Buying a home for the first time

With a baby on the way, Jason Eckel and his fiancee, Leslie Englund, decided to buy their first home.

But Eckel, a bricklayer, and Englund, a Spokane Community College student, discovered that finding a house was more challenging than they thought.

Their real estate agent “sent me 140 houses on the Web,” Eckel said. “I went through every house and picked out 45 houses. I looked at 20 of those. We found three that we were interested in and one that we’re really interested in….”

The couple eventually made an offer on a North Side home. Eckel and Englund didn’t have pie-in the-sky criteria. They wanted a clean two-to-three bedroom house in a safe neighborhood. Yet, they came across “so many houses (and thought) ‘this is scary,’” Eckel said.

What they didn’t know at the time, and are only now discovering, is that finding a house is a small part of the process of buying a house.

Buyers need to know the state of their credit, how to apply for a loan, what kind of loan to get, what they can afford, why they should pay for a home inspection and how home ownership meshes with their future financial plans.

They also need to know that buying a home is different than it was a generation or two ago.

“A lot of things have changed over the years,” said Rick Keith, an agent with ReMax of Spokane.

“It used to be if you had no money, you couldn’t buy a house,” Keith said. That’s not true anymore. “The most important thing is your credit. It doesn’t even have to be sterling. It has to be okay, but it doesn’t have to be perfect.”

Sharon Greer, a loan specialist with Mountain West Bank in Coeur d’Alene, said, “There’s still a lot of people that think they can’t own a home, but they can.” Even bankruptcy may not be insurmountable. The Federal Housing Administration, which insures many mortgages for first-time home buyers, “will allow you to buy a home two years out of bankruptcy,” she said.

Loan approval first step

The first step — even before the house search begins — is to get loan approval from a bank or mortgage company. It helps buyers know how much home they can afford. For this process, the lender will grab a copy of the buyers’ credit report, and the buyers will need to provide copies of their W-2s, tax returns or other income documentation.

“The biggest disappointment is when first-time buyers think they can buy a $100,000 or $150,000 house and they start looking and find out they’re approved for less,” Keith said.

Kay Cram, an affordable-housing loan officer with Action Mortgage, a subsidiary of Sterling Savings Bank, said preapproval is important for another reason, too.

“The market is hot,” she said. “If three (buyers) put in offers and one is preapproved, who’s going to get the house?”

Once preapproved, buyers shouldn’t jeopardize their credit, Keith said. “I tell buyers, ‘Don’t do anything between the time you’re preapproved until I hand you the key. Don’t make late payments, don’t apply for credit cards.’”

Financial help available

Many first-time buyers are eligible for financial assistance programs. Through the Washington State Housing Finance Commission “House Key” program, qualified buyers can get a lower interest rate than with an FHA, Veterans Administration (VA) or conventional loan, Cram said. Buyers must meet income eligibility requirements and attend a first-time homebuyer class.

Through the “House Key Plus” program, eligible buyers can borrow money for down payment and closing costs, Cram added.

In Idaho, the Idaho Housing and Finance Association offers a bond program that provides a break in interest rates. The program is not limited to first-time buyers; anyone who meets the income guidelines can use it.

In addition, first-time buyers who meet income eligibility may qualify for a $1,000-$2,000 grant that can be applied toward down payment or closing costs, Greer said. The grant doesn’t have to be repaid if the buyers keep the house for five years.

When applying for a loan, potential homeowners need to consider more than interest rates, said Jackie Cardle, branch manager of Countrywide Home Loans in Spokane.

“The typical lifespan of a mortgage is five years,” Cardle said. “From a rate perspective, you’re looking at short window in that lifespan.”

Keith said buyers should never feel pressured either by a real estate agent or a lender, and if they are, “my advice is find another one.”

Once buyers find a home, they should pay to have it inspected by a professional. Some of the defects the inspector might find “are piddling, some are serious,” Keith said. “But the buyer has the right to ask the seller to fix it at (the seller’s) expense. If they refuse, you have the right to walk away and get your earnest money back.”

The buyer pays for the home inspection, which can cost $250-$300 — money well spent, Keith said.

Other steps in the home buying process include an appraisal of the property’s value, underwriting of the loan, a title search and preparation of documents by an escrow company.

An escrow company prepares and holds the closing documents, said Jamie Parisotto, manager of the escrow division of American Title Company in Spokane. The title search is an examination of public records to ensure that the seller is the legal owner and that there are no liens, or claims, on the property, Parisotto explained.

Classes a good idea

If buying a home threatens to make your head spin, home buyer classes are a good resource.

In Washington, the Spokane Homeownership Resource Center and the Spokane Neighborhood Action Program offer such classes. The Idaho Partners for Home Buyer Education offers home buyer classes through North Idaho College’s workforce training center in Post Falls.

“We try to have people focus on, can they afford a home at this point in their life? If they go to the class and decide they have to wait a year, that’s fine,” said Pat Connell, NIC class coordinator.

“Buying a home is the ultimate for many people,” Connell said.

Cardle, of Countrywide Home Loans, said, “Home ownership is the springboard for financial wellness.” Buying a home can provide equity that a homeowner can use in the future to achieve other financial goals, she explained.

“It’s the one equity piece in the financial puzzle that will take them beyond what they ever dreamed,” she said. “It’s the difference between putting a child through college or not, having a retirement fund or not, having an emergency car repair fund or not.”

Cardle had some advice for first-time homebuyers: “Sooner is better than later. The rent trap is exactly that.”

Jason Eckel concurs.

“I wish I would have done this years ago. I’m 30 now. I wish I had done this at 25. I would have had five years equity in a house.”