7 Steps to Take Before Buying A Home
Are you considering buying a home? Whether you're raising a family and need more space or you're an "empty nester" and aiming to downsize, there comes a time in everyone's life when they're ready to begin the next chapter.
Before you begin that process, there are a few things that you need to take care of to ensure your homebuying journey goes as smoothly as possible.
1. Do your research
No matter your reason for purchasing, the process can be daunting for anyone, even if it is not your first time around. The best first step is to find your preferred style (e.g., colonial, ranch, split level, modern, etc.) or whether it should be a single-family home versus a condominium. Each option has its share of advantages and disadvantages. The best way to determine which one is right for you is simply by looking around. Whether your first move involves downloading real estate mobile apps like Trulia or Zillow or perusing the National Association of Realtors' website, the information you glean from these resources will help you make a more informed decision about what's best for you. There's no right or wrong answer, but the quality of research you perform now will pay off later on.
2. Determine your budget
Depending on whether you're a first-time homeowner or repeat buyer, the home you buy will likely be the single biggest purchase you'll ever make. It's important to ensure that you have the means to do so. While your lender will evaluate your financial capability, it's best to know before you connect with a mortgage provider, so you know what you're getting into. The easiest way to do this is simply by sitting down and running through all your ongoing expenses and calculating if the monthly payment for a house is something you can reasonably afford. There are online tools that have mortgage and affordability calculators that should make this process fairly straightforward. When deciding how much of a home you can afford, don't forget to factor in the extra expenses of homeownership that extend beyond your monthly mortgage payment, taxes, insurance and utilities.
3. Monitor your credit score
Your credit score provides insight to lenders about your financial situation, such as if you pay your bills on time and what debts you have. Your overall credit history is analyzed to compute your credit score. The type of loans that factor into your credit score include student loans, credit cards, car loans, along with past and present mortgages. The credit report also provides information on how long you had debt, the amount borrowed, the monthly payment, and your payment history. You should be aware that any negative information on a credit report, like bankruptcies, foreclosures, or judgements, are also factored into the credit score. Therefore it is always a good idea to monitor your credit so you can stay aware of your financial standings, remind yourself to be smart with your money, and be prepared when the time comes to apply for a loan. You can do so by going to www.annualcreditreport.com to obtain your free copy.
4. Get Pre-Approved
While doing your research, it is also a good time to get pre-approved. A pre-approval saves everyone involved time and money. It is a review of your financial situation and of available loan programs in order to arrive at preliminary determination that you qualify for a loan under the specified criteria. A pre-approval will give you many benefits:
You will learn how much you can confidently offer when you find the right home.
You’ll be considered a more serious homebuyer by sellers’ agents.
You can prepare how much you’ll need for down payment and closing costs.
Discover any credit issues to clear up before you become formally involved in the loan process.
Keep in mind, however, that a pre-approval letter is non-binding. In other words, you will still need to go through a more formalized loan approval process once you settle on the home you'd like to make an offer on.
5. Get in touch with a real estate agent you trust
After the pre-approval, you are ready to meet with a real estate agent to help you find that dream home! Without realizing it, there are likely several people you know who either are real estate agents or know somebody who is one. Real estate agents are a font of information. They can provide you with excellent guidance on what types of properties are available in each region, state, county, or city. Connecting with a buyer's agent should be at the top of your priority list, and they can supply you with loads of resources you can use to further your research.
6. Weigh the pros and cons of condo ownership
If you've contemplated buying a condo, this alternative to a single-family home can make a lot of sense, depending on your needs. In some ways, it combines some of the conveniences of renting (e.g., snow removal, trash pick-up, landscaping) along with the freedom and flexibility of homeownership. However, there are likely homeowner’s association (HOA) fees you'll be required to pay for these amenities. You also may not be allowed to own a pet or have more than one. In short, be sure you’ve considered the full spectrum of advantages and potential disadvantages of condo ownership before making a final decision.
7. Consider a home inspection
An inspection isn't the first thing people think of when they buy a home — or second or third, for that matter. While the inspection tends to be optional, an inspector’s findings may impact what you ultimately spend when you finalize a home purchase. For example, if your home inspector discovers needed repairs that were not disclosed in the original listing, the seller may be required to take care of those issues for the deal to proceed.
Among the more important aspects the inspector will examine are the sewer and septic systems, the electric panels, wiring and if there are any signs of termite damage. Termites target wood and are responsible for billions of dollars in property damage every year, according to the Environmental Protection Agency. It's not always easy to identify when termite damage exists but your inspector knows what to look for and if the damage is so extensive as to compromise the house's physical structure. They may also be able to point you to an exterminator. Who pays for the extermination — the buyer or seller — may be determined at closing.
If you don't personally know a qualified home inspector, your trusted lender or real estate agent undoubtedly does. Alternatively, you can go to the American Society of Home Inspections' website and find a licensed inspector in your area. When you get in touch with that person, you may want to ask about their certifications, licensing or areas of specialty. These questions can help you further verify that they are reliable and have the background and experience to perform an unbiased home inspection.
Buying a home is a big decision, but it doesn't have to be a complicated one. Residential Mortgage Services, Inc. can help ensure that it's as seamless as can be. Contact us today to learn more about the mortgage that is best suited for you, and how one of our experience Loan Officers can help Guide You Home!