Buying a home is a big decision that requires careful planning and consideration. It’s important to consider factors such as location, size, and cost when looking for a home.
One important step in the home buying process is getting pre-approved for a mortgage. This will give you an idea of how much home you can afford and Pearl Garden Home help you narrow down your search. We can help you find homes that meet your criteria and guide you through the buying process.
Another important factor to consider is location. You’ll want to look for a home that is in a good neighborhood, with easy access to schools, shopping, and transportation. It’s also important to consider the condition of the home and any necessary repairs or renovations that may need to be made.
When looking at homes, it’s important to keep in mind that the purchase price is just one part of the cost. You’ll also need to consider property taxes, insurance, and maintenance costs. It’s a good idea to get a home inspection to identify any potential issues before you buy. Pearl Garden Home real estate buying services provider would be the right choice for you!
Once you’ve found a home that meets your needs, it’s time to make an offer. Pearl Garden Home Real Estate professional will help you negotiate the price and terms of the sale. Once the offer is accepted, you’ll need to go through the closing process, which includes getting a mortgage, paying closing costs, and signing the final paperwork.
Overall, buying a home is a big decision that requires careful planning and consideration. Getting help of our real estate agent, consider the location, size, cost, and condition of the home, and be prepared for the closing process. With the right planning and preparation, you can find the perfect home for you and your family.
Buying a home can be stressful during the best of times, and it might feel positively overwhelming in a highly competitive market. Although a few of the details may look different right now, the overall process of buying remains the same — and understanding the key steps can help you reach your goal and make your dream a reality.
No matter when you plan to buy, there are a few things you should know. On average, the process of buying a house takes roughly six months. In 2021, the typical buyer reported searching for between 2 and less than 3 months. Then add to that 30-45 days to close.
But the process of buying a house includes more than just touring homes. You also need to review your credit and financing options, hire the Pearl Garden Home right real estate agent, helps to make offers and negotiate, inspect, prepares to move and, eventually, close on your new home.
Where to start when buying a house
Some of the first things to consider when you’re buying a home are how much you want to spend, where you’d like to live and what’s important to you as a buyer. Here a few questions to ask yourself:
- How much house can I afford?
- Am I going to take out a loan?
- How much do I have saved for a down payment?
- Can I afford my desired neighborhood?
- Are home values increasing or decreasing in the neighborhood?
- How long will my commute take?
- Is the school district a fit for my family?
- Is it within walking distance to amenities and activities?
- Once you have the answers to these questions nailed down, you can start your home search.
Pearl Garden Home Presents 15 Things to Do Before Buying a House
Whether you are planning to buy your first home or your fifth, there are several things you should do before you go house hunting and pull the trigger. Gathering information is a big part of this process. This isn’t difficult, but it will take time if it can prevent you from making mistakes and losing time and money.
1. Start Saving Now For A Down Payment
First-time homebuyers often struggle to come up with the money needed for a down payment on a home. Typical loans will require a minimum of 10% down. So a $300,000 home will require that you plunk down $30,000 of your own money.
That number can be overwhelming, but it’s not impossible to achieve if you start saving well before you are actively looking for a house. Unfortunately, you can’t go back and start saving last year, but you can start today!
Some low-down payment loans requiring less than a 10% down payment are available, but most conventional loans require 10% down.
2. Check Your Credit Score
Unless you are paying cash for your home, you will need a loan to cover most of the cost of your home. Your credit score will impact the amount of money you can borrow and the terms of the loan. If your score is too low, you may not qualify for a loan at all.
Credit scores range from 300 to 850. At a minimum, you’ll need a credit score of 500 to qualify for a FHA loan with 10% down. Conventional loans will require much higher scores, typically over 700.
If you qualify for a loan, but your score is on the low side, you will likely pay a higher interest rate (and thus higher mortgage payments) for the entire term of the loan. This can cost you tens of thousands of dollars over the life of the loan. However, you can take steps to raise your credit score.
Check your score, then consider how you can raise your score before applying for a loan.
3. Fix Credit Report Mistakes
Once you pull your credit reports for free (or you can purchase them if necessary), look them over carefully. You will see credit cards, loans and other information the credit bureaus have collected about you and your credit and payment history. If you have been sued, arrested or declared bankruptcy, which will probably be recorded on the reports also. Make sure the information is accurate and up to date.
Look for accounts that don’t belong to you. Look for erroneous information about late payments. Look for accounts that you closed but that still shows as open, and vice versa. Look for open collections that should show as satisfied.
You have a legal right to dispute errors on the reports, so take action if necessary to fix mistakes. If you see any problems, contact the appropriate credit bureau to make necessary corrections.
4. Start Improving Your Credit.
There are simple steps you can take to improve your credit.
- Pay down credit cards and keep them low.
- Don’t open unnecessary credit accounts.
