Being a New Hampshire First time home buyer
I am putting this blog together because there are so many questions when it comes to buying your first home. So hopefully this answers some of your questions, so here we go!
- What does it mean to be a first time home buyer?
Well if you are reading this on my blog that means you are thinking about starting the process to purchase the largest investment you will ever make. Congratulations for taking this step to Home Ownership. There are a lot of things to know about the process but working with local market experts and involving these people in your transaction such as a Realtor or real estate agent, local mortgage lender and local title company the process will seem incredibly easy. I always remind my buyers that it is important to have fun throughout the process and keep in mind this is an exciting time.
- What step should you do first in the home buying process?
So, every home buyer when they start, they get on their phone or computer and they start looking at properties, some may stop in some open houses and some may even contact a real estate professional first and want to hit the ground running to start getting into homes and see what the market has to offer. You might have before doing this gotten on a mortgage calculator and said, “oh I can afford that” and then used that as your basis for starting your search. BUT this can set many soon to be home owners up for disappointment. The real estate industry all agrees that before doing any of that window shopping the FIRST and the MOST important thing to do is speak with a lender and get Pre-Qualified. Here in the state of New Hampshire we have high property taxes and majority of the mortgage calculators will not calculate taxes and insurance in. Remember your payment is based upon PITI, Principal, Interest, Taxes and Insurance. Next point is if you have not spoken to a mortgage professional how can you be sure of today’s interest rates? Again, giving a false sense of what is really going to be your bottom line. So, to avoid sticker shock and to start your search looking at what is realistic for you and your budget it is always, always, always important to speak with a lender first. This will allow you to avoid the major let down later if you realize that the $400,000 home that you had seen with granite and gleaming hardwood floors is not realistic. So! I always say, “best to avoid the heart break”. Now who you choose to use for your loan is completely up to you however, I do recommend using a local mortgage lender over your local bank. Our area shows that with a local mortgage lender that their under-writing process is much faster. They can be as much time as 30 days quicker to get you to a closing table and get the loan finished to lend. This will matter when it comes time to make an offer and matter to the seller. Rule number one for us real estate professionals and most home sellers is time is of the essence. If you’re not sure what company to use, you can always ask your Realtor or real estate professional for some tried and true recommendations. None the less getting pre-qualified or better yet pre-approved is key. I will explain what the difference between a pre-qualification and full pre-approval on a different blog.
- New Hampshire Real Estate Market Trends?
Next, at some point through the beginning stages you will ask yourself should I wait to buy a house? What is happening in the market? As we have seen in the last several years the market has gone up rapidly, home prices are higher and interest rates are more than they were a year ago. Inventory has been limited for some time. The first question you will have to ask yourself is do I want to keep paying rent? No matter what the market does wouldn’t it be better to have your rent pay towards something? An asset? Surely an asset and paying towards the outright ownership of something is better than giving all your money to some investor or landlord. The next question to ask yourself would be am I buying this home to only stay in the home for 2-5 years or do I plan for this to be a place to hang my hat for the long term. If you are buying for a long term, then it doesn’t matter what the market does over the next several years because you are not going anywhere anyways. If your investment is for a short term 2+ years, then I say that is a conversation to have with your real estate professional. However, no matter what market we are in I will leave you with this… you will always have options. Say you need to move to something larger or if circumstances change. There are options such as renting the property and buying something else, there are options to sell, or maybe you did improvements that will get you a much higher dollar later. No matter how you look at it I will say home ownership always beats paying rent.
- Who pays for you to have an agent?
