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Buying a home can be an emotional, time-consuming, and
complex process. There are a few things that you can do to
help make the process go as smooth as possible:
1.) Check your credit.
Before you apply for a home loan, regardless of your credit,
it's a smart idea to obtain a copy of your credit report
from the three major credit bureaus and review the
information. If there are errors or things that need to be
addressed, it's easier to address them before you have found
a house, than after you have found a house and are trying to
close your loan.
If you know that there are a few blemishes on your credit,
let your lender know what they are, why they are there, and
why you are a still good credit risk. Lenders look at your
credit to determine how likely you will pay back the loan.
If you had extenuating circumstances - like a loss of a job
or medical bills - let them know so that they understand
that it is not likely to happen again in the future.
2.) Get approved before you buy.
An approval means that a lender has reviewed your credit
history, verified your assets and employment, and has
approved your loan before you have found a home to purchase.
As long as the home appraises for at least the purchase
price, the loan should close.
Getting approved also gives you an advantage over other
buyers. Your firm approval makes it easier for you to
negotiate on the price of a home, than a person who is not
approved or is pre-qualified.
While getting pre-qualified may sound official, it is really
just getting an idea of what you can afford. Its having a
person plug in a few numbers that you give them - your
monthly income and your monthly debt - and getting an
approximate payment calculated. From the payment, the
calculator can approximate the house price range that you
can afford. No information is verified. Because your assets,
income or credit is not verified, a pre-qualification has
little value when purchasing a home.
3.) Find a great buyer's agent.
Traditionally real estate agents represent the sellers in a
transaction. When you are not working with a buyer's agent,
they are less likely to negotiate the best price or
contingencies for you.
A buyer's agent's job and fiduciary responsibility (meaning
legal duty) is to you, the buyer. Before working with an
agent, establish if they are a buyer's agent or a seller's
agent. After spending a lot of time with a Realtor, it's
natural to feel like you're a team. But if they are not
negotiating for you, then they are not on your team.
4.) Learn about the neighborhood.
Often times the house you find may be in a neighborhood that
you're not familiar with, which is ok. It just means that
you'll have to do a little more research. If you find a
house that you like, ask for a list of the neighborhood
properties that sold in the last year. How does your home
rank? Is it at the top of the price range? If so, it might
be hard to resell. Is it average or on the low end? If so,
great - as the other home prices go up in value, they will
pull your home's value up as well.
Check out the schools - are they sought after? A good school
district means your neighborhood will always be valued by
families which is a great reassurance to purchase, not to
mention the value-add if you have school-age children.
Next, contact the police station and obtain crime
statistics? Are they acceptable to you? Sometimes, if they
won't give them to you, it could be a cause for alarm.
Talk to the neighbors. The more people you talk to, the
better sense you will get of who makes up the neighborhood
and how they will effect your time spent in it.
Check out the location of the shopping, police and fire
stations, schools, and air traffic overhead. These are all
things that might affect your property value or quality of
your life.
5.) Protect Yourself.
Ask your Realtor for a copy of the documents you will be
asked to sign if you decide to buy the house. Read them
ahead of time so that you'll understand the questions that
you will be asked, the things you need to know, and the
decisions you will need to make.
6.) Have reasonable expectations.
There is a lot of money at stake. No house is perfect.
Understanding and remembering these two statements will help
diffuse the negotiation stage, the inspection stage and the
closing stage.
Emotions are high for both buyers and sellers. - The seller
may have loving memories and years of sweat equity in the
house. Maybe they are being relocated and don't want to go.
Understanding their motivations for selling will help you
appreciate their situation and predicament during these
emotional times.
There is a lot of money at stake for all the parties
involved (and that includes the realtors) - Just remember
that market value (the value of a home) is the price that a
willing buyer and a willing seller can agree to. If you can
not agree on a price, ask yourself: Is there something you
missed? Are there comparables that support the price that
they want? Are there motivations that might factor into the
price they are demanding? In the end, does it matter? What
is the house worth to you today and what do you think you
can reasonably sell it for based on the amount of time you
plan to spend in it? Think about the answers to those
questions before you make your move.
No house is perfect - Always get an inspection. It might be
a few hundred dollars, but it's worth it. It's the
inspector's job to find any problems with the house that
could cost you thousands to repair down the road. Some
inspectors have a tendency to over play the importance of
their role and the items that they find. Get objective
opinions that you trust before making a decision on an
inspection report. Likewise, if an inspector says a
foundation is cracked but its nothing to worry about - get a
second opinion. Ask a handyman for an idea of how much
repairs will cost and how complicated they are. The home
buying process is an emotional, complex and time-consuming
process, but it is worth it. Nothing compares to owning your
own home in a neighborhood that you chose.
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