Smart Buyer’s Guide to Choosing the Perfect Property
Daydreaming about owning your own home is one of the most intoxicating practices known to modern man, especially now that HGTV and all the house flipping shows make it look like a cake walk. But when the time comes to actually put your money where your daydream is, it can be challenging for first-time buyers especially to understand how a home that doesn’t currently come anywhere close to “dream” status could be whipped into shape -- and how a home that they think is perfect now will end up feeling like a mistake in a couple of years. To avoid that unfortunate scenario, first-time buyers will need to think carefully and weigh all of their options. After considering all of these factors, you’ll be well-prepared to choose a house that feels like home today and for years to come. Price First and foremost, you need a home that you can afford. There’s no sense in deciding that you must have four bedrooms when the most you could afford in your market is two. You don’t need to go through the entire process of getting pre-approved for a mortgage before you can start even considering what you want, but do a little bit of research around what your current housing market looks like, and then think about the down payment size and your own current finances. There are mortgage calculators and other tools online that can be useful, and it’s almost always helpful to talk to a real estate professional, like a mortgage broker or a real estate agent, so you can get a realistic idea of what you might need to spend and what you can spend on your new home. Beds, baths, and size You know what size your household is and whether it’s likely to grow in the future. You also know how much space you’re likely to need based on your own current household’s configuration -- if you work from home, then your desire for a little more space (and a room for a home office) might be non-negotiable, whereas if you’re used to commuting to an office every day, you may not need a home office at all. So get a handle on the minimum number of bedrooms and bathrooms you’ll need in any home you buy. If you can, try to come up with some parameters for square footage, too. And you may want to think about your overall lot size if, for example, you’re an avid gardener or you have large dogs who’ll need some space to romp in the yard. Special features Once you understand your basic requirements for a home, you can start thinking about additional features that you’d like it to have. Perhaps you want a garage to store your tools, or a fenced in yard for the aforementioned dogs -- or a deck where you can lay out and soak up some sun on weekends. You should also think about the ideal heating and cooling setup in any home you buy, and it’s also wise to consider the school district (because even if you don’t have kids, it’s smart to keep in mind any buyers who could purchase your home from you in the future -- they might have kids). Some of these special features might be “nice-to-haves,” and you might decide that some are absolute necessities. Spend some time talking to a general contractor or a real estate agent before you make any final decisions about necessities, though -- it’s quite possible that some of the things on your “must-have” list can be easily added once you move in. Location matters -- a lot Smart first-time buyers will want to think beyond a school district when choosing a home. How close is your home to major highways in the area (and is that a good thing or a bad thing)? How close are you to work, and are there other job opportunities or thriving industries nearby? What’s the shopping like? Are there parks or recreation centers, and where are the best grocery stores? You’re buying a neighborhood just as much as you’re buying a home, and unlike your home, there isn’t usually a lot you can do to change the neighborhood. So make sure you’re fully aware of what the area where you’re hoping to buy is like, both positive and negative, and understand how that’s going to affect your life while you’re in the home and any buyers who may come after you. Focus on what you can’t change It’s really easy to fall in love with one part of a home and allow it to cloud a truer vision of your future. Maybe that kitchen is perfect for re-imagining yourself in a scene from Julia and Julia, but if there aren’t enough bedrooms or bathrooms in the home, then you’ll regret the purchase soon after you move in.Try to look beyond trims and finishes to focus on the aspects of the home that are fixed and unchanging, like the lot size or the location of the property. If you’re touring a potential home with an agent, give your agent your list of must-haves and ask your agent if the house could fit that list with a little bit of work. A real estate professional can help you figure out if a house that you think is just OK today might actually be your dream home in disguise. You can change out carpeting for hardwood floors and redo a kitchen over time, but if your heart is set on waterfront property … that might take a few thousand years to manifest, and you don’t have that long. Is that really a “bargain”? If you’re faced with a choice between a home that seems like a bargain but requires some fixing-up and a home that’s more expensive but requires little or no work, which should you choose? In general, you probably want to opt for paying more out-of-pocket today for a home that’s still standing solidly tomorrow. There might be a good reason why that home is listed at a “bargain” price -- it might be too expensive and time-consuming for anyone to reasonably fix. This is another area where your real estate agent can help you understand whether a home’s condition is really worth the savings. Agents have seen homes in the area of all ages and in many different conditions, and they can let you know what issues typically arise in homes and whether the place you’re considering might be at risk for exhibiting one or more of those issues.When you know how to choose the perfect property, you’re in a good place to start your home search -- even if you’ve never bought a home before. Once you’ve got your short list of what you’re seeking, talk to a real estate professional so you can take the next step toward your homeownership dream.
