Purchasing your first home is a big step and many first-time home buyers don’t know that there are steps they should take before looking for a home. Follow these tips and you will have a more enjoyable and rewarding experience purchasing your first home.
About a year before buying your first home check on your credit score, if it is not at least 620, start working on improving your credit. You also want to start saving money (if you haven’t done so already) so you have a down payment for the property.
Once your credit score and savings account are where you want them to be, meet with a mortgage lender (or 2) to get pre-qualified. This step is extremely important because you will find out how much you can really afford, therefore, you know what price range to start looking in. When you get pre-qualified the mortgage lender will look at your current debt, potential mortgage payment, interest rate, home insurance, HOA dues and other bills and your income to determine the max amount that they can lend you. This puts you in a good position to afford the mortgage and pay all your bills. This step is also important because if you fall in love with a house before finding out how much you can borrow; and then don’t qualify for a loan in the price point, you will be very disappointed. In addition, most offers require a pre-qualification letter from your lender before the seller will even consider your offer.
When choosing a realtor to help you with your house hunt, be sure to use a realtor that will have patience and take time to explain the process and answer all your questions. They should explain earnest money, due diligence, the process of making an offer, what the forms you are signing mean and help you identify properties that meet your needs.
You may decide you want to buy a fixer upper and turn it in to your dream home; this is a great idea if you have budgeted for all the work to be done and if you are knowledgeable on how to do the work. The mistake some new homeowners make is buying a fixer upper and then finding themselves in over their heads with the amount of repairs, underestimating the cost of the renovations and not having the time or skills to complete the repairs. When considering this type of property, be realistic and talk to professionals that can give you advice on the types of projects and challenges you might encounter.
Try not to get emotionally attached to a property. It is hard not to get attached to a home when you think you have found “the one”, but know that when you make an offer, it may not be accepted. The seller could get multiple offers and pick one that is more in line with what they are looking for or they might not accept your offer because it is too low or doesn’t have the terms they are looking (i.e. all cash). Don’t be discouraged, the right house is out there, it might just be something else.
When your offer is accepted you will have an inspector conduct a home inspection (this is mandatory when you have a loan), you the buyer pays for the inspection, and this is part of your due diligence. This gives you an opportunity to make sure that there are no underlying problems. When you get the inspection report, don’t be alarmed if it is 10 pages long, it is the inspector’s job to find every little thing wrong. You and your agent will look at the report and you will determine what items you would like to see addressed. If you are in a state where you need to use an attorney in real estate deals, the attorneys will correspond about the repairs; the seller may choose to fix all, some or none of the items on your list, this is still part of the negotiation. If you are in a state where realtors handle this, they will negotiate the repairs. It is good practice to only ask for the items that you are most concerned with so that the seller will be more apt to make the repairs. If you feel there are too many repairs or something makes you nervous, like foundation issues, this is your time to cancel the deal.
As part of your due diligence and within the same time frame as when you will be conducting a home inspection (varies state by state), check out the neighborhood during different times of day and do some test drives from your neighborhood to make sure you like the feel of the neighborhood during the day and evening and to make sure the drive to work is manageable.
One of the last things to remember (and this is important) DO NOT buy any big-ticket items before you close on your home. The lender will pull your credit before you close on your new house and if you have a lot of new debt you could end up with a higher interest rate, delay closing or have the deal cancelled altogether. If you plan on getting new furniture, appliances or other costly items, wait until after closing to ensure you have a smooth closing.
If you follow these tips when looking for your home, the process will go much smoother. It’s an important time in your life and you want to make sure you enjoy it and avoid as much stress as possible. Good luck and happy house hunting!
Lee Ernst Group, Reimagining your life with the Perfect Home or Property
630-514-4306 | 602-486-2255