Advice and Tips on Buying a Home
Are you in the market for a home? If so, read the following tips and advice to help you find the right home and make the process go as smoothly as possible. Let’s begin!
Get Your Credit in Order
Your credit score directly impacts the amount and terms of the mortgage you can receive. As a general rule, most lenders won’t accept any borrowers with less than 620 as their credit score. The better your credit score, the less interest you will have to pay over the course of the loan - which can be the difference of tens of thousands of dollars.
To get your credit in order, first get your free credit report from the three major credit bureaus: TransUnion, Experian, and Equifax. Review each report and address any outstanding debts. If you notice any debts that you paid off but are still being reported as “unpaid”, call those companies to correct these errors to raise your credit score.
How Much Home Can You Reasonably Afford?
Real estate agents and lenders agree that your mortgage payments shouldn’t be more than a ¼ of your annual income. For those couples that make a combined $100,000 annually, this means that you can afford $2,000/month. Similarly, an individual only making $50,000 annually can only afford $1,000.
This is a simplistic overview of what is required for monthly and annual expenses for prospective homeowners, but can help prevent you from becoming “house poor” and even facing foreclosure.
Obtain a Preapproval Letter before Looking for Homes
A mortgage preapproval letter is a document from a lender that states how much money they are able to lend to an individual. Having this on-hand when approaching sellers gives you a significant over other offers from the competition, showing that you have done your due diligence and won’t delay the process by being rejected by your bank.
Cash is King
Just about every home seller is looking to get rid of their home in the shortest timeframe as possible for the highest amount of money. If you have a significant amount of cash on hand, you can negotiate for a lower price and put yourself ahead of sellers that may take time to obtain a mortgage from their bank.
Always Have the Home Inspected
While you may believe that you have a good idea for potential home problems during the walk-through with the seller, the truth of the matter is that a professional home inspector will be able to provide more thorough insight. As they are experienced in making sure that homes are safe for occupants and code-compliant, a home inspector can point out expensive repairs that need to be performed or code violations that will eventually end up costing the homeowner dearly.
Be aware that not all home inspectors look for lead paint or traces of radon (among other contaminants), so it’s important to pay extra for these services or perform your own tests to gain a clearer picture of the home’s current condition.
Hire a Real Estate Agent
Hiring a good real estate agent is a great advantage in the homebuying process. Buyer’s agents not only have access to homes in your desired area, but may be aware of off-market homes and private sales that can lead to great savings. Because real estate agents have a fiduciary responsibility to act in the best interest of their clients, which means that you are guaranteed to find homes that meet your needs instead of being pressured into a home that’s not a good fit, but could result in a higher commission for them.
Real estate agents are also invaluable for being a trusted 3rd-party during negotiations. This can be a great service when dealing with homeowners that are selling their property by themselves and may need an expert to help negotiate a fair-market value, take of the paperwork, and close the deal with minimal hassles.
Consider Hiring a Real Estate Attorney
Hiring a real estate attorney is optional when it comes to real estate transactions. However, they are invaluable at ensuring that legal proceedings are adhered to and contracts are drawn up that meet the needs of buyers and sellers. For example, a real estate attorney can inform you of a potential code violation of a property that needs to be resolved before completing the transaction.