A Greater Des Moines first-time home buyer's guide
Editor's note: An earlier version of this story incorrectly stated that the Greater Iowa Credit Union offers a grant to first-time home-buyers in Des Moines and Ames. It ended that program in 2013.
At this point in life you have the apartment rental down. You've mastered the search, first month and deposit at the ready, expertly bribing strong friends to haul your couch up three flights of small stairs...but this move will be different. You love the greater Des Moines area enough to make a commitment in the form of property.
And the time couldn't be better. First-time home-buyers can expect to hit a market crammed with oodles of incentives and resources.
But it won't start off easy. Get ready for a drumbeat of new confusing terms (like, what is radon, exactly?). There are documents. Big, long documents. And the most daunting decision of all: What do you want in a new home? Just getting there is a big accomplishment.
We've compiled a guide that will help. And soon enough, you'll be one of those people, posing for an exuberant selfie in front of the "sold" sign of your brand new little slice of heaven.
Related: 5 terms every home buyer should know
Dive into a Decision
The first step as a first-time home buyer is actually deciding you want to be one.
If renting has gone well so far, why shake things up?
A big consideration is money.
"Statistically, buying a home is the best investment you can make...money grows over time, compounding interest and appreciation," said Doug Burnett, a broker with Keller Williams Realty Greater Des Moines.
According to Burnett, $170,000 is the average price for a property in Des Moines, with a 5 percent down payment. Monthly payments then ring in at around $1,100.
"You cannot rent a home for that price, these days," Burnett said. "We're having historic low interest rates and everyone is feeling pretty good about their jobs and the economy; Des Moines has been a bright star even throughout the crash."
Des Moines Hell Yes vs. Waukee: The Key to Good Living
The next question is where do you want to live?
It's time to start thinking, "Am I a downtown sort of person? Or a suburbanite?"
Think about your lifestyle. Do you have a dog? You might want a home with more space and a yard as opposed to a downtown loft.
Think you'll have some kids? Time to start thinking about the quality of the schools. This could dictate where you buy.
But what about the urban lifestyle? Are you a person who wants to walk to a restaurant after work -- and then walk home? Well, that decision is easy. You should look downtown.
Burnett said ultimately choosing the 'hood you want to buy in is, like renting, all about the lifestyle you enjoy.
"Trends have been and have been for awhile, urban-centric with younger buyers," he said. "We have a lot of people who live in Sherman Hill and downtown and reverse commute out to the suburbs for work."
But maybe you grew up on a farm, and long for some peace and quiet after a day in the city.
Burnett said some home buyers want a property with land, maybe an acreage. One thing to consider: those are getting increasingly more pricey, so second or third-time buyers are more likely to buy those properties, he said.
Karla Walsh, a first-time buyer, recently bought an older home in the Beaverdale area.
The first step was figuring out what she wanted--preferably a brick home with two bedrooms, two baths, hardwood floors with some sort of deck or patio.
"The biggest challenge for me was setting the right level of expectations for the home," Walsh said. "I'm a bit of a perfectionist and there's never going to be a perfect home unless you build it custom, but that wasn't what I wanted...I was looking for an old home with character."
Don't Go the Course Alone
Once you have decided that you will buy a home, the next step is finding a Realtor.
Rochelle Burnett, a Realtor with Keller Williams Realty Greater Des Moines (she is also married to Doug Burnett), said a Realtor's role is multifaceted. This person can help a home buyer with many of the nuts and bolts of the process: using legal contracts, negotiating the best terms and assisting with finding people to conduct repairs and inspections. A Realtor also helps guide a buyer through the closing process.
Walsh worked with a Realtor to help find a home she wanted.
"The search was pretty low key; we would tour ones that seemed like solid options and skip the rest," Walsh said. "We finally found the winner in February, and it was simple once the decision was made."
You can do your own search too, by scouting properties on a Realtor's website and places such as Realtor.com or Zillow.com.
First-time home buyers should also consider attending first-time home buying seminars, hosted often by various lenders, Realtors and community education outlets.
Once you have found a home you want to buy, you should get it inspected.
Among the red flags to watch out for include radon presence in a home. Radon is a radioactive natural gas that can be cancer causing, but is "easy to mitigate," according to Rochelle Burnett.
You should also watch closely to see if any inspections discover lead-based paint.
"These old homes in Des Moines likely have some traces of lead-based paint, but there is minimal concern from buyers on this," Rochelle Burnett said. "It is expected and they know it's currently either covered up or can be covered." .
She added some older homes can have asbestos and buyers should seek professional advice for removal. She also recommended observing environmental elements of the property, such as slope (for water drainage) and flood zone placement.
Walsh's advice for new home-buyers? Just know it's not all going to be perfect.
"I had to learn to be okay with some features that would need to be fixed, like repaving the driveway or replacing the skylights, but those are small issues compared to how much I love the view from the four seasons room overlooking the backyard and how I almost sigh every time I hear the old hardwood floors creak ever so slightly every few steps."
You will also spend lots of time during the home-buying process making financial decisions.
There is plenty of good news for first-time buyers, as recent policy changes on the home front are encouraging. Eight years after the 2007 housing market crash, the trend is starting to shift to encourage a healthy housing market through more accessible lending. For example, in October 2014, federal regulators dropped the proposed 20 percent down payment requirement for high-quality mortgages.
Tax abatements are reassuring to new owners as well. This can reduce or waive the amount of property tax owed on improvements or new construction, meaning you only pay taxes on the value prior to the changes. This means you will get a better home fort at a reduced rate. Des Moines offers 100 percent five-year tax abatements on rehabilitated properties or new construction of more than $40,000; 115 percent 10-year tax abatements are applied to certain properties that have seen additions or renovations under $40,000.
There are other programs as well.
The Iowa Finance Authority (IFA) recently announced that first-time home buyers in Iowa who are eligible can "reduce their federal income tax liability by up to $2,000 a year for the life of their mortgage."
Look into the many programs offered by the Neighborhood Finance Corporation (NFC) for purchasing, refinancing and home improvement loans. The unique financing structure focuses on Polk County neighborhoods marked for revitalization.
After the housing crisis in the late 2000s the mortgage industry tried to correct itself and in doing so required a minimum of 5 percent down for conventional loans. Subsidies up to $10,000 can be used to help finance home improvements for property repairs.
Rochelle Burnett said the days of 100 percent financing went away during the recession.
"The minimum you could find was a Federal Housing Association (FHA) loan at 3.5 percent, but FHA loans have extra fees and some restrictions on the type of home," she said.
This is where access to loans with 3 percent down payments is a market change. The program is led by both Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) with the goal of giving qualified buyers access to secure and attainable credit. Freddie Mac's Home Possible Advantage program is a conventional loan geared to middle to low-income borrowers with a fixed-rate 30-year mortgage. To qualify, participating in a borrower education program is required. Something to note: Fannie Mae's loan recipients do require private mortgage insurance.
"Conventional loans are always ideal, but not everyone has 5 percent, so that reduction in 2 percent helps a first-time home buyer enter the market more quickly while the interest rate is still low," Rochelle said.
New Home Check List
1. Decide you want to buy.
2. Consider where you want to live: The city or the 'burbs?
3. Hire a Realtor
4. Look at programs for first-time home buyers. Get all the help you can.