- What is your credit score? Your credit score affects the interest rate a mortgage company will give you. As many as six months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and correct any problems you discover.
2. Plan to stay at least 3 to 5 years. If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.
3. Hire a REALTOR®. Get a referral from someone you trust. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional Realtor®. Work with a Realtor® who represents your interest only and can help you with strategies during price setting, the bidding process, negotiations, and paperwork.
4. How much home can you afford versus how much do you want to afford. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. When looking at the whole picture you may qualify for more than you are comfortable with. Visit with a loan officer early to determine what is best for you. Besides qualifying for the loan, there are purchasing costs to buying a home– from .5% to 3% in addition to your down payment (20%) and a few out of pocket expenses during the transaction. Remember to adjust your monthly budget after you move in as you will have maintenance costs that you might not have had when renting.
5. Pre-Approval by the lender puts you in a position of negotiating strength. Getting pre-approved will you save you the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. Getting pre approved is especially important in a fast moving market. Your offer needs to be financially solid if a seller is going to take you seriously.
6. Hire a home inspector. Sure, your lender will require a home appraisal anyway. But that’s just the bank’s way of determining whether the house is worth the price you’ve agreed to pay. Separately, you should hire your own experienced home inspector. Your Realtor® can assist you with some choices. His or her job will be to point out potential problems that could require costly repairs down the road. You do not want to buy a money pit!
I would love to help you with your plans to purchase (or sell) a home. Go back to the home page and click on the ABOUT TAB — check out the testimonial page. I look forward to our visit.