5 Top Things To Do Before Buying a Home
Congratulations, you’ve decided to become a homeowner! Maybe you already own a home and are looking to upsize, maybe you’re a first-time homebuyer. Either way, it’s time to start getting ready for such a big purchase. But 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 view how Malfer & Associates can help you through the home buying process!
1. 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’re a responsible borrower and help towards final loan approval.
The first thing you need to do before buying a house is determine what you can realistically afford. Lenders will show you a dollar amount that is far above your budget’s comfort zone. Instead, start by using our handy monthly mortgage payment calculator to figure out what mortgage amount works best. When determining what you can afford, remember to include costs such as home owner’s insurance, mortgage insurance, property taxes, maintenance budgets, and potential association fees in your monthly and annual costs. So you’re 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 weren’t prepared for the real costs required at closing. Having a financial conversation at the beginning of the home buying process can make the purchase less stressful.
The second thing you need to do is start saving for a house. 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 more 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’re a financially savvy buyer and may help towards final approval.
While you’re saving, start paying. Your debt, that is. When lenders begin the arduous process of reviewing your financial status, they’ll look at how much debt you currently carry to determine if you can handle the loan payments. Most lenders want to see a debt percentage at or below 30 percent of your income. For example, if you’re interest is $50,000, the lenders would like to see a debt to income ratio of $15,000 or less.
Improve your credit score as you pay down debt. A good credit score is instrumental in getting the lowest possible interest rate for a mortgage loan. The better the score, the lower the costs of homeownership. Even half a percentage point can make a difference of thousands of dollars over the lifetime of a 30-year home 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. But be careful to 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. This includes getting a new credit card, loan, or a car loan, all of which pull credit.
Get pre-approved. Being pre-approved when you go to negotiate an offer tells the seller that you are a serious buyer, which can make the process move faster to secure final loan approval. A pre-approval is typically 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 pre-approval process, use the time to create a list of the necessary paperwork for the final step in the home buying process, such as bank statements, two years of tax returns, and statements of your assets like your 401k or IRA.
2. Determine What You Want in Your House
With the financial fundamentals behind you, does that mean you’re 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’s most 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 home buyers are looking for:
- Architectural types – (Craftsman, Cape Cod, Ranch, Tudor etc.)
- 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 most likely will already have specific areas in mind. That gives you the opportunity to begin researching the homes in those areas. For example, do a lot of homes in that area require sump pumps? Are many of the homes ranch style, with no basement? Which neighborhoods feature high association fees? 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’re ready to let go of and what is non-negotiable.
3. Shop for Mortgage Lenders and Real Estate Companies
Buying a home is the most expensive purchase most people will make in their lifetime. Lender offers can make the difference between getting the home you want, where you want, and having to make sacrifices in order to afford the mortgage. When considering mortgage lenders, consider these questions:
- Are there mortgage lenders with current special offers?
- Are there points associates with the mortgage loan?
- How much are the lender fees?
- Are any lender fees negotiable?
It’s not just your lender you want to shop for, either. While many real estate companies have varying costs associated with their service, the quality of their work 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. We also have a list of preferred mortgage lenders that we can provide for you to help you find the one that is best for you.
4. Prepare for the Showing
At this point, you’re almost ready to start shopping around! There’s just one more important thing to do prior: Make copies of that must-have list and store them in your car or bag. Bring that list with you to each showing so you can check off what the home has and what it’s lacking. This will be really helpful when you spend 10 full Saturdays viewing multiple homes; you won’t forget which house is which and what has what.
On this list, add to-do items when you’re inside each home, such as flushing the toilets, running the shower, checking the hot water, and checking the age of the utility systems and big-ticket items like the roof. And, of course, write everything down!
Finally, mentally prepare for extensive shopping. On average, the typical home buyer views roughly 10 homes over a period of 10 weeks before finding the one. This average has likely gone up in the recent months due to the current market. While that number varies widely, it isn’t uncommon to see over a dozen before discovering your perfect home.
5. Be Ready to Move Quickly
Once you are pre-approved 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 better 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 don’t fret! These tasks can be completed over weeks and months, giving you plenty of time to sort out the details. For a real estate team that offers extensive knowledge and expertise, reach out to Malfer & Associates when you’re ready to begin the journey to your new home!