3 Tips All First Time Home Buyers Should Know

I’m currently in the initial stages of attempting to purchase a home. I live in the Bay Area so the market is extremely competitive and stressful. I’ve listed some tips below that I wish I had been aware of before working with a mortgage lender and getting a preapproval letter. These are all based on my own experiences so what is true for me will not apply to all. Nevertheless, my goal is to impart some knowledge and bring awareness to the complicated process of buying a home.

1. Check with your bank/mortgage lender to see if they have a list of approved real estate agents and companies they work with.

Contrary to my belief that you could pick whichever local real estate agent you want once you receive a preapproval letter from the lender, that was not the case. The lender had a deal with a real estate agent and funneled me directly to her. When I asked the lender if I could work with another agent or company they fought me and stated it was much easier for them to work with that company. If you want more control over picking your own real estate agent or broker, ask your lender beforehand to provide a list of brokers or agents they have worked with in the past. From the provided list you can research and contact agents in order to find the best possible fit for you. Looking for and buying your first home is a monumental decision so working with a trusted real estate agent is invaluable.

2. Property Taxes are paid biannually but you pay a portion each month in tandem with your mortgage.

In California Property Taxes are due twice a year. However when you are paying a mortgage and do not yet own your home outright you pay toward the total tax each month to the lender and not in two large lump sums. Each month the lender takes the amount paid toward the taxes and holds them in an escrow account. When taxes come due the lender then takes the money you contribute monthly and applies them to the tax balance due. It’s a relief to not be on the hook for thousands of dollars twice a year when you are paying it off monthly.

3. If you put less than 15% down with a conventional loan you will need mortgage insurance.

In the competitive California markets, most lenders will steer you towards a conventional loan in order to be more attractive to sellers. Conventional loans typically factor in a base down payment of 20%. In the attempt to give me a wider range of options and higher loan amount my lender based my numbers on a 15% down payment instead of the typical 20%. With this lower down payment amount comes a monthly fee known as mortgage insurance. The fee runs anywhere from $50-100 per month so if you can afford to put 20% down then it is to your advantage. But if you’re not in that boat like myself please be aware of the additional monthly fee coming your way once you sign a contract and purchase your property.

What are some other tips first time home buyers should be aware of in the beginning stages of securing a home loan and looking for a house?