Home BuyersBack to Buyers’ Section
Few things are as exciting as buying your first home! Many people feel overwhelmed or intimidated, but there’s no need for such anxiety. We will break down the process into a series of steps that will make your experience quite manageable. We talk to you about your needs and guide you from beginning to end.Here are a few topics we will discuss with you:
- How much can you afford?
- Different types of financing
- Lender referrals
- Types of homes available
- Areas where you would like to live
- How to utilize our online custom home searches to save you time
- Looking at the best homes for you
- Making an offer
- Contract negotiations
- The escrow process
Home Buying Tips
You need to consider many different things before buying a home. Shown below are some useful tips that will help you during this process.
Before you start shopping for a home, you need to be preapproved. You can save time and effort by not looking at homes you can’t afford, and you will be able to take action when you find a property that is perfect for you. Don’t confuse preapproval with prequalification, however. Prequalification is based on a less-thorough review of your finances, but preapproval involves a lender’s review of your actual income, debt, and credit. Your lender will also be able to help you with the following considerations.
Avoid major purchases. To determine how much you can afford, a lender uses your debt-to-income ratio, which is the percentage of your pretax income that you spend on debt. Your debt ratio will include monthly housing costs, car payments, credit cards, student loans, and any other installment debt. If you take on more debt right before buying a home, the amount of loan that a lender will finance will be affected.
Set your sights on homes that you can truly afford. After you are preapproved, your lender will tell you the maximum purchase price for which you can obtain a loan. But this is not always the most valuable information you receive. A good lender will also ask how much you are comfortable paying each month and then work that amount into the equation. It really doesn’t matter if a lender can preapprove you for $500,000 if you are most comfortable with spending per month no more than the payment on a $400,000 property. You must keep in mind that you’re going to have to make that payment every month. We can’t emphasize enough the importance of this concept.
The old standard of a 20% down payment is not necessarily the standard anymore. Certainly the more money you put down on a home, the less you will be paying monthly, but many different loan programs are now available that require less down, including FHA loans, which only require 3.5%. Your lender will tell you all about the various programs and help you decide which one is best for you.
Always work with a professional agent. Even though technology has made it very easy to search for homes online, most buyers are better off using an agent. Most people only buy one or two homes in their lifetime, and this process can be complicated. A good real estate agent will be involved in the sale of one or two homes per month and can offer advice and negotiate on your behalf throughout the transaction. Also remember that your agent’s commission is paid by the seller through the listing agent.
When you find a home you’re interested in, do some research. Your agent can provide you with comparable sales information from the last six months, which will help you determine how well the home is priced, and also contact the listing agent to find out if there are any competing offers and major disclosures about the home. Your offer strategy will depend on all of these things. Regarding competition-if a home has been on the market for six months with no offers, you will probably not offer the full price. If the home has just appeared on the market, however, and several offers have already been made, then you may end up offering more than the full price. Each situation is different, and your REALTOR® will guide you.
You should plan for a home inspection by an inspector of your choice, regardless of the condition of the home you end up choosing. The inspector’s job is to conduct an overall analysis of the systems and structure of the home. While the purchase contract is written as an “as-is” sale, the home inspection will occasionally uncover conditions that would require high-dollar repairs. If that is the case, you need to be able to renegotiate with the seller (another instance when your agent’s assistance is invaluable). Occasionally, the seller of an older home will have a pre-listing inspection completed before marketing the home, which is a great idea, because it can point out things for them to fix before putting the home on the market and also functions as a disclosure document to give buyers an idea of the condition of the home before they make an offer. While we support a pre-listing inspection, it should never replace a buyer’s own inspection.