First Time Home Buyers
article by Meredith McKinnie
Buying a home for the first time is intimidating. Making such a significant purchase with another person brings its own complications. Marriage requires communication and compromise, and buying a home together requires the same. The process is a crash course in making a collective decision with profound financial and emotional implications. We spoke with Susie Dartlon, a mortgage lender at Eagle Bank & Trust, and Mark Sisk, a realtor with RE/MAX Premier Realty, to find out the best advice and information for first-time home buyers. We also chatted with Josephine Baris, a newlywed and recent home buyer, to find out a buyer’s perspective on the process and how to successfully combine two households.
So how does one begin the home-buying process? Susie advises first-time home buyers to begin with establishing a budget. That could mean deciding on the overall price range of a home or an estimated monthly payment. While it is tempting to look for the best home one can afford, Susie suggests finding a home that feels financially comfortable. No one wants to be strapped with a monthly payment that excludes enjoying life outside the home. Potential clients begin by filling out an application for a loan; this can be completed in person, over the phone, or online. Many couples find the online option more convenient due to conflicting schedules. The mortgage lender then assesses the clients’ credit reports to determine if the clients are pre-approved for a loan or if they need advice on how to improve credit scores.
Once pre-approved, clients must consider the type of loan suitable for their needs. Rural development loans offer 100% financing but must be applied to home purchases outside the city limits. The rural development loan is a popular choice for first-time home buyers. If clients want to remain in the city limits, an FHA loan and conventional loan are other options. Susie helps clients make the best decision depending on their financial profile. The FHA and conventional loans require a down payment, whereas the rural development loan only requires buyers to handle closing costs. As many couples just starting out don’t have much cash on-hand, the rural development loan makes home ownership a possibility. The conventional loan is available for buyers with strong credit scores, while the FHA loan allows those with lower credit scores to obtain a better interest rate and a cheaper mortgage insurance premium. Susie likes giving her clients options, but the final decision on the type of loan rests with the clients.
Property taxes and closing costs are other considerations buyers should understand. Home purchases inside the city limits require buyers to pay both city and parish taxes. On home purchases outside the city limits, tax rates vary by ward. Closing costs consist of bank fees, appraisal fees, attorney fees, homeowner’s insurance, and property taxes. The closing costs are estimated at a certain percentage of the home’s purchasing price. It is imperative that clients be aware of closing costs and necessary down payments that will be due at the time of purchase and can’t be factored into the loan amount. Determining financial readiness is where mortgage lenders can be extremely valuable. Making big financial decisions as informed buyers is key to purchasing confidence.
When potential clients are not pre-approved, mortgage lenders offer advice to improve one’s financial standing. Susie advises clients with no credit history to obtain a credit card and charge one tank of gas each month and pay off the balance when the bill arrives, making sure to keep the balance under 30% of the approved credit line. It is important to not max out the credit limit, as it can do more to harm one’s credit than help it. After about three months, Susie will perform a rapid rescore of one’s credit to see if the client’s credit score is increasing. Mortgage lenders can help clients go from no credit or low credit to pre-approval in a relatively short period of time.
Once potential home buyers have established a budget with a mortgage lender, they can begin to consider the right realtor. Mark Sisk with RE/MAX encourages buyers to look for a representative with knowledge of the local market and the mortgage approval process. A realtor should be informed about the homes becoming available on the buyer’s “micro” market and how quickly they are selling. Buyers should prioritize realtor knowledge and communication. It is important for realtors to be able to communicate with all parties involved in the sale, as realtors are the bridge between the homes on the market and potential buyers. When searching for a realtor, it might be tempting to click around online and assume one will be in good hands. Mark suggests asking the mortgage lender or friends and family for references. Make sure the realtor is active in real estate, as many have real estate licenses but are not currently involved in market transactions. Markets shift and home values change, so having an active realtor with timely information is essential.
Questions for realtors include: How long have you been in real estate? How many transactions have you handled this past year? Realtors with an established team of experts will have the most collective information for buyers, often circumventing potential problems before they inevitably arise. Expect honesty from a realtor. Make sure the representative is willing to say when a home is not a good investment. Building trust is the primary goal for Mark, as he hopes to work with clients in the future.
When house hunting as a newly married couple, it’s helpful for the realtor to stay cognizant of the “wants” and “needs” of each spouse. “It’s not always rainbows and butterflies. It’s compromise that moves us along,” says Mark, unashamedly quoting Maroon 5. When it comes to availability, buyers should expect realtors to respond quickly, as the market never sleeps, especially in the current market when inventory and interest rates are low. Home purchases are time sensitive, and a good realtor should be willing to accommodate that reality. Mark loves guiding clients on the journey of home ownership and building lifelong relationships. Helping people find and build financial stability is a rewarding profession.
As a more recent home buyer, Josephine Baris knows the process from the other side of the table. She and husband Ugur Baris started searching for their first home shortly before their wedding in April of 2018. She suggests buyers educate themselves on the types of loans available and start familiarizing themselves with the property values in any desired neighborhood. Josephine and Ugur did look at houses online, but found the most value in driving the streets, getting a feel for each neighborhood. She also encourages potential home buyers to follow realtors on social media, as they are consistently showing new properties on the market. Knowing your rights as a home buyer is crucial to navigating the process, and that’s again where the experts come in.
When it came time to furnish their new home, Josephine and Ugur discovered their radically different aesthetics. Ugur preferred clean, modern lines, and Josephine preferred lived-in spaces.She immediately began searching for ways of combining their tastes, centering in on their mutual love of neutral colors as a starting point. The couple exchanged pictures of spaces they loved and found ways to incorporate both styles in their new home. Like adjusting to marriage itself, decorating a space that feels like home for everyone takes time and attention.
While exploring home ownership can be scary, seeking information from the experts can lessen one’s fear. Buying a first home is an exciting experience, and though the decision is often the largest financial investment of a lifetime, it need not be overwhelming.