of ownership and deal with maintenance issues and their crazy next door neighbor complaining about how soon will they shovel their side of the curb. It’s understandable, some want convenience, fine. In all reality, NYC rents are getting outrageous and owning can sometimes be less dependent on how you budget yourself and utilize the tools set forth to obtain the right property that fits your requirements. Compromising and budgeting are essential when purchasing real estate. Not to bore you, but here are some tips and advice on purchasing your first home and what to prepare and to do and not to do when getting ready to buy.

Paperwork –

It’s always nice to scroll through zillow.com during your work day, see what’s available and fall in love with a dream home. That is until reality hits and you realize the listing price is way too high, up in the millions or just way out of your budget, or at least that’s what you think. But if you really sit down and analyze what it may cost you monthly, you may be able to afford that dream home. The first step in purchasing real estate is gathering the necessary documents needed to qualify for a mortgage. Now if your purchasing in cash, you can easily skip this step and you wouldn’t need a mortgage because you’re liquid. But for others the documents needed for a mortgage are your last two years of tax returns, this includes your 1040 and w2s. Other documents needed are one month’s of pay stubs, last month’s bank statement and any additional income you have. Showing income determines your eligibility of how much you can borrow. Your mortgage broker can help you determine your eligibility after analyzing all the documents.

A down payment on a real estate purchase is usually always needed when obtaining a mortgage. There is only one mortgage program available that I know of that allows 0% down and 100% financing, which is a VA loan (veteran). These types of loans are for military officials and people who served in the military. I won’t stress about the different types of mortgages but it is essential to look into the various options available. Most properties require a 20% down payment, but this all depends on the type of purchase. Having a down payment set aside will help you determine your buying power. Keep in mind that 20% is your minimum down payment and you can always put down more towards the principal of the property, this will lower your monthly mortgage. The less your borrowing the less you pay monthly – makes sense. You don’t want to put up all your savings into the down payment without any reserves. You still have your closing cost and if you want to do any repairs or upgrades, it’s best to have a reserve set aside.

Mortgage –

Now that you have your documents together and you have your down payment set aside, hopefully, your next move is to meet a mortgage broker to see your eligibility. You can find mortgage broker’s at your bank or by doing a basic google search. The mortgage broker will go over the different options with you. Some common mortgages today are FHA (Federal Housing Administration) loans, these are programs issued by the government to help borrowers obtain more affordable loans. One most common mortgage is a conventional loan which is typically a fixed loan for 30 or 15 years, the interest rate here is fixed and not adjustable but you can always refinance. Aside from the income verification docs, another aspect of the process is your credit report. Your credit report can determine your eligibility as well. A higher credit score can lower your interest rate. If your credit score is too low you may not qualify for a loan. In this situation, you may have to hire a credit repair specialist to help you bring up your score.

Real Estate Agent-

Now you’re thrilled and just found out your pre-approved for a mortgage and you’re ready to start shopping. Your mortgage broker went over your loan amount and what your monthly payment would be and you’re set to lock in your first home. Your next move is to find a real estate agent who specializes in the neighborhood(s) your interested in. One way of connecting to a real estate agent is to do a google search or by browsing on streeteasy.com. Once you find a real estate agent to connect with, that will be your go-to person when it comes to questions on properties, getting access to the newest properties for sale and scheduling showings for properties. Make sure your agent is listed with the local MLS (multiple listing services). This service allows agents to have access to the newest listings that hit the market as well as access to listings listed by other agents. All agents are to follow a code of ethics in which they must work together and share commissions, this way no home buyer is left without seeing all available listings. There is no cost to hiring a real estate agent since they work only on commissions. Agents earn their money once they close on a property and their commission gets taken out from the sale price. Take advantage and hook up with an agent who knows their market to begin your hunt.