Aspiring to be a homeowner in Sacramento? Here are 6 things to start doing to prepare...

Lately I have been chatting with several folks who are thinking about taking the plunge into homeownership -- some sooner than later -- and for many of them it is a little overwhelming as far as what to do to get started. I help buyers of all shapes and sizes, price ranges, and experience levels, and what I recognize is that whether this is your first time or your 5th time, many of the steps are the same or they significantly overlap! What is another day at the office for me is a life-changing event for you. So here are some things to think about as you contemplate your future home purchase.

(1) Check your credit score. Lenders use your FICO score to determine your mortgage interest rate...higher FICO scores lead to better interest rates, which can save you tens of thousands of dollars over the life of your mortgage. I cannot emphasize how important it is check your credit. For one, sometimes credit reports have errors, and they take a little time and effort to correct. NOTHING is more frustrating than finding a home you want to buy, and then trying to qualify for a mortgage only to discover some issue on your credit report that you could have proactively resolved -- sometimes this will cost you getting the house you love, or you will have to spend more to purchase it. Second, there are ways to improve your FICO score like paying down credit card balances, avoiding opening new lines of credit, having a solid history of on-time payments, etc. Pro tip: my bank offers free credit score monitoring, which I personally take full advantage of...I would highly recommend this as well. According to the Federal Trade Commission, federal law gives you the right to get a free copy of your credit report every 12 months from each of the three credit bureaus. In addition, the three bureaus have permanently extended a program that lets you check your credit report from each once a week for free at AnnualCreditReport.com. If you do not want to order your credit report online, they offer two other alternatives: call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can always ask a mortgage lender to run your credit as well for a fee.

(2) Where is your downpayment coming from? Often people assume you need 20% down to purchase a home, however that is not true. Many mortgage loan programs only require 3% - 5% down, or even 0% for qualified buyers like veterans who qualify for VA home loan financing. Most people who call me do not realize that they may already have enough in savings to qualify for a mortgage. Or, your downpayment may not already be in hand, and could be coming from the future sale of another property, or often my clients will receive downpayment "gift" funds from a family member -- and you probably need less of a gift than you think. In California, downpayment assistance help is available through a variety of state and local programs. Keep in mind that funding for these programs ebbs and flows. Here are a few available in our area to those who qualify (usually based on things like income, family size, and where the home is located):

• California Housing Finance Agency (CalHFA) Downpayment Assistance Programs – Offers several different types of conventional and FHA loans, and a couple forms of downpayment and closing cost assistance programs. 
• City of Citrus Heights Downpayment Assistance – Offers a low interest loan of up to $40,000 with no monthly payments (a "silent second" loan) for purchase of a home in Citrus Heights.
• City of Elk Grove Homebuyer Assistance Program – Offers a silent second, deferred-payment loans to first-time homebuyers meeting certain income and eligibility requirements
• Golden State Finance Authority (GSFA) Golden Opportunities Program – Helps low-to-moderate income homebuyers in California purchase a home with little-to-no money out of pocket by providing down payment and/or closing cost assistance (DPA) with an FHA, VA or USDA Mortgage Loan. You do not need to be a first time buyer.

(3) Talk to a Lender...please do this before you start sign up for online listing notifications and stalking open houses! Before falling in love with a listing, you really need to know what you can afford. A mortgage lender will help you...they will run your credit (and hopefully you followed step 1 and already have a sense of what your FICO score is and have worked to optimize it). The lender will take a look at your income, assets for a downpayment (or from step 2, downpayment assistance, proceeds from a future sale, gift funds, etc). They will run through different financing scenarios with you to help you understand what you can afford versus what you want to spend -- these are often very different! Perhaps the lender can qualify you for a $750,000 purchase but your comfort level with your monthly payment really lands at a $600,000 purchase. These are very important distinctions to make. ALSO, be sure you are taking all of the factors of the monthly payment into consideration. If your lender is not providing you clarity on the loan principal and interest, property taxes, homeowners insurance, and (if applicable) mortgage insurance then you are talking to the wrong person. Also while you may see lots of online ads for lenders, I would strongly recommend working with someone who is local, and who can sit with you and explain things. I can refer you to some great ones.

