For most, homebuying seems to be an overly complicated process. Viewed from a wider lens, you have multiple steps – mortgage application and approval, making an offer, competing with other buyers, contract negotiation, the due diligence period and (hopefully) a successful closing – rolled into one larger process that leads to your home purchase.
For something the majority of Americans will undertake at least once in their lifetime, shouldn’t it be easier?
All told, simplifying the homebuying process is hard without taking out key elements that ensure honest lending, sales negotiations and understanding of the details of the deal for both the buyer and seller. But resources for homebuyers to better get a handle on the process are growing.
First-time homebuyer workshops are popping up throughout the U.S. as real estate agents, lenders and agencies approved by the U.S. Department of Housing and Urban Development have taken up the task of providing more transparency for homebuyers about getting approved for a mortgage, making an offer and preparing to close on a home.
This is particularly important as new buyers flood the market. First-time buyers make up about 35 percent of homebuyers in the U.S., according to the National Association of Realtors’ 2016 Profile of Home Buyers and Sellers.
For many, an education in jumping into homeownership is necessary. “They’re coming in fresh and brand new and just wanting to understand the whole process,” says Darlene Bharath, a housing counselor for Belair-Edison Neighborhoods Inc., a nonprofit housing organization in Baltimore and a HUD-approved counseling agency.
Of the 50 people that typically attend the organization’s semimonthly homebuyer classes, between eight and 10 have spoken to a lender or real estate agent so far, but the rest aren’t quite ready, says John Watkins, also a housing counselor at Belair-Edison Neighborhoods Inc.
Homebuyer workshops aren’t exclusive to first-time buyers. Jessica Diaz, a Realtor for Coldwell Banker Residential Services in the Atlanta area who puts on first-time homebuyer workshops with colleagues, notes clients listing their home with her decided to attend her recent workshop because they previously purchased their home from the builder and wanted a refresher course on the buying process for an existing home.
“It took the edge off, because [buying and selling] can be scary to do at the same time,” Diaz says.
A first-time homebuyer class can be key to pointing out steps you may have previously been unaware of, walk you through some of the challenging aspects and help you identify the right timing and location for your home purchase. Here are eight things you’ll learn in a first-time homebuyer boot camp.
Your credit history is important. You’ve probably heard this once or twice already, but a first-time homebuyer class starts with the basics – and the most basic thing you can know about buying a home is that your credit matters when you apply for a mortgage.
Alexandra Conigliaro Biega, a Realtor with Coldwell Banker Residential Services in Boston who also hosts first-time buyer workshops with colleagues, says the stress put on knowing your credit score and available credit leads a lot of workshop attendees to determine whether they can buy now or if it’s better to wait and improve their credit.
Preapproval is a must. Beyond your credit, mortgage preapproval is key to both setting a budget and looking good to sellers. Being preapproved means a loan underwriter has examined your financial credentials and, barring any issues with the home's condition or appraised value, confirms you qualify for a certain mortgage amount.
“The first step is to get preapproved – we don’t know what to look at without knowing the budget,” Diaz says.
You may qualify for assistance programs. Lenders often offer or are able to be a part of larger mortgage programs that make it easier for you to purchase a home – whether it’s a down payment assistance program, a grant for the purchase price of your home or another form of monetary assistance.
A lender representative is often present in a first-time homebuyer workshop and will help guide you as you search for the mortgage program or low down-payment program that can best help you, but the organization that hosts the seminar may assist as well.
Belair-Edison Neighborhoods Inc., for example, works with homebuyers to apply for the right grants or programs, many of which actually require attendance of a homebuyer boot camp, among other requirements, before you’re considered eligible.
House hunting comes after mortgage prep. Securing your financing is certainly a big step, but it’s just the beginning – once you’re preapproved for a loan, it’s time to start house hunting.
At your first-time homebuyer workshop, you’ll likely get an overview of how you can begin searching online for available properties, as well as your real estate agent’s role in finding houses, touring them and narrowing your options.
Conigliaro Biega says she often includes a housing market report in her course materials, which can help homebuyers narrow the area they’re looking to buy in based on affordability and other personal factors the buyer has to weigh, such as commute time, schools and safety.
Next are offers, going under contract and due diligence. Once you’ve found the right house, naturally it comes time to make an offer and begin negotiations. Those leading the boot camp can provide details about this part of the process that are specific to your state or city, as local laws can have a significant impact on each part of the process.
One part in particular is due diligence – when the buyer has a certain period of time under contract to inspect the home and conduct research to reveal any potential problems. Laws vary by state as to what the seller is required to tell you, so it’s imperative that you move quickly to discover any code violations, cracks or leaks that need fixing or even an unseemly past that could make you rethink buying the house.
Closing and beyond. In an overview of homebuying, the natural end seems to be when you close on your home and take possession of the property. But there’s so much more to homeownership that can serve as an unpleasant surprise if you’re not ready.
In addition to lenders, agents, appraisers, inspectors and more discussing their role in the purchase process, Bharath says a representative from a title and escrow company is typically in attendance, as well as a homeowners insurance representative to discuss coverage once the home is yours.
There may be one-on-one options. Most professionals putting on the class welcome more personal questions about the homebuying process, and at HUD-approved counseling agencies, there are typically one-on-one meeting options to go in depth about your own qualifications for homeownership. For some programs, completing the workshop and a one-on-one session is required to be approved for a mortgage- or down payment-assistance program.
“Once the client comes in to schedule a one-on-one interview, we’ll address their individual situations, so we’ll look at their pay stubs, income tax returns, bank statements and things of that sort to determine how much of a house they can afford to purchase, as well as what grant they would be eligible for,” Watkins says.
There will likely be more than one pro. Many first-time homebuyer workshops bring in additional real estate professionals to help explain certain parts of the process – a lender, home inspector, title representative and more. For Diaz, one of the biggest takeaways from the class is that a homebuyer won’t be working alone or just with one agent, but an entire team of people to successfully make a purchase.
“There’s so much that people don’t know, they don’t even know where to begin,” she says. “And I think it’s helpful for these people to learn that it’s not just the agent that you’re dealing with, but it’s a whole team of people.”
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at firstname.lastname@example.org.