Buying a home is one of the biggest financial decisions you will make in your lifetime. Making sure your get the right home, at the right price and with the right loan requires a lot of work. Follow these four steps to ensure the process is smooth as possible.
Are you really ready?
Transitioning from being a renter to a homeowner is a big jump but it may for everyone. An important question you need to ask yourself is where do you see yourself in five years? If you suspect you will be moving within a few years, buying a house might not make sense financially. Another consideration is your current financial situation. If you are struggling now to stay afloat financially buying a home will merely compound the situation. The goal is to have your financial house in order and have somewhere between 10% and 20% saved as a down payment. The 20% down will keep you from paying private mortgage insurance which will keep your monthly obligations down.
Determine how much home you can afford
Buying a home can be very exciting but before you get carried away with all the possibilities it’s important to know how much home you can really afford. It’s really not as difficult as it sounds. Use the mortgage calculator to get an idea of what your payment will be based on down payment and purchase price. Don’t forget to factor in home ownership costs for items such as routine maintenance and repairs. Some of these items can be big ticket, such as a new air conditioner or new roof. In addition you will more than likely have a home owners association (HOA) and will have a monthly fee associated with them.
Talk to a lender
Getting prequalified for a loan is a simple conversation with the lender about your income, assets and down payment but getting preapproved takes a little more work. A lender will actually verify your financial information and submit your loan application for preliminary underwriting. Although it takes a little more work upfront, it will pay off when you start your home search since a preapproval letter will give your offer more weight.
Be careful here to stick to your numbers of what you feel you can afford. Your mortgage lender will most likely approve you for a bigger mortgage than you are comfortable with. Don’t let them pressure you into a bigger payment.
Choose the right Realtor
You don’t have to do this all on your own. In fact, choosing the right Realtor will ensure this process is smooth and that you get the biggest bang for your buck.
An important consideration is that Realtors have access to properties that are actually available. We live in an age where virtually anything we want is available to us through an easy internet search. Sites like Zillow, Trulia, and others offer information on listing status, asking price and even provide pictures but often times this is outdated or just plain inaccurate. The right agent will save you time and headaches by making sure you are armed with accurate, up to date information.
Finding the right agent is a balance of chemistry and credentials. It’s important to pick someone you like, given that you will be spending significant time with them in the near future. But you also want them to have the ability and expertise to safeguard your financial interests.
Just because you have a friend who has a friend who knows an agent doesn't mean you should necessarily work with this person. If you are considering an agent, Google them. Yelp them. Check out their website. Interview them. We are lucky to live in an age when there is so much information at our disposal, so use your resources.
Buying a house is a huge decision and shouldn’t be taken lightly. Take your time and put in a little work up front and you won’t be able to help but to make the right decision.
