Looking to buy your first home? Live MSP has compiled resources from the experts to give you the skills, confidence, and know-how to be on your way!
Getting started: What can you afford?
Before you start your home search, it’s important to figure out what you can afford. This will depend on your income and your expenses—as well as your credit rating, the down-payment amount, and mortgage interest rates. There are many calculators available to give you a rough idea of what you may be able to afford, but talking to a lender* is the best way to get an accurate picture.
You can also talk with housing counselors who can provide advice on buying a home, renting, credit issues, and other housing related issues.
Be sure to check out Live MSP’s directory of Incentive Programs to see if you might be eligible home purchase assistance.
*Lenders that offer home loans are typically: commercial banks, mortgage companies, credit unions, savings banks, and savings and loan associations.
Working with a professional
Buying a home is one of the largest financial investments that many people make. In addition to the large sum of money involved, the paperwork, contracts and negotiations can be complex. Working with a licensed real estate agent can help you successfully navigate the waters.
Check out this article for tips on choosing a real estate agent.
REALTORS® are licensed real estate agents who subscribe to a strict code of ethics. Learn more about using a REALTOR® here.
Get loan pre-approval
Many experts agree that you should start the mortgage process well before you make an offer on a home. Getting “pre-approved” means that you have worked with a lender who has reviewed your credit files and believes that you can qualify for a given loan amount. The lender will provide you with a “pre-approval” letter that shows how much you are qualified to borrow. The letter is not a loan commitment, but it shows sellers that you are serious and have the financial capability to purchase a home. Your pre-approval is important to sellers because they are looking for offers that won’t fall through due to lack of financing.
Home ownership education is a great way to learn the ins and outs of purchasing a home. To find out more about courses offered in your area, visit the Minnesota Home Ownership Center. The Center and its network of partners offer Home Stretch, a two-part program to simplify the home buying process and to prepare first-time home buyers for the important choices related to home ownership.
Know what you want
Once you know what you can afford, it’s time to start thinking about the things that are most important to you in a house and in a neighborhood. Develop a “wish list” that includes home features and neighborhood attributes that are “musts” or “desirable, but not necessary.” While being flexible is important, knowing what you want will prepare you and will help narrow your search. The US Department of Housing and Urban Development has a checklist available here. [PDF]
Live MSP’s neighborhood profiles are a great place to begin your research into Minneapolis and Saint Paul neighborhoods. While you’re exploring, think about what’s important to you. Are you looking to?
Use your wants and needs to narrow your search. Talk to your real estate agent about what’s important to you and get their ideas. Once you’ve honed in on a few neighborhoods, you can get in touch with neighborhood organizations to get a local’s perspective on the community. Visiting the neighborhood on foot and talking to residents is another great way to get a sense of the place.
have an easy commute to your place of employment;
live near lots of families and have a larger backyard;
be close to nightlife and entertainment; or
have the ability to walk or bike to parks, schools, libraries or shops?
Researching home sales information
Looking for information about recent sales prices or trends over time? Your real estate agent will be a good source for this information, but you can also check out a couple of online resources.
The 100+ —published by the Minneapolis Area Association of Realtors, the 100+ includes monthly updates for housing activity including data on sale prices, days-on-market, number of listings, and other information for 205 cities in the metropolitan area. Information for Minneapolis is divided into 11 neighborhoods and Saint Paul is divided into 13.
Minneapolis City Assessor’s Office—search Minneapolis property sales data. You can select a neighborhood and date range and find out the sales price of homes in that neighborhood.
Ramsey County’s Property Records and Revenue Department—search Saint Paul property sales data by searching for or entering in a street name. You can find the most recent sales price for individual properties and current property tax information.
Finding a home
Now the fun starts! A real estate agent and the internet are a great combination for pulling together a list of homes to visit. You can use Realtor.com to search for homes that are for sale in Minneapolis and Saint Paul neighborhoods. OwnaHomeMN.org lists quality, modestly-priced homes developed by community development organizations in the Twin Cities. Income limits and other eligibility requirements typically apply to purchasers of these homes.
Your real estate agent may also know of other properties that meet your needs. They can help you set up appointments to visit homes and attend open houses. Be sure to keep a detailed list of the homes you’ve visited, taking notes on each of them so that you can compare when you get home!
Securing a mortgage
Typically a mortgage is the largest loan that people have. Make sure that you understand your options, shop around for the best rates, and find a product that meets your needs. A great starting point is to read the US Department of Housing and Urban Development’s (HUD) “Looking for the Best Mortgage: Shop, Compare, Negotiate.” [PDF] This booklet defines terms, explains the rules, and outlines the process for acquiring a mortgage.
For all the information you need about home inspections, insurance, and the closing process, visit the Homebuyer’s Handbook published by the Minnesota Attorney General’s Office.
If you own a home and are concerned about making your mortgage payments, there are confidential, free resources to help you. Visit the Minnesota Home Ownership Center or call 651-659-9336 to learn more.
You can also contact the Cities of Minneapolis (call 311) and Saint Paul (call 651-266-6626) for foreclosure prevention assistance.
Foreclosures and short sales: information for buyers
Purchasing a home that is in some stage of foreclosure or owned by a lender is a different type of transaction than a traditional home purchase. In many cases the lender is directly involved, causing the transaction to take more time. Potential buyers must be careful to evaluate every property closely: there may be liens or back taxes owed on the home and/or the home may need substantial repairs to become habitable. Anyone considering the purchase of foreclosed or vacant properties should also conduct due diligence with the local government to ensure that all applicable requirements are met prior to purchase.
While there are opportunities to find a home at a significantly reduced price—it’s important to understand the state’s foreclosure laws, work with a real estate agent experienced with foreclosed properties, and to fully assess the costs associated with buying a particular property.
According the California Association of REALTORS®, a “short sale is a sales transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan.” For a buyer this can be an opportunity to purchase a home for less than similar homes in the neighborhood. Similar to buying a foreclosed home, short sales require patience and experienced real estate professionals to carry out the transactions.
To learn more about foreclosures and short sales, visit these websites:
About.com—has extensive information about the fundamentals, risks, and rewards of buying short sales and/or foreclosures.
National Association of REALTORS® Field Guide to Foreclosures and Field Guide to Short Sales—provide recent news articles and tips for buyers and sellers.
RealtyTrac—is a national on-line real estate listing service that focuses on foreclosed properties with detailed information about the foreclosure process and buying home that is in foreclosure.
Don’t Borrow Trouble—this program helps residents avoid being targeted by predatory lenders. Visit the website or call the help line at 612-312-2020 for free advice while purchasing a home, refinancing, consolidating debt, taking out a home equity loan, or for mortgage foreclosure prevention.
Home-Buyer’s Basics—the National Association of Realtors has compiled basic tips and ideas for first-time home buyers.
Home-Smart—dedicated to helping Minnesota homeowners understand basic home maintenance and improvement issues.
Road Map to Success—Your Path to Homeownership [PDF]—produced by Minnesota’s Emerging Markets Homeownership Initiative, this booklet provides step-by-step information about the home buying process and includes several useful worksheets.