There are few tasks more daunting than setting out to buy your first home, especially for the average New Yorker facing ever-so-steep price tags on teeny-tiny places.
In a nod to the ubiquity of the experience, HGTV created the series "Property Virgins," dedicated to documenting the travails of being a first-time buyer. Each week, viewers can catch real estate guru and host Egypt Sherrod guiding real estate newbies through their first purchase, helping them to strategize, plan, and ultimately buy a home that’s the right size for them (and their wallet).
Sherrod, who also founded The Egypt Sherrod Real Estate Group, a real estate firm based in New Jersey and Georgia, and the philanthropic organization the Egypt Cares Family Foundation, owns a home in Atlanta. Here, she offers some off-camera advice on preparing for that first apartment purchase.
What challenges are unique to first-time homebuyers?
The biggest difficulties are the learning curve, overcoming the nerves and emotional rollercoaster of purchasing a home, and knowing when to get off the fence and make a move or offer.
What should first-timers know before they start looking?
It doesn't matter if you are buying a 7,000-square-foot home in the Hamptons or a 700-square-foot condo in Manhattan, your first step to purchasing a home should always be to sit with a mortgage professional and go through the process of evaluating your finances and debt-to-income ratio. This will give you a clear picture of how much you can realistically afford. Sometimes buyers assume in their heads that they can comfortably afford one amount, but after getting pre-approved, they sometimes have a rude awakening when discovering what the banks will approve them for. The result of this process determines your "buying power."
The show helps adjust buyers' expectations from the dream home to something more realistic. How can New Yorkers do this?
I find that New Yorkers, in particular, are more realistic in expectation because they understand city real estate is super expensive. New Yorkers are often surprised when they find out they can afford more than they originally thought. Big Apple residents are accustomed to paying extremely high rent for a tiny hole in the wall. So wrapping their head around owning a place can seem unfathomable. The truth is, often times depending on what borough you are in, it costs about the same--if not cheaper--to buy than rent.
What advice do you have for people whose eyes are bigger than their wallets?
You never want to be house poor. House poor is when you spend all of your money buying a house and you have nothing left to furnish it. It’s when your mortgage is so high that you have no money left to do anything else you would usually enjoy in life. That sucks! The goal should be to find a home that you can be comfortable in, but more importantly, a home you can comfortably afford.
How do you figure out how much you can afford?
Again I stress the importance of consulting with a mortgage professional. But rule of thumb is usually that your mortgage and taxes shouldn’t exceed about one third of your monthly salary, even in New York City. Whatever you bring home in pay, divide it by three, and that is what you’d comfortably pay for mortgage and taxes.
Banks have a formula of determining whether someone is loan worthy, and it involves evaluating your debt versus your income. They take a look at your annual income and your credit rating to determine if you are a candidate for approval. ... [And] they look at your monthly overhead--bills and debts--versus how much income you earn. Then they approve you based on the amount you can afford after your bills.
What first drew you to a career in real estate?
When I started making a little money as a radio personality [as the host of a show on WBLS107.5 in New York], I was looking for something smart to do with it. Everything I was taught from early on embedded in my mind that investing in real estate was the way to go. So, I started buying dilapidated properties and flipping them for profit. After two years or so of doing that successfully I decided to get my real estate license so that I could sell my own flips. But then I was drawn into the industry, bit by the real estate bug.