Buying a home – whether it is your first or your 5th can be stressful. Deciding where the down payment will come from, hiring knowledgeable professionals and planning ahead make the process less stressful. Use the following home buying tips to help guide you through the home buying process.
1. Know about Your Down Payment
Where will you get your down payment?
Your down payment needs to be saved if you are buying your first home. Start early! Your down payment needed depends on your loan and can range from 3% – 20% down.
Are you selling your current home and using the proceeds for your down payment on your next purchase? Know your numbers and work with your real estate agent to make sure the numbers work.
Depending on your loan program, you may also be able to get a gift for your down payment.
Pro Tip: Start early! Also, talk to you real estate agent and ask for guidance even if you are not buying for 1 or more years. Agents help clients buy homes every day and are happy to help.
2. Clean Up Your Credit
Pull your credit reports from www.annualcreditreport.com. Check for inaccuracies and dispute any errors with the credit bureaus. A low credit score can keep you from getting a mortgage loan, cause the rate to be higher and possibly a higher rate on your homeowners’ insurance.
Pro Tip: Monitor your credit through a site like Credit Karma to keep an eye on things between your annual credit check.
3. Delay Opening New Credit
Your credit score can be negatively impacted any time a creditor runs your credit. This goes for car loans, in store credit cards to save 10% on your purchase, major credit cards and financing furniture.
Pro Tip: It is best to hold off on any credit changes before applying for a mortgage loan and throughout the process until closing.
4. What TYPE of Home Will You Buy?
Most buyers think of single family homes when they think of home ownership, but there are several other choices that might fit your needs and lifestyle better.
- Single Family Homes
- Condos
- Townhouses
Pro Tip: Think about your lifestyle and what you need in a home. Do you have time for yard and exterior maintenance or would you rather someone else handle those things? Do you like privacy and a yard or are you not an outdoor person? Do you need a garage for your car or storage?
5. Location, Location, Location
Living at the beach is different that vacationing at the beach! Before getting in a car with your agent to look at homes, start driving around your area. Decide what towns or neighborhoods you like best. Each town in our area has a different vibe. Go to festivals, events and dinner in the different areas to see what suits your lifestyle best.
Look at schools even if you do not have school-aged children. Schools will be important when it comes time to sell your home.
Pick at area that is hear hospitals, shopping, entertainment and other amenities you will use. Also, make sure your commute works for you.
Pro Tip: Drive your favorite towns or neighborhoods at different times of the day to check traffic, noise and activity levels.
6. Needs vs. Wants
Decide early on what you NEED in a home and want you WANT in a home. Also, know those things can change as you start looking at homes.
Pro Tip: Make a list of 5 things you must have in your home and a list of 3-5 things you would like to have in your home. Making a spreadsheet may help when you start looking a homes.
7. Talk to a Lender
Talk to a lender to find out how much home you can afford. A good lender can run your credit, advise you on how to improve your credit and let you know about down payment assistance programs. Some loan programs allow down payment gifts from family. Get a pre-approval letter (not pre-qualification letter) from your lender so you are ready to make an offer when you find the right house.
Pro Tip: Just because you are approved for an amount does not mean you have to go up to your limit. Make sure you are comfortable with the monthly payment and still have room in your budge for extra expenses that come along with home ownership.
8. Pay Bills On-Time
Likely, this tip goes without saying, but do not let the excitement and stress of looking for a home lead you forget to pay a bill on-time. That day late payment could come back to haunt you later.
Pro Tip: Consider setting bills on auto draft or auto send during your home purchase time.
9. Save, Save Save
In addition to your down payment, you will need money for closing costs, moving expenses and money for after move-in.
Closing costs typically run 2% – 5% of the loan amount and are on top of what you need to pay for your down payment.
Depending on where you are moving from and how many friends you can get to help you, you might need to hire movers. Make sure to allot the funds necessary to get your belongings to your new home.
Even when you find the “perfect” home, you will want to make some changes to your new home. Some of those could be minor, but some updates could be more expensive. Save some extra funds so you do not have to live with the previous owners wallpaper longer than you want to!
Pro Tip: Write a budget for what you think you need then add 10% “just in case”.
10. Hire a Buyers’ Agent
Your real estate agent will be a central part of your buying process. Your agent will ask about your needs and wants in a home and help you find the right home. Your agent will also guide you through the closing process once you find the right home and help navigate any hiccups along the way.
Pro Tip: Make sure you find an agent that is knowledgeable of the area, professional and available. Your agent will also have the names and contract information for trusted professionals (lenders, home inspectors, insurance agents and contractors) that came help with your home purchase.
11. Don’t Sweat the Small Stuff
No house is perfect! Look at the structure or the “bones” of the home and try your best to overlook fixtures, paint colors, wallpaper choices and furniture. Unless you are buying a furnished home, the seller will be taking the furniture with them. Fixtures, flooring and paint can easily be changed once the home is yours.
Pro Tip: Ask your agent or friends for the names of trusted contractors or handymen to help with those projects that may be more than you want to handle.
12. Understand the Home Inspection
Home inspections are meant to give you a look and understanding of the main components of a home.
- Heating and air conditioning systems
- Electrical systems
- Plumbing systems
- Water supply and water waste systems
- Roof
- Environmental concerns
- Structurally sound
Homes do not pass or fail a home inspection. The basic home inspection does not cover testing for radon, mold or pest. If you have a concern, talk it over with your agent and make sure you have that inspection covered.
Pro Tip: Attend your home inspection and review the findings with your home inspector. Ask questions. Your inspector is there to help you understand your home and should be happy to answer questions.