(4) What neighborhoods are you interested in? Location. Location. Location! The old adage in real estate is true. You can change a lot about a home's condition but you can't change the location. What vibe best suits you? Whether you want to live near the action of downtown or midtown Sacramento, or in a suburb like Elk Grove or Carmichael, or a charming vintage neighborhood like Land Park or East Sac, take time to do a little research. Common themes I tend to discuss with my clients are:

• School boundaries, and school district boundaries. I have resources to help you research school ratings, and everyone seems to value different things or programs in different schools. Got a particular school in mind where you really want to enroll the kiddos...? You should CALL THE DISTRICT and ensure that the school does not have an impacted enrollment and that your kiddos can actually go there. It can be a rude awakening buying a home down the street from the school where you want your kids to attend only to find out that the school does not have room, and the kiddos get enrolled elsewhere.
• Public amenities like parks, trails, community centers, etc. Sacramento has lots of wonderful recreation opportunities...some folks MUST be near an aquatic center. Or near the river. Or near William Land Park. Or in a secluded area. Being near those amenities may come with trade-offs -- like a higher price. Like traffic. Like noise. Like higher homeowners insurance costs. Like a long commute. Again, explore the areas and make sure living near those amenities (rather than visiting) actually makes sense.
• Safety. I often get asked if "fill-in-the-blank" is a good neighborhood?...well, for one my definition and your definition may differ, and I must emphasize that while realtors can give you certain insight and resources, we legally and ethically CANNOT “steer” buyers to or away from specific neighborhoods for any reason. That’s why doing your own research and visiting areas that interest you is so important. I have resources for clients who want to research crime rates. And drive by the area at different times of the day to get a sense for what the activity level and type is. 
• Demographics. Remember what I just said above? If demographics are important, the US Census has some great info for your perusal. 

(5) What type of property is best for you? Buying a single-family home isn’t your only option. Condos and PUDs can sometimes be more affordable and lower maintenance. Think realistically about your lifestyle, budget, and long-term goals. My first place was a condo before I moved on to a single family home. Each type of property comes with trade-offs: 

• Condos: When you buy a condo, you essentially own the interior of your unit, but not the land or exterior structure. Common areas like landscaping, pools, and roofs are typically managed by a homeowners association (HOA), and you'll pay monthly dues to cover maintaining those. Dues are subject to increase, and HOAs have rules that not everyone enjoys (like to limit the number or size of pets, or to govern the types of decoration you can put in your windows, for example). Not every HOA is the same -- some have deferred maintenance that can lead to sharp dues increases if the HOA governing board is not carefully planning for future expenses.
• Townhomes/Planned Unit Developments (PUDs): these may have many similarities to condos with shared walls and HOAs, however with a townhome/PUD you typically own the structure (interior and exterior walls) and the land it sits on (including the front and backyard, if any). Again, the governing boards of the HOA may be more proactive or reactive when it comes to maintenance.
• Single family homes: these offer more privacy and land space, fewer rules (though single family homes can be in HOAs too) but usually require more upkeep and maintenance as the expenses are not shared with other property owners.
• Side note: if you are interested in HOAs or have questions, I wrote my masters thesis about HOAs and would be happy to nerd out with you. 

(6) Did I mention talk to a REALTOR? Aspiring home buyers tend to reach out to me at different times during their exploration of purchasing a home...I come into the fray often as the first call -- and if that is the case I will help you navigate these steps in whatever order makes sense. Sometimes I am contacted as the last step as someone really wants to dive into their home search. All good either way. I am ready when you are. We will talk through what it means to enter into a Buyer Representation Agreement (the scope of the agreement, timeframe, compensation terms, geographic areas covered, type of property, my fiduciary duty to you) for professional representation, and how I advocate on your behalf, etc.

If you’re thinking about buying your first or 20th home in the Sacramento area, I’d be honored to help and welcome your call to see if we are a fit to work together.