1. Asses Your Finances
Understand your income, credit score, and current monthly expenses to determine how much you can afford.
Pull a credit report. By law, you are entitled to a free annual credit report from each of the three major credit reporting agencies and you can do so here: https://www.annualcreditreport.com/
Check for any credit discrepancies and for any outstanding debts that need to be taken care of.
Know which FICO score model is used by the lender you intend to use for your mortgage and know your credit score.
You can utilize www.myfico.com which has paid subscriptions options of $29.95 per month and get updates every 3 months or the $39.95 per month plan updates monthly. You can cancel at any time. Included with each subscription:
Complete 3-bureau coverage
FICO Scores
Scores for mortgages, auto loans & more
Credit reports
Score and credit monitoring
Up to $1 million identity theft insurance
24x7 identity restoration
Identity monitoring
FICO score versions available from myFICO.com: Learn About FICO Score Versions and Their Uses | myFICO
Do you have enough money saved for a down payment? A down payment is typically 3% and up, depending on the loan type and lender requirements. Do you qualify for no-down payment mortgage through specific government-backed programs?
Have you saved for closing costs which typically range from 2% to 5% of the loan amount?
Once a lender pulls your credit, they will be able to give you the total home price amount that you qualify to buy.
To estimate your monthly payments, to help plan ahead, visit www.mortgagecalculator.org.
2. Find an Experienced Real Estate to Work With
An agent can help you navigate the home search process and represent your interests. Working with an agent should be a given, especially for first-time buyers, who need to work with a professional who understands the ins and outs of a real estate transaction. Let buyers know that the process can be complicated and full of legal contracts and deadlines and that you are there to guide them through it. With the new court cases in the headlines and expectations for buyers paying for representation, you should go through the legalities of the buyer-broker agreement.
3. RESEARCH, RESEARCH!
Do a bit of research in advance. Make a list of things that are most important to you in a new home and list items that are lower priority or are a bit less important to you that you are willing to compromise on.
List the neighborhoods you are interested in and whether you prefer ones with or without a HOA.
Prioritize your list to help you and your agent target homes and areas that fit your specifications to save yourself time.
4. Be Practical
Decide early what’s most important as you fill out your priority list. It is crucial to manage your expectations. While being selective about the home you want, it is important to remember that you will not find the “perfect” home. Unless you build it, the perfect home doesn’t exist.
Think of the three-sided triangle concept. A triangle has three sides: location, features and price. You can find a home that meets two sides, but you cannot expect to find a home that meets all three criteria of the triangle.
5. Know what documents you need for your loan.
Identification
Drivers License
Social Security card
Proof of Income
Pay stubs from the most recent 2 months
W2 forms for the last 2 years
Tax returns for the last 2 years (for self-employment, rental income, and commission income)
1099 forms for contract employment
Social Security award letter if receiving Social Security benefits
Profit and loss statements and/or business tax returns if you are a business owner
Asset Statements
Checking account statements
Saving account statements
Certificates of Deposit
Bonds
Retirement accounts
Investment accounts
Business accounts
Other documents may be required by your lender in addition to these mentioned.
6. Find a Lender and Get Pre-approved
Once you have determined your finances, talk to a lender and get pre-approved. You want to know how much you can afford before looking for a new home, so you don’t spend time looking at homes outside your price range or fall in love with a home that is priced higher than the amount for which you are pre-approved.
7. Choose a Moving Timeline
Establish a realistic timeline for moving. If you expect to move in the next 30 days, it could be difficult. Your real estate agent can help you by giving you some parameters along with how long it takes to find and put in an offer on a home, have the offer accepted, and go through the process to get to the closing table. It can sometimes take months to close on a new home.
8. Know That There Is No Perfect Time to Buy
You may have concerns about the economy and the housing market. The truth is that there is no perfect time to buy or sell. The time that works best for you is the best time. Real estate has traditionally been an excellent investment, no matter how the economy is doing.
9. Choose a Neighborhood You Love
Don’t just shop for a house. The worst thing that could happen is you find a home you love but end up in a neighborhood that doesn’t fit your needs. Check out the neighborhood you’re considering buying in. Does it have the conveniences and attractions they seek (e.g., schools, restaurants, parks, shopping, entertainment)? You may not find everything you want, but the neighborhood is definitely something to consider when shopping for their home.
10. Think Long-Term
Real estate is an investment that can provide leverage against financial hardship. Your real estate agenst should help you understand how real estate investing works. Are you clients just starting and looking for a starter home that you can upgrade after a few years? Or are you looking for a forever home?
Real estate is a long game, and it takes time to earn your money back, so be sure you plan to stay in your new home for at least three years to earn enough equity to sell at a profit.
11. Be Sure to Get a Home Inspection
No matter what type of home you buy, you should invest in a home inspection. The home inspector’s job is to give you, the buyer, a full-spectrum analysis of the home, checking for things you can’t necessarily see on the surface. An inspector will check for foundation, roof, plumbing, and electrical issues to ensure the home is worth the money you're offering to pay. In essence, it’s an investment in peace of mind.
12. Don’t Negotiate Yourself Out of a House
Many homebuyers, especially first-time homebuyers, believe you shouldn’t offer the asking price on a home; that you should haggle to get the best price possible. To get your offer to stand out, keep things in perspective. If you love the home but are hesitant to offer the full asking price, keep what’s most important in mind—that you love the house. Understand that if you're unwilling to pay the full asking price on the home, there could be another buyer who is.
13. Factor in Some Repair Costs After Closing
Even a brand-new construction home may not have everything you want when you close. You could possible need to spend a little money on final touches after you move in. There will inevitably be a few things that need to be addressed after closing. It is good to keep these final details in perspective as you get closer to your closing date. Ask yourself, “Is it important enough to keep you from closing?” If not, make it their own once you move in. You can use the home viewing checklist from their home inspection as a plan of action.
14. Be Ready to Make a Decision
When you see a house you love, be sure you're ready to make an offer. Shopping for a new home is like dating—ask, “Would you keep looking if you found your soulmate? Or would you stop and put a ring on it before someone else finds out how amazing this person is?”. Just understand that if you hesitate, you could lose a home you love to another buyer. Don’t let fear keep you from going for it.
15. Bid Competitively
Don’t try to outsmart the sellers, especially if you love the house. Long gone are the days when there were several options for buyers. Today, we live in a seller’s market, with tight inventory and high demand, more cash offers than ever, and the sellers have the most control. If you love the house, you should make an offer reflecting that.
16. Keep Contingencies to a Minimum
Try to eliminate as many contingencies as possible before making any offers. Especially when your offer may be competing with others in a bidding war, work through any possible contingencies (financing, inspections, etc.) to draw up an offer that’s as attractive as possible to the sellers. You can even throw in a real estate love letter to the sellers to sweeten the deal and increase your chances of winning the bid.
17. Manage Expectations: No House Will Ever Be Perfect
The perfect house is a myth. It’s a unicorn. Think of a three-sided triangle—there are three sides to the triangle: price, location, and features. Your can have two sides of the triangle, but you can almost never find a house with all three. Think of it this way: If the perfect house is a 10 and doesn’t exist, then if you find a house that is an eight on that same scale, that’s probably going to be the right house for you. No house will have all the features and amenities you want. Ask yourself, “What are you willing to accept? What are you willing to concede?”
For example, consider this, what if a house that has the perfect kitchen but no covered patio and both were on your list. One is more important than the other, and one can be added after closing. It’s essential to consider your priorities when deciding on your home purchase.
No comments:
Post a Comment