Buying a home can seem like a daunting prospect. Whether it’s your first home or your fifth, much is at stake: your savings, your credit rating, and your financial freedom.
How do you determine whether the purchase of a home makes sense? What is the easiest way to examine the whole picture, from emotions to economics? How do you separate whims from true needs? Follow these Seven Steps for Success to prepare a game plan for your real estate venture, how to research effectively, choose wisely, finance appropriately, and survive it with a smile.
STEP 1: Establish your “wants” and “needs.”
Begin your search for a perfect home by making a careful assessment of the kind of home you want (desires or ideal preferences) and need (things that are necessities). Write it down. Take time, right now, to be as specific as you can about your particular requirements.
STEP 2: Determine how much you can afford.
Set up a budget for yourself. Decide how much you can really afford to invest and be comfortable with, for your monthly house payment. Be realistic. Most lenders suggest that your payments be no more than 28 percent of your total monthly income. Don’t forget to include taxes and insurance if you plan to escrow.
STEP 3: Get pre-approved by a reputable lender.
You can save yourself time and heartache by meeting with a lender before you start your search for a home. A lender can let you know what specific loan programs would be best for you and also help you understand what it takes to qualify for the loan that you want. By taking a look at your financial situation and looking at your credit history, a lender can usually give you a good idea if you can qualify for the loan amount that you want. Many lenders call this ‘Pre-Qualifying A Buyer.’
However, to be absolutely certain that you can be approved for a loan, you should ask to be “fully pre-approved.” In this process, all of your documentation is completed and submitted to an underwriter. The pre-approval you will receive is an actual loan commitment from a lender — your guarantee of loan approval.
STEP 4: Contact Lisa Povlow to help you.
Lisa is focused on your needs and is always easy to reach. Committed to a high level of service, she will carefully advise and guide you throughout the entire home buying process providing straightforward advice, answering your questions and addressing any concerns you may have. Lisa attributes her success to hard work, dedication and integrity along with attentive, personal service and strong negotiation and communication skills. Working with Lisa Povlow will save you huge amounts of time, effort, and frustration. Remember, as your “buyer’s agents” she is working for YOU and your interests!
STEP 5: Find a home that meets your needs.
- Keep an organized record of all your research data.
Write down comments about the homes that you see. Keep track of your likes and dislikes. Assign a letter grade to each house, based on how closely it meets your ‘wants’ and ‘needs’.
- Make sure that your agent is aware of your time schedule and your expectations.
Do you like to look at one or two homes in a session? Four? Eight? Discuss all of this with Lisa.
- Tell your agent about any homes that pique your interest.
Include those homes you discover as you explore the area yourself or those you see advertised in the newspaper, including any that are ‘for sale by owner’.
- Get to know neighborhoods better.
It is good to spend some time driving around looking at homes for yourself; just ask your Lisa for a list of drive-by homes which you can consider first from the outside. She can then make appointments to show you the interior of those that appeal to you.
- Express your likes and dislikes to your agent after you see a home.
Honest communication is essential. Some buyers are shy and hesitant to tell an agent what they really think of a house. They think the agent may take it personally. Remember, the homes don’t belong to the agent. You should be straightforward about your likes and dislikes.
STEP 6: Make an offer to buy a home.
Rest assured that Lisa Povlow, your Weichert Sales Associate, is a neighborhood specialist and well trained in the techniques of negotiation. After helping you think through the issues to determine the best offer for you to make at the time, Lisa is well qualified to negotiate on your behalf with your best interests in mind.
By looking at homes selling in the area and the length of time it takes to sell, you should be able to get a good idea of value. Only a “buyer’s agent” can give you all the information necessary to make an intelligent offer in your best interests.
STEP 7: Save as much as you can on your initial investment.
There are two major investments to consider when buying a home. These are the initial investment (including down payment and closing costs) and the monthly payment (including principle, interest, taxes, and insurance).
HERE ARE SOME WAYS TO SAVE ON YOUR INITIAL INVESTMENT:
- Choose a low down payment loan.
You do not necessarily have to put 20 percent, or even 10 percent, down. You can put 5 percent, or even 3.5 percent, down on some loans. Ask whether or nor your loan includes “private mortgage insurance” or PMI. Your loan officer can show you the many options available for financing today.
- As part of your offer, you may want to ask the seller to pay some of your closing costs.
Sellers are usually allowed to contribute to a buyer’s closing costs. In many cases this is a negotiable item. The decision to ask or not will depend on many factors, including the offer price, the value of the home, the seller’s situation, and whether or not you are ‘competing’ with other offers.
- Shop around for your home insurance.
A little shopping can save you a significant amount of money. You can deduct money paid for discount points from your gross income before computing your tax the year after you buy, which would effectively reduce your cost. Always check with your CPA to find out specific guidelines in your area.
IF YOU WOULD LIKE TO KEEP YOUR MONTHLY PAYMENTS LOW:
- Get a loan with no monthly mortgage insurance premiums.
You may be able to reduce or eliminate them by paying a little more at closing. By putting 20 percent or more down, you may be able to eliminate them entirely.
- Choose an Adjustable Rate Mortgage.
ARM’s can be up to 3 percent lower than fixed rates; but watch out for how the interest rate may increase in the future.
Remember that interest payments on a primary residential mortgage are fully deductible in most circumstances. Your property taxes may also be deductible. Tax rates definitely favor homeowners.