First Time Home Buyer? Here are tips to help you prepare.
Deciding to take the plunge and buy a home is very exciting and very scary at the same time. After all, this is a huge step and a giant investment. You don’t want to make a mistake.
Here are some tips to help make the process smooth and get you as prepared as possible.
SAVE AS MUCH MONEY AS YOU CAN
In our markets, it is customary to put down 20% in cash. Yes, that’s 20%. That’s an intimidating number, so be as prepared as you can. You can put less money down but you may have to pay private mortgage insurance.
MAKE SURE YOUR CREDIT IS AS CLEAN AS POSSIBLE
Unless you are one of the lucky few who can pay cash, you will need to have a mortgage in order to buy. Checking out your score well in advance will give you time to clean up any mistakes, like tax liens that were paid off many years ago, or any delinquencies, or even mistakes on your report. This isn’t a quick process, so get an early start so you don’t have to face surprises.
You can also raise your credit score by paying down credit card debt if your balances are on the high side and closing accounts that you don’t use. You can go to annualcreditreport.com for a free report annually. And a number of banks now provide credit scores to their customers.
GET PREAPPROVED FOR A MORTGAGE
A key benefit of going through the preapproval process is that you will have a much better idea of what your buying power really is, that is, how much you can afford to borrow.
You will also be required to provide a mortgage preapproval along with any offer that you plan to make on a house, so best to have this before you seriously start to look. If you find a house you love, but you don’t have a preapproval done, you could be at risk of losing the house to another buyer while you are waiting for one.
Make sure that you are getting a preapproval as opposed to a pre-qualification. Many banks send these out to encourage you to talk to them about a mortgage. A preapproval is a written estimate based on an initial review of your credit and financial information by a lender. You will be required to submit pay stubs, bank statements, possibly tax returns and other financial documents. Most lenders don’t charge for the application, since they are hoping to win your business. Nor are you committed to work with that bank once you have the preapproval, so you can still shop for the best rate when the time comes to actually apply for the mortgage.
Talk to your lender about the different instruments that could work for you. There are programs that don’t require a 20% down payment, so make sure you have a complete understanding of your options.
Preapproval letters typically expire in 90 to 120 days, but can be quickly updated with a phone call to your lender.
FIND A GOOD BUYERS AGENT
Buyers may not think it’s time to work with an agent until they are ready to actually buy. But you can benefit from having an agent to check in with very early in the process. A good agent will get to know you and build a relationship with you over time. Someone that you feel comfortable with will help you narrow down where to look, provide you with advice and information about the communities you’re checking out, and once you’re ready, scout properties for you based on what she/he knows you like, saving you time and aggravation.
FOCUS ON THE TOWN AND THE NEIGHBORHOOD FIRST
It’s easy to fall in love with a house that has great features, but is it in a town or neighborhood that is right for you? Towns have their own personalities and vibes. Have you figured out what type of community fits what you are looking for?
Spend some time in each town you are considering, go to Starbucks and hang out for an hour or two, walk through the parks, wander through town, and of course do your research about commute, town amenities, schools, other features. Can you see yourselves here? does it feel like you?
This is something else that a good agent who gets to know you can help with. She/he can help you determine which towns are the right fit for the lifestyle you are looking for. Once you pick out towns that are a fit, you can look for the right house.
DON’T GET TOO ATTACHED TOO SOON
Unfortunately, it is not unusual to find the perfect house but not win it. Our local commutable towns are competitive home markets. The house you love may be loved by someone else as well. There are a lot of things in the process that are beyond your control, so be prepared for some disappointments.
And be aware that if the sellers have accepted your offer, until you are under contract, they can still entertain and accept other offers.
You may have to make some adjustments to your thinking as you go through the process, but rest assured, once you move into your new house, you will make it your home. And that’s what really matters.