The 5 Biggest Mistakes to Avoid When Buying Your First Home
Buying a home can be an anxiety-ridden process, and that potential anxiety gets amplified for anyone who’s embarking on homeownership for the very first time. There’s so much to do and so much you don’t know that “being overwhelmed” hardly seems like an appropriate description of how it feels. And even though you don’t want to scare yourself away from the entire process, you still need to be wary of falling into a few common traps that first-time buyers generally don’t avoid. If you’re aware of these five potential mistakes -- and able to keep yourself from making them -- then you’ll be saving yourself some significant stress on your home buying journey. Mistake No. 1: Not understanding your down payment options The biggest headache for so many first-time buyers is the down payment. If you’ve ever bought a car, then you’re probably familiar with the concept -- it’s money that you contribute to the total cost of the purchase. A down payment of just a couple thousand dollars can get you a head start on your car. If you don’t have a certain amount to put down on your home loan, however, you might find yourself paying private mortgage insurance (PMI) on the lifetime of the loan. Depending on your credit score, the bank and other factors, PMI could cost between 0.5 percent to 1 percent of the total loan amount. Most banks require at least a 20 percent down payment before they will waive the need for PMI on the loan. And most homes in this area cost about $300,000, so that means a buyer would need to bring $60,000 to the table in order to avoid PMI. However, there are loans that allow you to put as little as 3 percent down on the home ($9,000 for a $300,000 home), which is much more reasonable for a first-time buyer, especially if you can accommodate the annual cost of $1,500 to $3,000 in PMI into your monthly payment amount. And veterans could be eligible for zero-down loan programs with no PMI through the Veterans Administration (VA) loan program, so that’s something else to think about. There’s one more thing to know about down payment options: Some government organizations and lenders try to incentivize first-time homeownership by offering free down payment grants or loans to qualified buyers. Depending on your age, income level, credit score and other factors, you could qualify for free money to wrap into your down payment; a full rundown of programs is available at downpaymentresource.com. Mistake No. 2: Not getting prequalified for a loan Between the amount of money you plan to put down on the home, the potential PMI and other cost factors, your monthly cost could be significantly more (or possibly less) than some of those calculators will show you online. So before you trust those “estimated monthly mortgage loan amount” numbers that you see popping up next to your potential new dream home on Realtor.com, Zillow or a brokerage website, it pays to figure out what you can actually afford -- and that means getting prequalified for a home loan. This means you will need to talk to a mortgage loan officer and submit a slew of documentation, from your monthly pay stub to your credit score, in order for that loan officer to tell you how much money you can get for your home loan. It’s a little bit painful, but the prequalification letter you’ll get as a result is much more credible than a quick qualification you can pull up on an app -- and that means sellers will take it more seriously when it comes time to put in an offer. You’ll have to qualify for a loan eventually anyway, so why not get the painful part out of the way? Be careful: A bank might approve you for a loan amount that’s realistically more debt than you can carry month-to-month. Consider that you’ll need to pay homeowners’ insurance, taxes and possibly flood insurance on your new property or PMI on your loan, and try to make sure you’re not setting yourself up for a total monthly payment that’s more than about one-third of your household’s take-home pay. Not only will this help you set your price range for the search stage, but it will also give you confidence that you -- yes, you! -- can be a successful homeowner someday soon. Mistake No. 3: Not finding a qualified real estate professional It’s so easy to find homes online these days that you may wonder why a real estate professional is even necessary. After all, isn’t the hard part -- finding the place you want to buy -- something you can do yourself? Well, maybe. But the process of buying and selling a