For some newly-married couples, the prospect of buying a new home makes them break out into a cold sweat, while other newlyweds look forward to finding their perfect love nest.
There is no doubt that purchasing the first home is a major financial decision and that it is easy to get emotionally involved.
“Think with your head, not your heart,” suggests Martha McCampbell, a realtor with Realty Executives Price and Associates. She said couples who are buying their first home should understand that it is a big business decision.
According to McCampbell, couples should first contact a lender to prequalify. Most experts suggest to choose a lender you can trust. Get a referral from a trusted friend, relative or real estate broker. To prequalify, the lender will need to know your gross income and total monthly payments. You and the lender can compute your debt-to-income ratio. The lower the ratio, the better interest rate you will quality for.
The lender will also obtain a copy of your credit report. The credit score is a system of calculating the risk of lending money based upon several factors such as how long a person has been at their present job, their occupation, the ratio of balances of available credit lines, the number of recent credit inquiries, the age and any bankruptcies or collection action. An excellent credit score will also ensure that you’re receiving the best interest rate.
Finally, the lender will prepare a pre-certification letter. While this letter is not a guarantee of a loan, it will smooth the road of purchasing a new home.
“Don’t look for houses until you know what you can afford to buy,” McCampbell said. She said a couple is setting themselves up for heartache if they look for homes before they know what is in their price range. “Don’t go beyond your means.”
Melissa Stuart, a broker and realtor with Realty Executives, Price & Associates, says engaged couples and newlyweds need to know that there is help available when looking for a new home, just as there is when planning a wedding.
“Buying a home -- like getting married -- is one of the most emotional and exciting decisions a couple can make together,” said Stuart. “First-time home buyers should consider consulting a reputable and experienced realtor. A realtor will be able to use their resources to find available homes which meet the buyer’s specific needs. By evaluating market conditions, offering resources for financing options and negotiating the transaction, a realtor will help make the home buying process as stress free as possible and allow the buyer to enjoy the reality of owning a home.”
McCampbell adds that a realtor’s role in helping the happy couple find the perfect home is to provide information and accessibility into homes that are for sale. Ultimately, the homebuyers are the ones to make the decision. “The couple is the one who has to live with the decision,” McCampbell said.
Another suggestion McCampbell has for the potential homeowners is to be present for the home inspection. “It’s the only way to try on a house,” McCampbell said. She said it is important to understand the details of the home inspector’s report and the best way to understand is to be involved in the home inspection process.
“No house is perfect,” McCampbell said. She said this is important for new homebuyers to understand. Experts suggest knowing what your needs and wants are in a home. Are you determined to live in a certain location or do you want a scenic view? Do you need a two-car garage and hardwood floors? Do you need an office and want granite countertops?
McCampbell said to make the real estate closing process smooth, do exactly what your lender says. When it is time to send a deposit or complete paperwork, do it and do it promptly.
“Make it a fun process,” McCampbell said. “A realtor and lender should keep it a smooth process.”
Kristie Millsaps, realtor with Coldwell Banker Nelson Realty, said that buying a home is often one of the biggest decisions a new couple will make.
“Most of the time, the first home is not quite their ‘dream home,’ but it can still be an exciting time for a couple. My job is to make sure a couple finds the home that best suits their needs and budget. Sometimes it is not as fun to be practical, but it can save a lot of heartache down the road if wise, informed decisions are made.”
From the mortgage-lender’s side, the most important thing for couples who have never owned their own home is to buy something they can afford, something that fits comfortably into your budget, says Rick Hudolin, mortgage bank professional with TN Bank.
“Everyone wants their dream home,” says Hudolin, “but the important thing is to buy something you can afford. The general rule of thumb is to figure the total income of you and your spouse, figure what your bills are and then figure what percentage your bills are in relationship to your income. That is your debt-to-income ratio, and it should be kept to around 30 to 35 percent.”
Hudolin says couples need to remember when doing the math that owning a house is not just a mortgage payment of principal and interest, but taxes and sometimes mortgage insurance.
Planning ahead is also important when buying a home. Hudolin says. “You need to have a general idea of how long you plan to stay in the home,” he says. “Adjustable rate mortgages, for example, are not necessarily a bad thing if you plan to stay in the home for three years, build up some equity, then sell it and buy your dream home. It depends on your plans.”
When searching for interest rates, Hudolin says to use common sense and do your homework. “Shop around,” he said. “If it sounds too good to be true, then it probably is.”
Buying a home is still a good investment, he added. “Homes in this area still appreciate at a 5 to 6 percent clip. A home is going to appreciate in value if you keep it modernized. There are things you can do to make it appreciate even more -- like adding square footage or ‘going green.’ You can drop $15,000 into your home, and, if it’s smart changes like adding double-insulated windows, attic fans or other energy-saving additions, it can be worth $25,000 on the market.”
To contact Rick Hudolin, call 865-681-9444 or e-mail firstname.lastname@example.org. Martha McCampbell can be reached by calling 865-977-0770. Her office is located at 369 Fountain View Circle in Alcoa. To contact Melissa Stuart, call 865-977-0770. Her office is at 703 William Blount Drive. Kristie Millsaps can be reached at 865- 368-1089 or at www.Nelson-Realtors.com.