- Keep your existing credit accounts open
- Avoid credit inquiries
5. Create A Personal Budget
Budgeting means you actually have to be responsible with your money, watching it carefully and forgoing some fun things in life.
But you must keep the ultimate goal in mind: buying a home.
Create a simple spreadsheet and note all of your monthly household income. Next, put down categories for all of your expenses. Food, rent, automobile expenses, entertainment, credit card payments, savings, taxes, unexpected expenses, etc. Try to look at several months to get an average for each category.
Now, subtract all your expenses from your income. Is the result a positive number? Great! You are spending less than you make. You’re on the right track.
Next, you need to determine what, if any, categories will change after you buy a home. Some obvious areas that will increase include your new home mortgage payment (instead of rent), maintenance costs, homeowners insurance, HOA fees and real estate taxes. You may have some categories that decline such as transportation (if you move closer to work), storage costs (if you can get rid of a storage unit) and food costs (if you have more freezer space to take advantage of bulk buying). Total everything up and determine what your budget would look like after buying a home.
A budget will help you make better financial decisions, now and in the future. Once you have a mortgage, you will need to manage your money carefully and make payments on time. This is a great time to get in that habit.
6. Answer The Question, “How Much House Can I Afford”
You’ve determined what your budget looks like. Now you can decide just how much you can afford to spend on a home.
Lenders like to use a debt-to-income ratio to determine how much you can afford to spend on a mortgage. A good rule of thumb is that your housing expense, including mortgage, taxes and insurance, should not exceed 28% of your income. And your total debt should not exceed 36% of your income.
A quick calculation example:
Monthly Income: $5,000 x .28 = $1,400.
In this case, your mortgage, taxes and insurance, should not exceed $1,400 per month.
Monthly Income: $5,000 x .36 = $1,800.
Here, your total monthly debt payments should not exceed $1,800 per month.
These are guidelines that may be affected by your credit score and other factors. Lenders will adjust, up or down, how much they are willing to lend based on those factors.
One way home buyers get into trouble is when they take on a home loan that is bigger than their current income vs. expenses and debt can handle. If you already have a bunch of credit card debt, then you take on a home loan on top of that, you can quickly find you are not able to make even minimum monthly payments.
Remember, lenders are in business to make loans. They will sometimes make loans to people who really can’t afford those loans, causing the borrower to default on the loan months or years down the road. Be honest with yourself about how much you earn versus how you spend money and how much you are willing to sacrifice to get the home you want. If your income drops, do you have money to survive on and still meet your loan obligations? You may decide you need to save money for a bit longer before taking on the responsibility of a mortgage.
7. Decide How Much Home You Actually Need
Have you ever gotten a stomach ache because you ate too much at your favorite restaurant? You see a big plate full of your favorite food and dig in. Before you know it, you are feeling overly full, but it tastes so good, you just keep eating until you find yourself stuffed and nearly sick.
Home buying can be very similar. You start looking at homes, you see all the beautiful features and the bells and whistles and you just have to have it. You may be able to afford it, according to the debt-to-income ratio as discussed above, but once you buy it, you may find the monthly expense is too much, and now you have a “debtors stomach ache.”
Just because the numbers say you can afford it, that doesn’t mean you have to buy it.
Especially when you are a first time buyer, being honest with yourself about what you truly need in a home can prevent you from buying too much home. Do you really need a basement? Do you really need 4 full baths? Do you really need a 3 car garage? Be honest about what your or your family need to live versus what you just want to have. Always keep your income in mind and balance wants and needs with you income and expenses.
Remember that it is almost always easier to sell a home and move to a bigger one when your income goes up than it is to pull yourself out of foreclosure if you can’t make your monthly mortgage payments.
8. Get Very Clear About What You Want In A Home
Start a list of the features you want in a home. If you are buying the house with a partner, spend time creating a list you both agree on.
Sort the features into “must-have” and “want-to-have” lists. These lists will guide your search, but they will also be very important to share with your real estate agent. Your agent needs to know your hot buttons so they can direct you to the homes that are best for your wants and needs.
9. Know What You Don’t Want In A Home
Excluding features is sometimes the best way to narrow your search and find the perfect house. If you know you can’t stand being on a main thoroughfare, add that to a list of things you don’t want. If you don’t like noisy neighbors then condos aren’t for you.
Once again, share this list with your agent so they can make your search faster and more effective.
10. Become Familiar With The Available Market
Today, there are so many resources available to research the properties that are available.
Spend time familiarizing yourself with the price ranges within areas that interest you. Can you afford a home in a particular area? Searching by maximum price, you can quickly find homes that are within your budget. Do they have the number of bedrooms and bathrooms you need? If not, you might need to look in a different part of town.
Get to know the size of homes that are available in a particular area. Some areas will have few properties available with five or more of bedrooms. You might not find basements in another area. Still other areas may be strictly condos or high-rise apartments.
Where are the schools in relation to the properties? Are the schools good ones?
