The real estate market can be an overwhelming and confusing industry to navigate – especially when buying a home is often the most expensive purchase people will make. Feelings of uncertainty, lack of knowledge or experience, and stressfulness are common among homebuyers. These feelings are amplified for first-time homebuyers, who have never purchased a home before or dealt with real estate agents, lenders, appraisers, inspectors, and the like.
Here at Red Door Agency, we take a personalized approach to buying and selling real estate. Whether you are a first-time homebuyer or an investor with multiple properties, we work with our clients to help educate, explain, and walk through every step of the way. For first-time homebuyers, this often starts with a comprehensive client consultation. This consultation involves one of our agents sitting down with the client to discuss and understand their needs, situation, and timeline. Equipped with this information, our REALTORS® work quickly to put a plan into action.
In our experience working with first-time homebuyers, there are several common questions that our clients ask that can help other potential homebuyers. With this in mind, we created this guide to help address and answer some of these situations.
How Do I Select a REALTOR®?
Referrals represent about 40% of a typical real estate agent’s business. Most homebuyers have either worked with an agent before or know a friend or family member that has. In the case of a first-time homebuyer who may not have a referral in mind, it’s important for them to understand what to look for in an outstanding REALTOR®. In fact, we previously discussed just this in our blog about attributes your real estate agent should have. While these attributes can help filter out the good, the bad, and the ugly, it’s important to find an agent that you feel comfortable working with and know they will be working for you.
When Should I Get Pre-Approved?
Yesterday. But in all honesty, the COVID-19 pandemic has flipped the real estate market on it’s side. Normally, clients and their agents have the convenience of time to view homes, consider the pros and cons of each, and then decide on which they would like to place an offer. Since the beginning of 2020, the available inventory of homes for sale has been cut in half, interest rates dropped to historic lows, while more and more people moved to the Tri-Cities region. Each of these factors put pressure on buyers to act fast and dish out more money. Knowing this, we encourage anyone actively considering a home purchase to contact their bank or lender and start the pre-approval process. In most instances, this can happen in as little as a day, and the pre-approval remains valid for 90 days – giving buyers enough time to shop around and find “the one”.
Why is Pre-Approval So Important?
Like we mentioned, homes for sale are in short supply. In an effort to remain fair and consistent to client’s listing their home for sale, listing agents are often requiring a pre-approval be submitted before showing. While this may seem unorthodox, it actually makes sense. The listing agent is simply protecting their clients in the event an offer is submitted, the house sits under contract, and the buyer isn’t able to obtain proper financing. In this case, the home would be taken off the “active” market and would eventually have to be placed back on the market in the event financing was not available to the buyer. In a market where homes often go under contract the same day they are listed, it only helps both sides for a potential buyer to have a pre-approval in hand so they get the home they want and the seller doesn’t have to unnecessarily relist the home on the market.
If you have more questions about the pre-approval process or what the difference is between pre-qualification and pre-approval, we’ve got you covered.
Which Lender Should I Select?
While we can’t recommend just one – there are so many great lenders! – we can say that working with a local lender provides the best experience and results. In our experience, using an online or out-of-state lender might sound easy and promise “Great, low rates!”, but buyers need to beware. In these situations, it’s best that buyers conduct due diligence to research the lender they will be handing over sensitive personal information like: social security number, date of birth, address, paystubs, etc. Aside from the security risk, online or out-of-state lenders just cannot provide the in-person level of service that local lenders provide. If you don’t have a lender in mind, ask your agent! At Red Door Agency, we will recommend at least three lenders that are able to help and assist you based on your needs.
It’s important to know that some lenders are only licensed in certain states, so if you are considering an online or out-of-state lender, you should be upfront with your needs and expectations. With this, don’t feel afraid to shop around to get the best terms and rates. If you are having several lenders pull your credit, you may be concerned about these “hard pulls” negatively impacting your credit score. Don’t fret: credit reporting agencies have mechanisms in place to support the needs of homebuyers. Multiple credit pulls within the same timeframe should only count as one “pull” and won’t negatively impact your credit score.
What Happens After I’m Pre-Approved?
Once you’ve been pre-approved by your lender, they should give you a pre-approval letter that you can give to your real estate agent. Remember: this letter is good for 90 days and can always be extended for an additional timeframe by contacting your lender. Now that you and your agent have the pre-approval letter in hand, you can feel confident in knowing that your time won’t be wasted looking at homes that require a pre-approval. You are now able to view homes with your agent and put in offers on homes you wish to purchase.
Pre-approval is just the first step in the homebuying process. Once you’ve placed an offer on a home and it’s accepted, your agent will go over next steps in the buying process, including: appraisal, inspection, remedies, warranties, and more! Don’t forget: the real estate market can be overwhelming, but your REALTOR® will be there at every step to help you along the way. In the meantime, be sure to read over a few scenarios in the buying process where you might want to consider walking away from the purchase.
Until then, happy house hunting!