home is filled with 100’s of details that need to be planned for and navigated to a successful outcome. Not to mention areas with competitive markets where you’re probably not seeing the most updated listings -- that home you just fell in love with online might be under contract before you can set up a time to tour it. Not only can a real estate professional make sure you have access to listings the second they hit the MLS, but a licensed real estate professional can also provide expertise on the area where you want to move. Whether that’s feedback on who can help you with homeowners’ insurance quotes to warnings about some of the challenges of owning a home in that particular area, you want to work with an honest professional dedicated to protecting your interests and those of the public. A real estate professional is an invaluable resource. Here are some questions to ask any real estate professional you’re interviewing: How long have you sold real estate? How long have you sold real estate in this neighborhood in particular? What can you tell me about the energy options in the area? What else should I know about utilities, like water/sewer and other amenities? What do other clients who have moved here like about the area? What don’t they like? What do people in this area like to do for fun? What are some popular weekend activities? What can I expect about the buying process? What steps should I be especially aware of, and how will we stay in communication? A real estate professional who’s an area expert should have no trouble answering the lifestyle questions, and a real estate professional who’s a transaction-management ace can help you understand exactly what you’re in for, how long it’s likely to take and what rewards await you at the end of the tunnel. Mistake No. 4: Not spending the night in the neighborhood If it’s at all possible, see if you can find an Airbnb or another vacation-rental type of setup where you can crash for a night or two -- preferably closer to a week -- so you can try your new neighborhood on for size. Is an 8 a.m. arrival time at work still reasonable with this neighborhood’s commute? This is an opportunity for you to start navigating your way around public transportation or new routes to work so you know exactly what you’re signing up for. Where are the closest grocery stores, parks, rec centers and hiking trails? Figure out where you’re going to shop and work out, and where you can spend time outside walking the dog or enjoying nature. That way you won’t kick yourself later for realizing too late that something you really value isn’t available. And what are the overnight noise levels like, anyway? If there’s a train that rolls through town in the early hours of the morning, you’re near a highway or a flight path -- and any of that is going to disturb you -- then it’s best to figure it out before you’re spending your first night in your new home and wake up to unpleasant (and unexpected) noises. At the very least, you can learn enough about the neighborhood to know how close to (or far away from) the bus line you need or want to be and target your home search accordingly. Mistake No. 5: Not understanding what’s fixable and what’s a deal-breaker Those drop panels in the ceiling are hideous, and you can’t imagine how anyone can fit into that minuscule bathtub. Are those annoyances that can be fixed or deal-breakers that mean you should pass on the property entirely? This is another area where a good real estate agent can help. They see so many houses in various stages of repair and updating that they can show you where you can claim another foot or two for bathtub space (and help you figure out how much it will cost and who’s trustworthy enough to take on the job) or let you know that the ceilings are too low for any changes to make much of a difference. They can also give you an idea of what’s up to code and what simply won’t pass an inspection in 2017, so you know what concessions to request as soon as you’re ready to make an offer. In markets where entry-level homes are getting snatched up as soon as they hit the market, knowing what’s acceptable and what you just can’t take is a huge advantage -- it’ll help you make a decision, with confidence, on the fly. None of these mistakes will keep you from buying a home of your own -- but they could delay the process and cost you hundreds (if not thousands) of dollars at the end of the day. But if you’re able to avoid them, you’ll be signing the closing papers on your dream home before you know it!
