A Checklist for First Time Homebuyers

Pay down your debt. And while you're at it, check your credit score and look over your credit report. "Before you start the process, you should make sure your credit score is OK," says Michael Eisenberg, a certified public accountant and personal financial planner with Eisenberg Financial Advisors in Los Angeles. "If you don't have a good credit score, you may not get the best [interest] rate. In fact, you may not get a loan, period."

So before you do anything else – with any luck, long before you do anything else – focus on paying down your credit cards, paying your bills on time and raising your credit score. (A score of 720 and above is generally considered good, and 750 to 850 is excellent). You want your future mortgage lender to like what it sees when it comes time to request a loan for a house.

Have money in the bank. Most experts suggest that you have at least 20 percent of the house's purchase price saved as a down payment. You can certainly buy a house without that – and many people do – but there are plenty of good reasons to put down at least 20 percent. For starters, you'll almost certainly avoid paying private mortgage insurance, or you won't have to pay it for long. PMI is typically 1 to 2 percent of the value of the loan, split into monthly payments. It may not seem like much, but if it adds, say, $100 to your monthly mortgage payment, you can see why you'd like to avoid it.

In other words, if you happen to have $20,000 in a bank account, and you're thinking of buying a house in the not-so distant future, hang onto it. This isn't the time to buy that motorcycle you've always wanted or invest in a coin collection.

Fine-tune your budget. Regardless of what you have in the bank now, this is a long-term, year-after-year, month-after-month expense you're going to take on. "So the first thing I would say to anyone buying a home is, 'Let's see how much you can afford to spend,'" Eisenberg says. "Everyone thinks about the mortgage and interest, but there's more to it than that. What about the property taxes? Will you have homeowner association fees? Are you renting now, and will your house be much bigger? That means you'll pay more for utilities. Are there amenities that you're going to have to take care of? Does the house have a pool? You need to plan much more than by asking yourself if you can afford the mortgage."

Pej Barlavi, a real estate broker in New York City, agrees. "I always recommend to work your numbers backwards," he says. "First, know your budget or set a monthly budget that you will be comfortable with paying that will not put you under a difficult strain should you not be able to work for several months."

That might sound a little grim, but think about it. If this is going to be a house you'll live in for years, there are going to be good and bad times ahead. You want to be prepared.

Think about how you'll pay for the house. Yes, with money. But will you take out a fixed-rate mortgage or an adjustable-rate mortgage?

ARMs had a terrible reputation after the Great Recession, and for good reason. With an adjustable-rate mortgage, you'll get the lowest rate available – but then it will adjust after several years, often based on an index, like the Cost of Funds Index. The main point here is that your payment with an adjustable-rate mortgage won't stay the same.
"During the economic meltdown of 2007-2009, many homeowners lost their jobs and then discovered the interest rates on their mortgages were going up," says Diana Webb, an associate professor of finance at Northwood University. Small wonder she says: "Adjustable rate mortgages are the scariest mortgages that I see."

For more visit: http://money.usnews.com/money/personal-finance/articles/2014/05/23/a-checklist-for-first-time-homebuyers

Mary Zohar, is a long-standing member of the Coldwell Banker North Tampa Office and an active member of the Greater Tampa Associates of Realtors. Besides having a Bachelor in Science from the University of Florida, she holds: Certified Home Marketing Specialist, Certified Negotiation Specialist, e-Pro, Short Sale and Foreclosure, and Accredited Buyer Representative and Certified Residential Specialist certifications; and received the International Diamond Society Award this past year. She also is the representative of the North Tampa office for Coldwell Banker CARES.  And is current in Continuing Education and licensure for the State of Florida. Having lived in the Tampa Bay area since 1981, makes her an expert in the  community at large. If she doesn't know what you're looking for, she surely knows who to ask or how to find out. Watching Tampa Bay grow, after these years makes her knowledge priceless. She can be reached at 813-417-6696, and is eager to assist you with all of your Real Estate needs.