At each step of the home buying process, from browsing to buying and from measuring the markets to managing your mortgage, preparation is as essential as flexibility, creativity and imagination.
Be A Better Browser
When you’re ready to make the dream of a new home a reality, where do you begin? As with nearly any endeavor, your house hunt may very well begin online. With dozens of reputable real estate sites to choose from, it’s easy to while away the hours (days, weeks and even months!) browsing for homes. But, where, when and for how much? Every fruitful search begins with both a specific goal and a flexible approach. Know what you’re looking for: Is it a sense of the market or a specific home? If you think you know where you want to live but can’t find any listings you like, check out surrounding areas. Beyond listing prices, be sure to pay attention to market trends, municipal services, crime rates, school ratings (which affect home values whether or not you have a family) as well as property taxes, which can make a big difference in carry costs as well as resale value.
Take The Long View
As you start looking at homes in person, try to visualize the potential in each home, both upside and downside. First impressions can be deceiving. Though you may fall in love at first sight, this is not always a sign that a house is destined to be your dream home. Likewise, a less-than-perfect house in a great location can be customized to suit your style. A charming fixer-upper may require more of an investment than you can make. A larger home, while allowing room to grow, may take a lot of work to maintain. Go too small and you may be looking for a new home sooner than you’d like. Moving is not only a lot of work, but it’s also expensive. As you house hunt, look at least 5 years into the future. Your future self will thank you!
Measure The Markets
If you have some flexibility in terms of either geography or time, it’s always best to look in a buyer’s market: one where the economics, inventory and pricing trends make buying most attractive and affordable. How can you tell if it’s a buyer or seller’s market? A buyer’s market occurs when the supply (available properties for sale) exceeds demand (the number of buyers seeking to purchase properties). In a buyer’s market, you may be able to buy a great home for a lower cost than you would in a seller’s market. A seller’s market occurs when demand exceeds supply, or there are more buyers seeking to purchase properties than there are available homes on the market. If you’re buying a home in a seller’s market, be aware that sellers have the advantage. Trying to get a lower sale price probably won’t work to your advantage. In fact, you could lose the opportunity to purchase the property altogether if a competing buyer makes a higher offer. This is where your trusted real estate agent is perhaps most helpful. They will compare sales data and other local property values to help you make a reasonable offer. Your agent will also draw up an offer letter and submit it to the seller or the seller’s representative.
In a buyer’s market, you have more flexibility to include some contingencies in your offer. Inspection contingencies are pretty standard. If the inspection on the house reveals that repairs are needed, the purchase price you’ve offered is subject to change. If your agent feels the market conditions are truly in your favor, you may also request some upgrades in your offer as well as additional items, like furnishings.
In a seller’s market, you’ll have less leeway with contingencies. Again, trust your real estate agent on this. Also bear in mind that your offer will include what’s called an earnest money deposit, which is essentially a small advance you make toward your down payment to the seller. Your earnest money deposit is usually equal to 1% – 3% of the purchase price of your home. Be 100% sure you want to purchase a home before you submit an offer because, if you back out, you may lose your deposit.
Be Ready To Buy
When the home you want appears, you need to be ready to make an offer on the spot. So once you decide you’re serious about buying (maybe even before you begin browsing) you’ll want to have a downpayment ready and preapproval on a mortgage.
You’ll need to have a budget set, considering your total income, debt, monthly expenses and how much you can comfortably afford for a down payment. This will give you a better sense of what’s realistic in terms of a purchase price and how much and what type of mortgage may work best for you. Having a mortgage preapproval gives you a good idea of how much house you can afford, your interest rate and the types of loan programs you qualify for. A mortgage preapproval also tells sellers and real estate agents that you won’t have trouble finding funding for your home purchase. This gives your eventual home offer more weight.
Keep in mind that a preapproval is different from a prequalification. When you get prequalified for a loan, your lender doesn’t verify the claims you make about your credit and income. On the other hand, a preapproval requires a credit check and sometimes underwriting. A prequalification holds less weight than a preapproval because it often doesn’t include those details. When you get a preapproval, you get the most accurate information possible about how much of a loan you can obtain. This benefits everyone involved with your home search.
When you better understand the home-buying process, finding the perfect home can be a little easier and less stressful. Look for a mortgage lender who’s responsive to your questions and offers an easy way to apply for a mortgage, like Rocket Mortgage® by Quicken Loans®. A preapproval from Rocket Mortgage® offers a quick application process and preapproval online. With their industry leading technology and tools, Rocket Mortgage created a better home buying experience centered around you – personalized, convenient and clear. So you can focus on making your house, home.
To be sure you’ve covered your bases before you begin your prospecting journey, check out this helpful checklist.
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