Buying a home can be a stressful process, but it doesn’t have to be. There are many twists and turns throughout the experience, but you can minimize the stress by taking the time to follow a few simple steps.
Save your money.
When you begin to dream of buying a new home, start saving! Consider the money you will need for a down payment, closing costs and the additional costs of moving into your home. Entering the process with cash in your pocket will reduce a lot of stress.
Good credit is key.
Generally, in order to buy a home you will need a mortgage. In order to qualify for a mortgage, you’ll need decent (preferably very good) credit. Take the time to order copies of your credit reports to make sure your credit history is clean and there are no errors. If there are mistakes, take every step to correct them – a few letters can go a long way towards improving your credit and saving you money.
Evaluate what you can really afford.
The general rule of thumb is that you can buy a house that is about 2 ½ times your annual salary. There are many online calculators that offer an accurate estimate of how your income, debts and expenses impact affordability.
Explore down payment options.
The preferred down payment is 20%, but there are many lenders who offer low-interest mortgages that require lower down payments – sometimes as low as 3 percent of the purchase price.
Investigate local schools.
The reputation and ratings of local schools is critical information when buying or selling a home. Even if you don’t have school-age children, when it comes time for you to sell your home, it will become very apparent that strong school districts are a top priority for most home buyers. A home in a desired school district will increase property values. Do your homework and understand the quality of the local schools.
Consult with a professional.
Searching for a home can be overwhelming and exhausting. Although the Internet gives buyers access to home listings, understanding the intricacies of the market place can be complex. A professional agent is skilled at identifying properties that will meet all or your needs and creating strategies to help you during the bidding process.
Buy points for a better rate.
When choosing a mortgage, you will usually be given the option of paying additional points, which means you will be paying a portion of the interest at closing in exchange for a lower rate. If you intend to stay in the home for a longer period of time – at least 3 to 5 years or more – it’s usually a better deal to buy the points. The lower interest rate will end up saving you more over time.
Get pre-approved BEFORE you start looking.
Getting pre-approved will give you a clear idea of what you can afford and save you from the anxiety of looking at homes that are not within your budget. It will also put you in a better position to make qualified offers on homes. Do not, however, confuse pre-approval with pre-qualification. Pre-approval from a lender is based on your actual income, debt and credit history, while pre-qualification is based on a cursory review of your finances. Also, it is well worth it to get multiple quotes from lenders to thoroughly understand your buying power.
Do your homework before you bid.
Your agent will review sales trends of similar homes in the neighborhood over the last three months and your opening bid should be based on this analysis. If homes have recently sold at 5 percent less than the asking price, you should consider a bid that is about 8 to 10 percent lower than what the seller is asking. An agent will also give you guidance in this area.
Hire a home inspector before closing.
Your lender will require an appraisal, but this is simply to determine that the house is worth the price you’ve agreed to pay. Additionally, you should hire your own home inspector to thoroughly inspect the home for issues or potential problems that could require costly repairs in the future. Carefully review the inspector’s experience – try to hire one who is an engineer with experience in home surveys in the area of the home you are purchasing.