Laying the Foundation

When making your first home purchase, it pays to be prepared.



When a first-time homebuyer initially considers purchasing a house, the motivation can range from the romantic to the pragmatic. The move to buy can come as an impulse, a flash of inspiration that occurs when you happen to see and fall in love with the perfect house. Or it can be as methodical as carefully plotting your financial and family future, finding a house as the derived answer to complex equations of commute time, the neighborhood where present and hoped-for children will attend school, what tax bracket you'll land in, and the planned return on your investment.

Regardless of your reasons for becoming a homeowner, real estate professionals offer the same advice. Generally speaking, finding a Realtor who works in your best interest and earning pre-approval status from a bank or mortgage broker -- a measure that vastly enhances your offer in the seller's eyes -- are the main rules for getting started. But that's just the beginning. Buying a home is a daunting process, so there's a lot to consider.

Agent Shopping

Cowboy humorist Will Rogers famously quipped that he never met a man he didn't like. It's the same with real estate agents. You'll likely never meet one who isn't friendly, smiling and brimming over with enthusiasm. Dig deeper to know what you're getting in terms of loyalty, knowledge and experience. The right agent is a tremendous help -- and often a necessity when it comes to finding the right house.

Most Realtors advise starting your search for an agent by getting references from family, friends and colleagues. Take time to interview at least three agents in person. Ask to see their "activity lists." These lists show every property the agent has sold during the past year. You're looking for an agent who's experienced in the area where you want to live and who deals with buyers in your price range.

A seller's agent works for and gives complete allegiance to the seller; a buyer's agent does the same for the buyer. There are plenty of reasons why you want an agent on your side. A buyer's agent will point out -- rather than gloss over -- any flaws with the house or neighborhood. Your agent also will help you negotiate a good deal, explain your other options and be unquestionably on your side. While some shoppers feel they'll save money by skipping the agent's role (which earns a total of 6.5 percent of the sale value), most Realtors point out this amount will either be passed to the owner or fall somewhere between the bid and buying price.

Another key piece of wisdom shared by Realtors is to not over-extend yourself. Don't buy your dream house -- no matter how much you love it -- if you can't afford the down payment or monthly mortgage. Buy only what you can afford. A good rule of thumb: Your total monthly debts, including your mortgage, should not exceed 36 percent of your monthly income before taxes. Also, your mortgage payment is only one portion of what you'll be paying each month for your piece of the American dream; there are also property taxes, homeowner's insurance, flood insurance (depending on the location of the house) and more.

Mortgage Shopping

The local market has enjoyed a boom period for the last decade or so in part because of low interest rates, which have in turn given potential homeowners varied financing options. But there are a lot of choices, from three-year adjustable-rate mortgages (ARMs, as they're commonly called) to 30-year, fixed-rate mortgages. Mortgages are available from banks, mortgage companies and credit unions. You can also get one through a mortgage broker, who will contact several lenders to find competitive rates. It's vital to do some comparative shopping when it comes to your mortgage. Get mortgage information from more than one source, and get the same information from each so you can compare the offers.

The Federal Trade Commission (FTC) has published a guideline for picking a mortgage, and recommends that in addition to finding out the basic interest rate you ask each lender:

€ Is the rate fixed or adjustable? When interest rates rise, monthly payments for adjustable-rate loans eventually go up, too.

€ What is the loan's annual percentage rate (APR)? This includes the interest rate, points, broker fees and any credit charges you may have to pay, expressed as a yearly rate.

€ Is private mortgage insurance (PMI) required? If you make less than a 20 percent down payment, the lender will probably require you to purchase PMI, which protects the lender in case you fail to pay. Find out the exact monthly amount and how long you will be required to carry PMI.

Once your financing is secured, it's a good idea to have a pre-approval letter in-hand. That makes the seller and the seller's agent much more willing to work with you, as they don't have to worry about financing falling apart at the last minute. A good credit report can qualify you for little -- or often no -- down payment. With these two ideas in mind, you can set forth into negotiations with an edge. Now you're ready to start searching for your home.

House Shopping

Uptown native and resident Seph Dupuy, founder of The Dupuy Company, has been in the real estate business for decades with a strong background in commercial properties, but for the past eight years has done only residential listings. "Because that's where the action is," he explains.

Dupuy specializes in Uptown, an area that has seen a huge amount of activity and appreciation value increases in recent years. He recommends that buyers begin by finding a lender, so they can first know their price range. Dupuy says buyers already have an in if they are customers with a bank that's large enough to have a mortgage department. Dupuy adds that being pre-qualified to buy the home at the listing price "gives you a big competitive advantage over other bids, as the seller doesn't want to risk the buyers going into contract and then not getting the financing."

After financing is taken care of, Dupuy advises that you find a Realtor who you're comfortable with. "You're new, so you're going to need more counseling than experienced homebuyers," Dupuy says. "You need an agent that works in your best interest, that's experienced enough to point out deficiencies in the house. If you're looking in the $200,000-and-under range, you're going to find plenty of deficiencies. It's one thing if the house just needs a new paint job, that's easy. It's another if it needs all new electrical wiring. An experienced Realtor will discover that and tell you how much it'll cost to fix, and even introduce you to a contractor that'll give you expert advice."

Dupuy says that New Orleans remains a seller's market, so buyers should be aware that in-demand properties move very fast. It's not uncommon for houses to sell for 5 percent above the asking price in this market, he says, and that means that while buyers should be careful, they should also know how to react within the market. "That comes with experience," Dupuy says. "After they lose a couple of houses they really wanted because somebody snatched them up, they'll have a better knowledge of how to proceed."

Laura Geddes, a Realtor with Latter & Blum, says that quick action is more necessary in the non-luxury home market, defined as houses less than $350,000, than in luxury homes. In the range of luxury houses, there's more supply and less demand, she says, so those buyers typically can look at 20 houses before making a move. Shoppers looking for houses in the lower price ranges look at five to 10 before settling on something they like.

Geddes stresses a solid, comfortable relationship with a Realtor as a way to find your ideal home. "I believe that compatibility, similar lifestyles with a Realtor will help the buyer," Geddes says. "Does the agent also have children? Then they'll be more well-versed in what school options you have. Do they like the same type of architecture? Then they'll be looking at the same style of houses that you like."

Geddes likes to find out what the buyers like in terms of style, but also what they need from the home, based on several qualifiers such as distance to work, the neighborhood and the availability of off-street parking. "I drive around with them and we look at houses together, and that determines it," Geddes says.

Yet Geddes says that people investing in New Orleans homes are also looking for something special -- a style and aesthetic found in no other city. "People have a certain amount of space they require, and certain things they have to live with," she says. "But I always tell people that in New Orleans, you're buying more than a property, a roof over your head. You're buying architecture, style. People that are looking in the historic areas, they're looking for floor-to-ceiling windows, wide pine-length floors, mantles made of cypress, hand-carved stair railings. "You're getting wrought-iron balconies, side porches. Other cities have the same level of appreciation values for homes as we've had in New Orleans. But you're buying here an ambience you can't find anywhere else in the country."


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