Congratulations, you have decided to become a homeowner! Maybe you already own a home and are looking to upsize, maybe this is your very first one. Either way, it is time to start getting ready for such a big purchase. Before you rush into the next open house, there are a few things to prepare. Check out these five top things to do before buying a home – then check out how Malfer & Associates can help you in your home search!
- Figure out the Finances
Buying a home is a financially complex process – and one that starts long before the actual purchase of a home. There are a few financial tasks to complete prior to applying for a mortgage that will show you are a responsible borrower and help towards final loan approval.
First, determine what you can realistically afford. Sometimes, lenders will show you a dollar amount that, in reality, is far above your budget’s comfort zone. Instead, start by using our handy mortgage calculator to figure out what mortgage amount works best. When determining what you can afford, be sure to include home owner’s insurance, mortgage insurance, property taxes, maintenance budgets and potential association fees in your monthly and annual costs. And so you are not surprised at closing, discuss all closing costs and fees with your lender – but also understand that number is not always final. Many home buying plans get derailed because the buyers were not prepared for the real costs required at closing.
Then, start saving. When you become a homeowner, you are saddled with all the costs associated with such an endeavor. If the worst were to happen, such as a medical emergency or a job loss, having a most robust savings account will help you coast through the tough times without having to make painful decisions about keeping your home. Significant savings also show lenders that you are a financially savvy buyer and may help towards final approval.
While you are saving, start paying. Your debt, that is. When lenders begin the arduous process of reviewing your financial status, they will look at how much debt you currently carry to determine if you can, indeed, handle the loan payments. Most lenders want to see a debt percentage at or below 30 percent of your income.
As you pay down debt, your credit score will improve. A good credit score is instrumental in getting the lowest possible interest rate offer with your mortgage. The better the score, the lower the costs of homeownership. Even half a percentage point makes thousands of dollars of a difference over the lifetime of a 30-year loan. Other ways to improve your credit score include fixing any errors that might exist. A quick request of your free credit report will tell you if there are any mistakes worth rectifying. Last, avoid any credit pulls on your report, particularly if your score hovers close to a lower rating tier. Each time your score is pulled, you will lose a few points.
Last, get preapproved. Having preapproval when you go to the negotiating table tells the seller that you are a serious buyer and can move faster to secure final approval. Typically, preapproval is valid for 120 days, so only make the move when you are prepared to buy within the next six months. While you are preparing for the preapproval process, use the time to create a list of the necessary paperwork for final approval, such as bank statements, two years of tax returns, and statements of your assets such as a 401k or IRA.
- Determine What You Want
The financial part is done. Does that mean you are ready to hit the open houses? Not quite yet. Have you ever walked into the grocery store without a list and ended up buying a ton of things you neither need nor want? Believe it or not, the same can
happen in house hunting. Before ever stepping foot into a home for sale, figure out your priorities. Here are just a few things to consider that will help you find your perfect home.
Decide what is important. Does location matter the most, or do you prefer to get more for your money? What size will let you grow into the home? Do you have a particular home style you love? Knowing how much house you can afford will help you narrow down the choices. Create a list of must-haves in your home and another column for nice-to-haves. Not only will this help you focus, but it will also help you avoid falling for a single feature in a home despite it not having anything else you need.
Let’s break down a few of these to give you some ideas on what other homebuyers are looking for.
- Architectural types, such as Craftsman, reverse 1.5 story or stucco
- Open floor plan
- Number of bedrooms and bathrooms
- Finished basement
- Proximity to work
- Quality of school district
- Close to highways
- Near entertainment districts
Research the neighborhoods. Once you begin to narrow down what you want, you will most likely have marked off specific areas. That gives you the opportunity to begin researching the areas. For example, are many of the homes in the neighborhood – ranch style, with no basement? Which neighborhoods feature high association dues? What is the traffic like? Knowing area quirks will help you avoid nasty surprises later, ones that could have been a deal breaker had you known about it prior.
Prepare to compromise. Remember that must-have list you made? Make a note next to a few items that you are prepared to give up. Inevitably, there will be some compromise on price versus amenities versus neighborhood, so prepare ahead of time by figuring out what exactly you are ready to let go and what is non-negotiable.
- Shop Around for Lenders
Buying a home is the most expensive single purchase most will make in their lifetime. Lender offers can make the difference between getting the home you want, where you want, and having to sacrifice in order to afford the mortgage. We have a variety of lenders we worth with regularly that are highly recommended. When considering lenders, consider these questions:
- Are there points associated with the loan?
- What are the lender fees and how much are they?
- Are they willing to drop certain fees?
The quality of a real estate agent can make or break your home buying experience. At Malfer & Associates, we understand that customer service is of utmost importance when working with buyers. That means providing the personal service needed to fully communicate and listen to our clients’ needs. It also means never pressuring you into making split-second decisions for the sake of a sale. We are here to help you find the right home at the right price, with integrity and honesty.
- Prepare for the Viewings
At this point, you are almost ready to start shopping around! There is just one more important thing to do prior: Make copies of that must-have list and store them in your car or bag. You will want to bring them with you to each showing so you can check off what the home has and what it is lacking.
On this list, add to-do items when you are inside each home, such as flushing the toilets, running the shower, checking the hot water, and the checking the age of the utility systems and big-ticket items like the roof. And, of course, write everything down!
- Be Ready to Move Quickly
Once you are preapproved to begin shopping, time can seem to go into warp speed. Suddenly, you need to make a decision now or another buyer may swoop in and offer a golden ticket of a deal. Be mentally and financially prepared to make a fast decision on a home – especially in the seller’s market we are currently in. It may be tempting to give a low-ball offer, but everyone else is coming to the table with the best deal they can give; you need to be prepared to do the same – and fast!
There are quite a few things you need to do before jumping into homeownership, but do not fret! These tasks can be completed over weeks and months, giving you plenty of time to sort out the details. For a real estate agency that offers extensive knowledge and expertise, reach out to Malfer & Associates when you are ready to begin the journey to your new home!