With the holiday season fast approaching, many first-time homebuyers are still on the hunt for a home. To help, we’re serving up some hardy home buying tips in hopes of making your journey toward homeownership pure gravy.
Be sure you are ready to be a homeowner
Before deciding if homeownership is right for you, take some time to research the pros and cons of owning vs. renting. Our first tip is to make sure you are ready to take on a home loan. Did you know that most home loans span 15-30 years? It’s important to understand that, homeownership is a long-term commitment and while you may not need to stay in that home for the life of the loan, you do need to be prepared financially.
Don’t assume that just because you have enough for a 20% down payment that you can afford to be a homeowner. Draining your savings to commit to a 20% down payment is not always the way to go, especially if it’s at the expense of losing emergency savings.
Check your finances, establish whether you have enough for a down payment, closing costs and a little extra for at least a few months of expenses in an emergency.
Ensure your credit is healthy
Our second tip is to ensure that your credit is healthy before you begin your house hunt. After all, before you purchase a home, you need to pre-qualify for a mortgage and you can’t pre-qualify for a mortgage if your credit health is subpar.
In the 3–6 month time period before buying a home, do not make large purchases. A lender will want to see that you're responsible and reliable when they determine what type of loan you qualify for. Large purchases, significant credit card debt, or other new loans could have a significant impact on your credit rating and debt ratio.
Build the right team
Purchasing a home is likely one of the largest purchases you will make in your lifetime. When the stakes are that high, it’s important that you have a strong team of professionals to help guide you.
A lender is a licensed professional who determines whether you qualify for a loan and the amount of the loan. Be sure to shop around for multiple lenders in order to ensure you are getting the best rate, loan terms and conditions.
A real estate agent is a licensed professional who represents buyers and sellers in real estate transactions. A real estate agent provides guidance through your house hunting journey and can help determine whether a home is priced correctly.They also help you properly negotiate during the offer process.
In today’s hot housing market, competition for homes is fierce and at times fast-paced. Be sure to find both a lender and real estate agent who are quick to respond and efficient. Asking for referrals from family and friends who’ve purchased a home before is a great jumping off point when building your team.
Don’t skip the pre-approval
Getting pre-approved means that a licensed loan officer (or lender) has pulled your credit report and reviewed financial documents such as bank statements, tax returns, W-2 forms, to name a few, and has determined what loan amount you can afford and how much they will lend you.
A pre-approval letter gives you a big leg up when you are competing for a home and allows you to make an offer with confidence. It strengthens your buying credibility and provides assurance to sellers and their agents that you have the ability to complete the purchase of the home.
Pre-approval vs. pre-qualification: Do not confuse pre-qualification with pre-approval! A pre-qualification letter (while better than nothing) does not carry the same weight as a pre-approval and most likely will not stand up against competing offers with pre-approvals. A pre-qualification letter does not require any formal documentation of your finances and typically does not require running a credit check.
Don’t make decisions based on emotion
Buying a home is an investment, and with any investment it’s important to base decisions on sound facts and not emotion. Though it is difficult not to get invested in the home you want to purchase, If you remember to stick with your budget and let that be your guiding light, in time you will find the right one. Making sure you can comfortably afford the home you put an offer on must remain a top priority.
Stay the course and you’ve got a recipe for success
It can take anywhere from 4 – 6 months to shop for a home, so stay the course and with that in mind try not to get frustrated and trust the process. Your home is out there! These tips, plus a little patience, are a recipe for success in the search of your first home.