9 Experts Every Home Buyer Should Have On Their Team – Part I
First time buyers tend to focus entirely on their choice of Realtor when it comes to choosing the associates that you'll work with over the course of the purchase and moving process. It's their general hope that a Realtor will be sufficiently well-connected to hook them up with all the other experts that they will need to get the job done right. This is potentially true.
However, no Realtor can know every expert in every area, and very few can know precisely what issues will arise during the course of your particular search. While your Realtor may be able to make some very solid recommendations for these 10 roles, your personality type and learning style may demand someone outside of their sphere. As is always the case here at StrawStickStone, I recommend doing some research on your own to find the team members that are best at making you feel comfortable with the process.
1. Credit Counselor.
If you're like most of the renters out there, your credit is not in the best condition. You'll need a credit score in the high 600 range to even be considered for a loan, and in the low to mid 700's to get a prime interest rate. According to Andrew Ross, the NYU professor who recently wrote the controversial "Are Student Loans Immoral" for Newsweek's DailyBeast.com, 41% of the college class of 2005 is already delinquent or in default on their student loans. These former students are now in their late 20's, what used to be prime position for becoming first time buyers. They will need help.
There's good credit counselors and poor ones. A good one will legitimately help you with resolving your debts and teaching you how to get ready for the levels of financial responsibility that come with owning a home. Most of these are community-based, non-profit groups with a focus on improving the ownership diversity and maintaining the housing stock of their neighborhoods. A great source for these organizations is HUD's list of approved providers. (That link takes you to a pre-filtered search for providers in Chicago that offer Financial Management counseling. You can alter the search parameters at the bottom of the page to find counselors who specialize in foreclosure prevention, rental issues, counselors in other areas of the country or specialists who speak languages other than English.)
Buying a home or investment property with cash is always preferable, and can mean the difference between winning and losing the house in a multiple-offer situation. However, for most of the first time buyers out there you're going to need a loan to cover some of the purchase costs of your new home. Once your credit is in good shape, you've had a steady job for a few years and you've assembled your down payment, it's time to go find a lender who can help you find a mortgage that will cover the rest of your purchase price.
There are mortgage bankers, who represent one specific bank or source of funds, and mortgage brokers, who can offer loans from multiple sources simultaneously. Brokers will have more options for buyers with weaker credit and folks who want to bargain hunt for the best rate possible. Banks will have access to specialty loans like physician's loans or teacher's loans, and smaller banks may have the ability to underwrite a loan from their portfolio instead of subjecting you to Fannie Mae & Freddie Mac's lending criteria.
You don't have to decide on which lender you'll want to use immediately. Unless you're buying with cash, you'll need at least a pre-approval before most Realtors will agree to work with you. However, you don't have to go with the lender who gives you a pre-approval.
The lender will dictate how expensive of a home you can buy. This is why you want a pre-approval - it sets your maximum purchase price and will give you an idea of what your monthly mortgage payment will be. Your lender will also determine what caliber of a home you can buy and how long it will take to go from offer to closing. Therefore, beyond interest rates, it's important to ask what their restrictions on property are - especially if you're shopping for a condominium - and it's also crucial to know how long your lender will need to process the paperwork. A six week turnaround time will kill most offers these days. You need someone who can do it in 28-30 days at most.
Your Realtor will help you sort through the many properties currently on the market to find the ones that suit your style and budget. They will assist you in gaining access to view those properties and do research to give you an idea how they stack up against others in the same area. They can serve as a sounding board to help you choose the winning property. They will make sure you're aware of any environmental and structural hazards that might lower the property value or cause you harm. They will verify that the person selling the property actually has a right to sell it. They will help you to negotiate a strong offer on the property that saves you as much money as possible. They will handle the transfer of earnest money payments between you and the seller of your new home.
Once you go under contract on a property, there is very little your Realtor can do to affect the success or failure of your deal. Everything's in the hands of your attorney and lender from that point forward. The Realtor's job between contract and closing is to make sure that all deadlines are met and observed.
First time buyers - especially singles - will often want to bring a friend along for a second opinion of the properties they view. This is an excellent idea and I endorse it fully. However, make sure that when you choose your wingman that they meet two crucial criteria.
If your wingman has never owned property before they will only be able to see the property from a renter's perspective. You really need someone with homeownership experience, but not someone who's been so burned by particular homeownership problems that they've gotten tunnel vision. (For example, someone who bought a house with a leaky basement may get obsessed over basements and forget to look at the ceilings.) So make sure your "moral support" is a happy homeowner.
Additionally, if you're going with a second opinion make sure they have skills that complement yours. If you're methodical and function-oriented, bring someone who's a little impulsive with a flair for design. If you tend to fall in love with everything you see, make sure your wingman is someone who isn't afraid to bring your criteria back up for you to review when you start to get excited.
As I recently discussed, the perfect house for you may not look perfect at first glance. In fact, it may need quite a bit of customization before it really feels like home. If you're an adventurous sort you may want to bring a handyman with you to give you an idea of project costs and renovation ideas.
Even if they're not involved in every home you go to view, it isn't a bad idea to request a second showing of your favorite properties and bring your favorite home improvement expert along to let you know what you can reasonably expect to spend to get it into perfect condition for your use. Knowing the numbers up front means you can consider them when making an offer and even potentially fold them into your loan.
Besides, a handyman may be able to alert you to potential maintenance problems before you go under contract, rather than waiting for your inspector to find them after you've already coughed up a ton of earnest money.
Stay tuned for Part 2 on Friday.
These five team members should get you up to the point of signing a contract on a property. Friday we'll look at the rest of the team who will handle your deal from there until the day you move in.