Shopping for Your First Home
Taking the Leap Into Your Future
Mark J. Miller
Mark J. Miller is a freelance writer who writes for many magazines and newspapers including the biannual Crain's Life, a magazine about residential real estate in New York.
Tom and Lisa Stone never doubted they’d eventually buy a home together; the big question was when. For three years, the newlyweds rented a tiny one-bedroom apartment in Boston’s Back Bay while they put down some roots. They loved the city, had wonderful jobs, knew they wanted at least one kid. But buying a home? That was a commitment they could put off—until Tom ran the numbers on the Web and realized that purchasing a house in nearby Roxbury would not only reduce their monthly payments but also give them a tax deduction. (Consult your tax adviser regarding the deductibility of interest.) That was all the encouragement the Stones needed. The next Saturday they had free, they started house hunting.
"Buying a first home can be stressful, but there’s a plethora of ways to make the process easier—and get a great deal in the bargain."
For most Americans, buying a first home often comes along with a major life change—after a wedding, a baby, or simply because they’ve decided that the time has come to stop paying rent. For most of us, that makes buying a home even more stressful than it already is. But as the Stones found, there’s a plethora of ways to make the process less stressful—and get a better deal in the bargain.
The first step is getting to know the market, and these days there’s no better way to do that than hitting the Web. Web sites such as Realtor.com® , Zillow.com® , Trulia.com®, and PropertyShark.com®, can all help create a sense of the local real estate marketplace that can then be tested against the reality of actual properties on the websites of local realtors who share listings on a local MLS (Multiple Listing Service). If you’ve never "shopped" for real estate this way, you’ll be amazed at how quickly your understanding of the market will grow just by shopping these sites. (Don’t forget other local online sources – your local newspaper and Craigslist.com ®, for example.) In a matter of just a few hours, you’ll have developed a sophisticated view of what’s available in your neighborhood and how home values are being calculated — and you’ll save a lot of time not driving around your new neighborhood in circles with a real estate agent.
Both banks and brokers have their strengths and weaknesses. Brokers work with many mortgage bankers and, as a result, can sometimes find slightly more competitive rates—perhaps one-eighth of a percent lower—but dealing directly with a mortgage banker can move a loan along more quickly. Depending on your situation, that may make a bank loan more appealing than a mortgage processed by a broker, although most mortgage experts say that rates are pretty much the same wherever you go, give or take this tiny percentage.
Your buying business isn’t complete until you’ve gone through the process of filling out a 1003 (say Ten, Oh, Three) form (the basic loan application form developed by Fannie Mae and Freddie Mac and used by most banks and mortgage brokers). Once you do, by law, you will receive a Good Faith Estimate and TIL (Truth in Lending) disclosure from your loan officer—an official estimate of your closing costs and cost of your credit in chart form—within three days of providing your loan application. This is your lender’s estimate of what it will cost you to close including the Annual Percentage Rate (APR)—the cost of money borrowed in a percentage rate, inclusive of all fees. Here as elsewhere, use caution in accepting any figures that aren't specific to your situation.