A lot of you will ask well how much a real estate agent is going to cost me. It costs you the home buyer NOTHING for representation of a buyer agent. The seller is who pays for you to have a buyer agent. Before that real estate listing even goes on the market there is a pre-determined fee by the listing agent and seller already calculated for you and agreed upon. So, the answer is nothing, there is no cost of a commission rate for a buyer to have representation. Pretty awesome, huh! So, your next question maybe well isn’t it better if I use the listing agent? Doesn’t that give me a better chance of getting the house? Well let’s talk about that, first the seller is 100% of the time going to go with the best offer, so if you get the house typically it is because your offer was the strongest offer on the table. So, do you think you could have accomplished the same end result if you had your own agent? Next that commission that we discussed that gets offered for you to have a buyer agent, that fee is getting paid by the seller to the listing office regardless if you use your own agent or not. So, makes sense for you to have your own representation doesn’t it? Next the listing agent works for the seller, so if you get that house and you have used the listing agent to make your offer and now you have a home inspection and things need to be taken care of, do you think when you give the agent the list she is going to negotiate for the items to be done. Does the agent have to give the list of items to repair to the seller, well sure, but is the listing agent stressing to the seller that the items should be corrected? Next, what happens if the appraisal doesn’t come in and your back to negotiating? All I will leave you with on this topic is that the Listing Agent is the Sellers agent, they do not represent you the buyer and there is already a fee for you to have your own representation. So why wouldn’t you have a real estate professional represent you and your best interest in the biggest purchase you will ever make?
- Average Closing Costs in NH?
Average closing costs in New Hampshire fluctuate. A lot of this is based on the home that you decide to purchase. There are a few parts of what a buyer brings to the closing table that fall under closing costs. There are closing costs from the lender, pre-paids for your taxes and insurance, buyers share of New Hampshire state tax stamps (this is split 50/50 between buyer and seller), closing fees from your title company to conduct the closing and sometimes other miscellaneous fees such as recording charges and currier fees. These closing costs from the lender, the pre-paids, your share of the tax stamps will heavily change based on the home your purchasing Other factors can be the time of year, depending on when pre-paids are due, as well as many other factors. The average costs could range I have seen as low as $6,500 and as high as $15,000 but again before you let these numbers scare you, your lender can certainly give you an estimate. In addition, there are ways to get some or all of these costs rolled in, so you can hang on to some of your nest egg. Your real estate professional and your lender will have this conversation with you.
- Be prepared for unexpected home buying costs?
I know right! Now you’re thinking more? More costs? We have already discussed the worst of them which is your closing costs but, yes unfortunately there are a few more costs that most people do not think of. So, after you have hunted across Southern New Hampshire to find that perfect home you will want to make sure you are purchasing a sound investment. So, to do that you have a home inspection. It is always, always, always recommended that you have a home inspection. Your real estate professional can help you by recommending a list of thorough inspectors in the area. Again, you can choose any inspector you want for your purchase.
Now which inspections you should have conducted, will again be based on the home you selected. Inspections could range from your general home inspections, septic inspection, water testing if you’re on a well, radon air testing, lead paint testing if the home was built prior to 1978 and many other tests. This will be another thing your real estate agent can help you determine which inspections to have and if it is necessary to have all of them or some of them conducted. Home inspections can range as low as $350.00 and be as high as $1,000 depending on what is ordered.
The other expense is your real estate appraisal. This is going to be required by the bank so that the bank can determine that the home you have decided to purchase holds enough market value so that the lenders investment to give you the money is a solid investment to them. The bank wants to know that their interests are protected. The lender will ask the buyer to pay for an appraisal. Not to be confused with a home inspection. I will explain the difference in a different blog post. An appraisal can run between $400-$600 and this may vary from market to market. Once the appraisal comes back by law you will receive a copy. As the old saying in Real Estate goes “Pray for appraisal”. If the appraisal does not come in for your purchase price well then, you are back to renegotiating.
One more I will mention and that is your deposit. When you have found that home and you sign your contract, known in New Hampshire as a Purchase and Sales Agreement. You will be expected to offer some form of deposit as a good faith saying I want this house. Now deposits are negotiable but, in some cases, the higher deposit the better as it shows a seller that you are serious. This deposit should be refunded if due to you walking away from the home due to findings in a home inspection or should also be returned if the bank who gave you that pre-approval determines that they can no longer qualify you for the loan. Last to know although you do bring this up front at time of contract signing, upon reaching a closing table this money will come off your expected cost to closing. So, you will see a credit against your closing costs or down deposit.
This covers some but there is a ton more to know. I hope that this gives you the basics to get started with your home search. If you ever have any questions or you decide you are gonna go for it and buy your first home. Our office is happy to offer you competent representation and help you in your process. Also, please sign up to our website as we will be hosting First Time Home Buyer Classes periodically, Sign up to get the information on when the next one will be held and how you can register. Happy House Hunting!