Buying That First Home? Here’s What You Should Know

With the unprecedented drop in home prices, more people can now afford to get into the market. However, there are some things that first-time homebuyers should keep in mind.

Contact your mortgage professional to find out what you can afford before you start to look. Being realistic from the beginning of the process will enable you to set expectations appropriately.

Plan on putting down between 3.5 and 5% of the purchase price. This can come from either your own funds or be in the form of a gift from a close relative. Other up-front expenses will include closing costs and escrows.

If you’re looking at either foreclosures or short sales, allow extra time to complete the process, as these sales need to be approved by the holders of the mortgages on the properties. These lenders are undoubtedly overwhelmed at this point in time, so they might take several weeks or more just to respond to an offer submitted on a property.

Keep in mind that the $8,000 first-time home buyer tax credit will take effect when you file your taxes next year. The program is set to end December 1, 2009. Many people think you can use some of this money at closing, but you cannot.

There are very rare instances where an at-closing credit would apply, but these cases involve the use of a third party, such as a charitable organization.

Always have an experienced real estate attorney involved in the process, and have him or her review everything that you sign.