Before You Buy: The Necessary Criteria
the top 10 things you need to know when buying a home
1. What's Your Credit?
Seriously, what’s your credit? Most people have no idea! Unless you’re going to pay all cash for your new home, you need to get a credit report and make sure that everything is in order. If it isn’t, you need to fix any problems you encounter before you can even think about qualifying for a loan.
2. Can You Really Afford It?
The general rule for home purchases is that you should aim for something that is about 2 or 3 times your annual salary. If you want something a little more accurate, try the mortgage calculator on our website. Just scroll over the “Buy” tab and select Mortgage Calculator!
3. Buy Only If You Can Stay Still
When buying a new home, you really need to make sure that you can commit to remaining there for some time –we recommend 3-5 years. If you end up selling sooner than this, even if the market is strong, you may still end up losing money when you add up all of the transaction costs associated with the purchase and sale.
4. You Don’t Need a 20% Down Payment
Although it’s hard to get a loan if you haven’t saved much money, there are both public and private lenders who, given the right credit and qualifications, may offer low interest mortgages that require less than 20%, although if you don’t have 20% saved, are you really ready? You need to ask yourself that question.
5. Points and Rate on a Mortgage
When choosing a mortgage, you’re usually given the option to pay additional “points”. Essentially, you’re buying a lower interest rate. The interest rate is a big factor in your monthly payment, so a lower interest rate means a lower monthly payment. However be careful, because when you buy down an interest rate, that money that you use to buy it down is gone for good. If you’re going to be living there for a while, it usually makes sense to buy the rate down.
6. Location, Location, Location
You don’t like to swim and you don’t have any kids; does that mean you shouldn’t buy a beautiful beachfront home in a great school district if you can find a great deal on it? These may not be required criteria when you’re looking to buy, but when the time come to sell, it can make a difference! Above all, if you want to ensure good resale value, make sure that the home you want to buy is in a good school district and is not located on a main road or intersection (or other noisy area). Good luck selling a home that has a major highway running behind it!
7. Get Pre-Approved, First!
A lot of buyers decide to go searching for homes before obtaining preapproval. This is not the same thing as “pre-qualification”, (which most people won’t take seriously since it’s based on what YOU SAY your finances are), a pre-approval is based on ACTUAL income, credit, and debt history, and will let you and your agent know exactly what you can afford.
Getting pre-approved will save you the grief of looking at houses you can’t afford and will 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. In today’s hot real estate market, many sellers will not even consider an offer that is not accompanied by a pre-approval letter.
8. Work with a Professional Buyer Agent
When you work with someone like me, I genuinely have your best interests at heart. Not only can I guide you through the process and help you negotiate for your home, but I can also assist you with the closing process. Real estate commission is paid by the seller anyway, so you have nothing to lose and everything to gain by working with a professional agent.
9. Get a Home Inspection
A home inspector will come in and identify potential problems that you may encounter down the road. This is crucial, as it may affect how much you want to offer or whether you even want to buy the property at all. Feel free to contact me directly for a list of home inspectors that I can recommend.
10. Consider Title Insurance
When it comes to a real estate transaction, what you don’t know really can hurt you. After the sales contract is accepted, a public records search will be conducted to ensure the home has a ‘clear’ title. However, in many cases, this search can still fail to turn up potential issues that can arise down the road, which can lead to litigation in court and possibly even loss of your property. Title insurance will protect you if these issues arise.