March 04, 2009

First Time Buyers! Now is the Time to Prequalify!

This week I have been working on funding more real estate purchases for my own portfolio. It took me back to our very first qualification process when we bought our first home my wife and I purchased in 1974 for $35,000. We were self-employed and had been taking sufficient money out of our new and growing company to qualify for a mortgage. We came prepared with tax returns, W-2, and an armful of paperwork as documentation for our income. We had our down payment in the bank seasoning as an asset and we were excited to move forward. We worked with the contractor to get some “sweat equity” to lower the price of the house so we could afford the monthly payments. Having never owned a home before, and as the sole breadwinner, I was worried if I would be able to make the payments on time each month. As a safety net, I would write the check for the mortgage a month in advance so it came out of the checkbook register and wouldn’t be spent. We were a little tight that first year but after that it never seemed to be a problem. We sold the home 15 years later for $90,000 or more than 157% increase over our original costs. This equals an appreciation rate of about 10% per year during that period.

What is even more important, we used the equity in the home to fund a small business loan to start our own company which we sold later for many millions of dollars. With that business came some office real estate which we still own and have expanded our real estate ownership to add cash flow to our income now.

The point is this, it all begin with qualifying for the first mortgage. For some that is a scary process…but it will be worth it in the end. We love working with first time homebuyers and helping them through this process. We have lenders we can refer our clients to and they can help most get pre-qualified for a loan on the phone.

There are still some standards to be met to obtain a loan. Here are some web articles that help with the education process. Here is a pre-qualification form that you can fill out and send to us and we will have some “friendly” lenders contact you with several quotes. Here is a website explaining FHA Qualification Requirements.

Whatever the process, it is important to find out what you need to do because owning your own home will provide you the same blessings it has for us. First Time Home Buyers now have more advantages than ever before. Housing is more affordable now than in past years. Mortgage interest rates are low… very low. Housing inventory is high and there is a lot to choose from. Having a prequalification letter from a lender will get you the house you want and likely save you several thousands of dollars in negotiations process because the Seller wants to work with a buyer who they know can buy the home. Take the first step today and ask for a list of lenders to call to prequalify for your first home.

Click here to see what Suzie Orman said on Oprah about owning a home.

Posted By: Steve Randall