Spring is often the season that couples begin looking to purchase a home. There are several factors in the decision to purchase… key is to know your criteria and rank them in order of importance for you. You also must be aware of some of the challenges and pitfalls of purchasing a home. Here are five things to consider when taking the big leap:
Don’t Buy “Too Much” House
I phrase the subtopic this way, because “too much” is not necessarily a home that’s too expensive, or too big, it depends on your circumstances. Lenders still provide the option to purchase a lot of house, in some cases, more house than you are considering. Make a list of what you want in your house and stick to it:
- Decide how many bedrooms and baths you need
- Decide what square footage is comfortable to you. If you want a 2500 sq. ft. home and you purchase a 4000 sq. ft. home, you may never use the extra space, and it’s more house to heat, cool and clean!
- You determine your budget as to what you want and what you can afford. No one else, including the mortgage company or realtor, can make that determination for you.
As a follow up to the last bullet point, mortgage companies will routinely qualify you for a more expensive home than you would like to pay for. If that home is not what you were looking for, do not take that route. Do your research, determine what you want and go for it, not what someone wants for you.
Use a Good Realtor
Real estate agents are professionals who help you buy and sell your home. You will see many photos on signs around every neighborhood for realtors in your areas. Get referrals from your friends, relatives and co-workers. All realtors are not created equal. You want responsiveness and a realtor who can help move along the negotiation and even help with the closing process. Having a great realtor makes the process much more comfortable.
Get Pre-Approved for Your Mortgage
You can save yourself many challenges later if you get pre-approved early in the house-hunting process. This is different than a pre-qualification, which is not looking very in-depth into a borrower’s financials, but a lender looking at your overall financial picture, including assets, debt and income. Pre-Approval actually looks at your credit scores and income verification to begin much of the pre-closing process. If you are pre-qualified, the realtors and any sellers feel much more comfortable working with you as you are much more likely to be able to close a deal.
Location, Location, Location
Those three words are a mantra long held in the real-estate industry, because of its importance to buyers. Decide on your location, but be reasonable about your expectations. If you have a $140,000 budget but your desire neighborhood’s median home price is $200k, it’s going to be challenging to find a home with your budget in that neighborhood. Research the market to help you wrap your mind around getting your budget and your location preferences in sync.
Alternative Methods of Purchase
The same buyer who couldn’t purchase a home in the 200k neighborhood with the $140k budget might be able to do it if they are willing to make some sacrifices. If you are willing to look at foreclosures or short sales, you may have to wait a little longer to close or put in some work on your home. In the end, you could be in the neighborhood you want at a budget that’s comfortable for you.
- Short sales are purchases made with the bank and seller working together for them to sell the house, but the bank will take a bit of a loss. These loans often take longer to close, for many reasons. Talk to a good realtor and mortgage company to walk you through the process.
- Foreclosures can also be tough to close, but they can come at bargain basement prices. Foreclosed homes will often need major repair, so make sure to get a good home inspection before the purchase of a foreclosed home. Again, a good realtor and mortgage company can help tremendously.
You will also want to research things such as getting the best interest rates, property taxes, FHA, VA and Conventional loans and private mortgage insurance to name a few.
BMWK – Start with these 5 tips and you will be well on your way to owning a new home.