Why Working With a Real Estate Professional is the Best Decision You'll Ever Make
Most people don’t buy a home every day -- it’s a once-or-twice-a-decade activity for many of us as opposed to a day-in-day-out activity. So when you start getting serious about buying, whether it’s your first home or your fourth, it’s easy to feel overwhelmed pretty quickly. Some parts of the process (like searching for a home) have recently become more accessible through technology, but when every buyer has access to the same technology and resources, it’s tough to stand out in a crowd of showing, bids and contracts. And there’s a lot more to the journey than just finding the home: You need to figure out financing, negotiate on price and possibly request repairs or make concessions, get the home appraised and inspected, and make sure all the i’s are dotted and t’s are crossed by the time you sit down at the closing table to sign your name on a stack of paperwork. That’s why a real estate professional can be an indispensable resource for buyers -- unlike most of us, real estate professionals do manage home sale transactions every day, and they can serve as a guide on the buyer’s journey, ushering you from Base Camp “I Think I Want To Buy A House” to Summit the mountain of “I’m A Homeowner,” step by step. Here are just a few of the ways a real estate professional can help smooth your home buying path. Getting pre-approved by a lender Instead of paying rent to the owner of your residence every month, as a homeowner, you’ll be paying back a bank for the money you borrowed to buy your own place. But before you get there, you need to find that bank and secure that loan. Where do you start that process? A real estate professional is one good place -- agents work with an array of local loan officers representing different lenders, and depending on whether you’re a veteran, your down payment size, your credit score, and a number of other factors, a good local agent will know which lender (and loan officer) might be the best fit for you. The right loan officer will explain your financing options and help you drill down to the real nitty-gritty, like the size of the monthly mortgage payment that’s affordable on your current income, what you should expect in terms of closing costs, and whether the down payment amount you’ve saved is going to cut it. Agents can also explain what to expect during the mortgage loan application process, what you should know about transferring money during the sale, why it’s important to review certain documents -- and they can usually even attest to whether certain lenders have parameters that might be better for one type of home instead of another. Choosing a home Many buyers (mistakenly) think that they don’t need an agent’s help finding a home. They know what they want, and they know how to search the internet -- what’s the point of hiring an agent? Here’s the thing: You might not need any assistance when you’re picking out a car, but there is no consumer report that exists for the specific home you’re about to spend 30 years paying off. What if you’re someone who thrives on direct sunlight and your “dream home” happens to be located by a hill that’s going to cast it in shadow half the year? What if you can’t sleep when airplanes are flying overhead and your soon-to-be home is in a major airport’s flight path? What about the schools? What about the amenities? How do homes in that area hold their value -- can you expect this investment to appreciate in the next few years, and by how much? Cars come off an assembly line; homes do not. Whether it’s the condition of the home or the neighborhood around it, you don’t want to be unpleasantly surprised once you move in. A real estate professional has seen other buyers make mistakes (and find gems) and can help you find a home that you still love two or three (or ten!) years down the road. Making an offer This can be one of the most nerve-wracking parts of the process for buyers. Because even if you love the home and are making an offer at the very top of your budget … there is no guarantee that the seller will think it’s worth accepting. You could wind up starting all over again on the home search process. Real estate professionals can help you do more than make an unsophisticated stab in the dark when it comes to offers -- they can show you data that will help you understand whether you’re likely to be underbidding or overbidding, for example, such as the recent sales prices of similar homes nearby, the price-per-square-foot range in the neighborhood, and much more. This is really where the home sales rubber meets the road. If your offer is high for the market, the seller may leap at it … but you’ll always wonder if you could have gotten a better deal. And if your offer is low, you should understand that so you won’t feel offended or put-out if the seller comes back with a counter-offer. Closing You did it! You found a home you love at a price you can afford, the seller accepted the offer, and now all you have to do is sit back, relax and enjoy the closing process. Right? OK, that’s not exactly true. Even the simplest real estate sale involves quite a few mandated hoops that must be jumped through -- like the inspection, the appraisal, title review, and more. In some states, a title company manages the closing process; in others, a lawyer is involved. But the negotiation isn’t over yet, not by a long shot. What happens if the inspector finds an issue with the home that must be addressed before the sale is legal? Who will pay for those repairs -- you or the seller? And what can you expect in terms of finalizing the loan and moving your down payment or earnest money from your account to the sellers? What should you look for during the final walk-through? An agent can lay out a roadmap from offer acceptance to keys-in-hand and make sure you’re staying on track ... which can feel like a lifesaver to a buyer drowning in details. … And beyond! When you’re all moved in and settling down, you’ll probably discover some upgrades you’d like to make and work on shaping your home to fit you instead of the previous owner. Your real estate professional already knows your house (and the neighborhood), so why not reach out when you’re considering adding a deck or redoing a bathroom? They can help you figure out which improvements are timeless and will increase your home’s value versus quickly dated trends that you might have to redo again before you sell. And that’s not all -- your agent probably knows people in the neighborhood, from home service providers like plumbers and electricians to lifestyle service providers like day-care operators and pet sitters. If you need a recommendation, ask your agent! Buying a home goes well beyond finding one for sale on the internet. Buyers who use the services of a real estate professional find the process more enjoyable and less stressful -- and they also have an advocate to negotiate tirelessly on their behalf.
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