Getting those keys to your new home is such a wonderful feeling! You’ve worked so hard to get here. You’ve been in the process of it for months, years, maybe even decades! Are you the first person in your family to own a home? What milestone will you reach once you’ve accomplished your goal of buying your next home? Finally, how much of what you watched on HGTV actually helped along the process?
Maybe some of the advice helped on the shows of buyers finding new homes is great and helpful, but nothing on any reality tv channel can really prepare you for what you experience in real life. You need professional, personal and trusted advice along the way. Anything short of that will leave you unprepared and open to any preventable pain that could have been avoided if you were better prepared.
That’s why we’re continuing our two-series on buying a home with Part II of home-buying tips. You can view Part I here. These tips are here to give you a good foothold in your position as a buyer. We don’t cover everything because frankly, you can’t do so with tips on a blog. Your situation is different than everyone else’s because you’re different from everyone else. Getting personal advice from an advocate you can trust in real estate will be in your best interest.
Check out the tips below and please feel free to contact me with any questions you may have.
1. Follow Interest Rates
It is important to know what interests rates are doing. The big question is are they on the rise or are they falling?
When the economy is good the Federal Reserve typically raises the interest rate in an effort to slow down economic growth in order to control inflation and rising costs. When the economy is in the dumps the Fed does the exact opposite. They lower the interest rate in order to entice more people to make larger purchases that require loans (i.e. land, cars, and houses) to help stimulate the economy.
As new soon-to-be homeowners, it’s a good idea to know how the overall economy is doing, and more importantly, how it’s impacting the interest rates you’ll soon be applying for. In 2018, after years of bottom of the barrel interest rates, the Fed raised interest rates three times and is projecting to raise it three more times in 2019. So far so good, we still low!
2. Know How Much Time it Takes to Buy a House
The home buying process from start to finish is time-consuming and very relative to individual circumstances and the housing market in your area. However, there are some general universal constants that you can expect, such as a cash offer on a house is usually much quicker than a traditional loan, and if there is a perfect house in a good neighborhood and at a great price, you better expect competition and added time for a seller to review offers.
Depending on the housing market in your area and possibly which season you’re buying in, it can take you a couple of weeks to find a home or more than a year. But after you find your home you can typically expect the entire process from making an offer on a house to walking in its front door, to be as little as a few weeks to a couple of months on average.
3. Find a Knowledgeable Real Estate Agent
There are several ways to find a knowledgeable real estate agent. Many people rely on recommendations from friends and family, while others look to online reviews. While both of these scenarios work really well and can land you a great real estate agent, the reason these agents rise above the others as the best of the best or the crème de la crème is because of their intentions.
A good real estate agent isn’t trying to get you into a house as quickly as possible so they can earn a commission. Instead, you want an agent that will act as your guide through the home buying process, while having your best interests in mind. A good agent will be able to tell you straight if they think a house is a good fit for you, or if you should keep looking. They should also be expert negotiators so that you get the best deal possible.
4. Find a Mortgage Lender
There are a few things to keep in mind when researching a mortgage lender. The first thing that comes to most people’s’ minds is what mortgage rate can they get. You may have to shop around to find the best rate because lower the rate the more money you save.
Secondly, how does that mortgage lender rate compared to other lenders? By looking at positive and negative online reviews you can usually establish a theme pretty quickly of the strengths and weaknesses of the lender, and what you can possibly expect for a level of service down the road.
Ask the lender what their average length of time is to close on a house after the offer has been accepted? A good lender versus a bad one can be the difference of moving into your new home two to four weeks earlier. You want to find out how streamlined their processes are.
5. Get Pre-approved
When being approved by a mortgage lender, you should be aware that there is a small but relevant difference between the typical fast pre-approval for a home loan versus an underwritten pre-approval.
The fast pre-approval usually encompasses a credit report and a loan officer review and can be done in less than a couple of hours. This basic pre-approval allows you to quickly know how much you can afford and then make an offer on a house that may have just come on the market.
