5 Tips That’ll put Your First-Time Buyers at Ease
1. Crush your credit
In the rush to begin a home search, it’s easy to forget to start at square one: credit score. However, pulling a credit report from TransUnion or Equifax should be the very first task in your client’s home search process.
This step is particularly critical if your client has past debts that may need resolving. Explain to your client that a lender will most certainly check their credit score and that ignoring any red flag won’t make it go away; worse, it can increase the best mortgage rate offered by lenders. For those certain that their credit score is excellent, remind them that mistakes can turn up on any credit report. These can be resolved, but the process can take months. In the meantime, your client will be blocked from getting the best mortgage rates.
2. Hold off on significant purchases
Just before purchasing a home, and while paying off debt, suggest to your client that they should hold off on making any significant purchases or acquiring any new debt. This includes setting up a new store credit or new credit card (unless it’s part of a debt repayment strategy).
Lenders will examine credit scores as well as debt-to-income ratios (known as debt ratios). Any new debt will increase this ratio and make it harder for them to qualify for a mortgage (or get the best rates). Plus, adding new debt or access to debt can cause unnecessary fluctuations in credit history. This is a red flag for most lenders. Tell them that lenders want to see stable, squeaky clean spending habits.
3. Seek mortgage pre-approval from several lenders
Many first-time home-buyers take the easiest route available and apply for a mortgage with their usual neighborhood bank. Remind them that while it’s wise to maintain a great relationship with a local banker, don’t assume that this bank will offer them the best mortgage rates. Check rates with multiple lenders and tell them to read the terms — as they’ll want to find a mortgage with a good rate and terms that are favorable to their lifestyle. Once they have obtained their mortgage pre-approval letter, they can shop confidently knowing precisely the amount of dollars they can spend on their home each month.
4. Avoid closing cost calamity
Quite often you will provide exceptional service to your client, only to have a publicly negative review. Although this hurts, there are steps you can take to avoid this.
Always confirming throughout the process that you’ve heard and understood your client’s needs and concerns is integral, but so is putting yourself in your client’s shoes. For them, you are their real estate coach. The person tasked with assessing the field, examining the other team and calling the plays. As a result, many clients assume that agents should also alert them to all potential obstacles and warn them of all unexpected circumstances — including financial ones. While this isn’t supposed to be part of our job, a client doesn’t see it that way. This doesn’t mean you need to take on the responsibility, but you can take on the task of reminding or alerting your client of these financial obligations, such as closing costs.
While many buyers are vaguely aware that these fees exist, first-time home-buyers are taken aback when they total up the sum of these costs.
To help them prepare, simply provide them with a list of costs they may incur, such as:
- Land transfer tax
- Legal fees
- Title insurance
- Homeowners insurance
- HOA fees
- Property taxes
- Utility hook-ups
- Other potential fees
These costs vary from state to state (with larger cities sometimes adding in their own municipal fees). All you have to do is remind them to do their homework about these costs before finalizing a home purchase deal.
5. Expect extra move-in costs
Here’s a cost that home-buyers — first-time or experienced — forget to consider more often than you’d think. To help, give your client a list of moving tips along with ways to save money (such as how to buy furniture for your new home without breaking the budget). Quite often, just reminding your buyer client that additional costs may come with a new home purchase is enough to help them plan and budget for these expenses and — more importantly — not feel overwhelmed or shocked by costs they didn’t consider.