Home-Buying 101 – How to Pick the Right Pros

If you’re racing to buy a home before prices and mortgage rates go through the roof, you’ll need to hire the right team to help you reach the finish line.

If you’re borrowing money, start with a mortgage expert, then select a real estate agent.

Sounds simple enough, but plan to be thoughtful about these selections. Getting just the right professionals can make a big difference as you navigate a marketplace where sellers have the upper hand and buyers compete for the best properties.

Housing market’s hot

The National Association of Realtors predicts sales of new and existing homes will climb this year and next after dropping in 2014. The median price for an existing home will climb to $229,600 by the end of 2016, up more than 10 percent from $208,300 in 2014. The median price of a new home will reach $300,500, up 6 percent from $283,600 for 2014.

For the week ending June 11, the rates on the most common home loans, 30-year fixed-rate mortgages, climbed to an average of 4.04 percent, up from 3.87 percent the previous week but down from the 4.20 percent average of early June 2014, according to Freddie Mac.

The Mortgage Bankers Association predicts rates will continue to climb, averaging 4.4 percent by the end of 2015 and reaching 5.3 percent by the end of 2016. You’ll feel the difference if you wait. At 4.04 percent, a $100,000 mortgage loan would cost you $480 a month for interest and principal alone, amounting to $172,800 over 30 years. That same loan amount at 5.3 percent would run up the monthly payment for principal and interest to $555, or $199,800 over 30 years, an extra $27,000.

(For more details on rates, see the Money Talks News Solutions Center for a mortgage rate comparison.)

More buyers are also entering the market, the association says.

“Mortgage application volume rebounded strongly in the week following the Memorial Day holiday … purchase activity is up over 6 percent, while refinance activity is down 5 percent,” says Mike Fratantoni, MBA’s chief economist. “Strong job gains in May and initial signs of wage growth are supporting the purchase market.”

Nailing down your mortgage

Look for a mortgage expert with lots of experience, advises Tina Mulligan, regional sales manager at The Mortgage Firm in Pompano Beach, Florida.

“You’re going to look for how long have you been in the industry, what do you specialize in, is it purchases, is it refinances,” Mulligan says. “‘Because that puts them in a different caliber. Do they know the various programs that are offered?”

Pick your mortgage pro the same way you’d pick anyone from a doctor to a plumber: Ask questions, advises Stacy Johnson, Money Talks News financial expert. “Get referrals from friends or look online. Make a list, then start asking questions. Talk to several: see who gives the best answers.”

Know what you need

Preparation is key to navigating today’s housing market, says the American Bankers Association, and it will help you communicate effectively with prospective agents and lenders.

Determine what you can realistically afford. Take into consideration your credit score, how much debt you currently carry and what type of down payment you are prepared to make.

The Federal Trade Commission offers a mortgage worksheet here.

To qualify for an affordable conventional mortgage in today’s market, the bankers and Paul Mullings, a senior vice president at Freddie Mac, say a borrower should have:

• Stable income
• Good credit history
• Common-sense down payment
• Documentation, such as W-2 forms, pay stubs, tax returns, employment verification, your latest credit reports, copies of bills for car loans, credit cards and student loans, and bank statements to verify savings.

Choose an agent

The next step is to choose a good real estate agent. Your mortgage expert, trusted neighbors and friends are good people to start with for referrals.

Before deciding on a real estate agent, make a list of the most promising candidates, talk to a few and check their reviews.

“Zillow.com, Trulia.com, Realtor.com are all places where they can have consumer reviews posted, and you can see what people really thought, answers, and in short order, you’ll form an educated opinion of who’s best for you,” says Amber Taylor, a real estate agent.

Ask about how many listings the agent has, how well he or she knows the neighborhoods that interest you, how many homes he or she has sold in your area and how often he or she will communicate with you.

You may want to consider an exclusive buyer agent. The National Association of Exclusive Buyer Agents (NAEBA) recently opened a free service to provide homebuyers with a listing of exclusive buyer agents, if there are any in the buyers’ areas. These buyer agents never take listings nor represent sellers and therefore, don’t have any vested interest in any homes for sale, says their association.

So now that you have your team assembled and you know how much money you can spend on a home, happy house hunting.