The underwritten pre-approval usually takes about twenty-four hours and includes a credit report, loan officer review, underwriter review, and a compliance/fraud review. Though this process takes longer, your offer on a house is actually stronger. Eventually, if you’re planning on buying a house, you will have to go through the underwritten pre-approval process anyway, so it’s better to jump on it from the start.
6. Research Neighborhoods or Areas You Want to Live
There are many variables to think about when researching your future residents. The key to beginning your research is to determine those variables most important to you. Are you looking for a good school district, a large house, convenience to commuter options, or a specific neighborhood that is extremely friendly and ranks high on Walk Score?
Your real estate agent will most likely tell you to figure out your list of the things you absolutely want in a house versus the extra features that you would like to have, but wouldn’t deter you from a house if it wasn’t there.
Your list will help your agent narrow down the number of houses they’ll show you, saving you time by only showing you houses you’d actually be interested in.
7. SHOP FOR YOUR HOME AND MAKE AN OFFER
Now that you know where you want to live and you’re pre-approved, the fun begins. You get to look at houses! Once you find the house you know would be a great fit for you and your family, you’ll want to make an offer.
There are numerous variables to consider and hopefully, your knowledgeable real estate agent will help you through this process. Understanding the market conditions, how houses have been selling in the neighborhood and at what price (above or below asking), and knowing if there are other competing offers will help you assess and determine how you’d like to make an offer.
Negotiating an offer on a house can be emotionally taxing, so do your research and rely on your agent’s advice so you come to the table prepared.
8. Get a Home Inspection
Congratulations are in order! The sellers have accepted your offer. Now you want to get the home inspected to make sure there are no underlying issues that could cost you money down the road, such as a bad roof or foundation. Usually, a home inspection is a contingency built into the initial offer, and your real estate agent can help you set this up. However, it is recommended to hire an inspector that is certified by a national organization (such as ASHI or Inter-NACHI). Though you can waive this contingency if you’re trying to make your offer more competitive in a hot market. Just be aware that if you do waive a home inspection contingency, you may be taking on considerable risk.
There are several types of home inspections, but in general, a typical home inspection involves a certified inspector that will go in, around, under, and top of your house looking for anything that could be of concern, such as structural or mechanical issues. The inspector would also look for safety issues related to the property. Though they will go into crawl spaces and attics as part of their inspection, they will not open walls. They will inspect the plumbing and electrical systems and should point out any defect in the property that could cost money down the road for the homeowner.
Then they will put their findings into a nice written report for you with pictures, which then basically becomes a miniature instruction manual for your house. No house is perfect, but the report will give you a great snapshot of the property at the time of the inspection. If there are fixes that need to be addressed, this report will certainly let you know.
You should also know that the sellers are not required to make any repairs to the property. However, you can request them through your real estate agent, which will let you know what repairs are reasonable or not.
9. Have the Home Appraised
Home appraisals are an important part of the process because oftentimes house prices can quickly skyrocket when the housing market is hot, and banks do not like to loan out more money than what a home is worth. A home appraiser will not only tell you what the home is actually worth for the area and for the current housing market, but this appraisal will also directly affect the size of loan the bank will give you.
If the home appraisal comes back and states that the house is worth $300,000, but you made an offer of $310,000, the bank will most likely only lend you $300k. You will then either be stuck with paying the additional $10k out of pocket, or you may try to renegotiate the price with the sellers to see if they would be willing to come down. Or you may lose the house altogether.
Also, the mortgage lender will usually set up the home appraisal so you can take this time to focus on other home-buying tasks that need to be finished up.
10. Close the Sale and Sign The Papers
Congratulations, you’re a homeowner!
Your real estate agent should help you map out the last details, such as when and where you should sign all the papers to take ownership of the house and, of course, the handing over of the keys.
Welcome to your new home!