You might need to widen your scope of search just a little to find the size and price and features that you want in your ideal home.
11. Shop Around For A Mortgage
When you buy a car, you probably look at several before you settle on one. If you are buying a new car, you might go to several dealers and compare their prices on the same model. It’s just “good business.”
So, when you get a mortgage, you should do the same thing: shop around!
Mortgage rates and programs can vary quite a lot. And service may be the most important thing to shop for if you don’t want unnecessary delays in loan processing.
Ask around for recommendations from friends and family. A mortgage broker can help you find a loan from multiple sources. And don’t forget your local credit union as another option for rates that may be lower than most other lending institutions.
Do your due diligence and pick a reputable company when you finally pull the trigger.
12. Get Pre-Approved For Your Mortgage
You’ve taken steps to save a down payment, improve your credit and get clear about what you want in a home. You may have started searching for property. You’ve compared lenders.
You’re ready now to actually look at houses and possibly make offers! Whoa there! Before you get all excited, take the time to get pre-approved for a loan.
Lenders offer pre-qualification and pre-approval to help give their clients an idea of how much they can actually borrow. These two options may sound nearly identical, but they are not. One is a mere estimate or opinion, the other is an actual approval to borrow up to a certain amount of money. Let’s look at the difference.
Pre-qualification is a simple estimate of how much you qualify to receive on a loan based on limited information that you submit to a lender. The lender typically does not verify the information with third parties, so no legally binding commitment is made to lend you the money. Your credit is normally not verified with credit bureaus. There’s usually no charge for a “pre-qual” letter, and they can be available in just a few hours up to about three days.
On the other hand, a mortgage pre-approval letter involves a much more formal submission of a mortgage application which typically requires the borrower to pay a fee. You will submit bank statements, tax returns and many other documents, depending on the policy of each lender. The lender will pull your credit, and a loan officer will investigate your financial background with third parties. Pre-approvals take several days to a couple of weeks to complete.
At a minimum, before you search for property, get a pre-qualification letter so you have a general idea of how much you can borrow. Most real estate agents will ask you to get pre-qualified before they start showing you property.
When you are ready to actually make offers on properties, getting pre-approved will help you to win an offer on a home. In competitive markets, sellers may have 10 or more offers come in on the same day. Given similar offer prices, a seller will almost certainly pick a buyer who has a pre-approval from a lender versus homebuyers who aren’t pre-approved because the seller has greater assurance that the transaction will actually close.
13. Hire A Real Estate Agent
We might be a bit biased, but we do believe that an agent will make your home buying experience easier, faster and less costly than if you go it alone. Agents have familiarity with the area. They have experience negotiating to get you the best deal possible. They can save you from wasting time on properties that you can’t afford or that would not meet your requirements.
Agents really do work hard to make their clients’ dreams come true, but as a buyer, the services of your agent cost you nothing out-of-pocket. The agent is nearly always compensated by the seller, so why not get their free expertise and assistance? This is especially true if you are a first time home buyer or are not familiar with the area.
14. Help Your Agent Help You
Real estate agents may do a Staggering job of finding you a home, but they are still only human. They can’t read minds. They can’t avoid the laws of physics and appear out of thin air when you want them. They can’t enter the mind of a seller and make the seller give you the home you want for free.
Pearl Garden Home gives you amazing service based on what you enable them to do for you. That means that you are very clear about what you do and don’t want in a home. It’s important to relay this information to your agent up front. Now, of course an agent’s job is to present creative alternatives when a buyer asks for something that is financially impossible or for a property that is simply not available. But agent can only do this if you have open communication with them, and are willing to listen to alternatives and options they present to you.
Remember that your agent is working hard for you to help you close a deal. Use their expertise to your advantage. You hired them for that expertise, right? Let them guide you during your property search and during offer preparation and subsequent negotiation. Negotiating can be tense and even confrontational. Do your best to reduce any confrontation with your agent. They are on your side, working to help you. Confrontation with the seller is enough!
15. Be Aware Of the Current Market Conditions
The real estate market is very cyclical. The ups and downs of real estate are practically nightly news. Real estate sales have a huge impact on the economy that can last for years.
Begin paying attention to the real estate market so that you will be ready for the challenges and opportunities that it presents. Read and listen to the news. You’ll quickly find out what kind of market your area is in. Your agent can advise you on this as well.
Is it a seller’s market? That means sellers are in the driver’s seat, able to sell quickly and get above-market prices for their homes. Buyers will compete for homes, driving the prices well above the asking price. As a buyer, you will likely have to make offers on several homes, and at higher prices than you’d like to pay, just to get a seller to consider your offer.
Is it a buyer’s market? After tough economic times, real estate prices may be depressed and the market may be flooded with houses that aren’t selling. Buyers are able to take their time, pick from many different options, and make low-ball offers that get accepted.
Know what you are facing when you start home shopping so that you make the best of the current economic situation.