Real Estate-Home Buying Guide
Important Tips for Success
Finding the Right Home
After deciding you’re officially in the market to purchase a home, consider the following five tips when making that very important decision.
1. Decide if you want to purchase a new home, or if you’re looking for something pre-owned. New home contractors often give buyers options including choice of appliances, carpet, tile, and paint shades. Older homes often offer more character and history, but usually require more maintenance than newer ones.
2. Put together a wish list. Here’s where it is okay to dream. Make a list of all the things you would ideally like to see in a property. A pool? A spa? Three car garage? Your wish list will allow you to prioritize your wants, and will provide a place to get your thoughts on paper. As you tour homes, keep notes of what features you’re willing to trade for others.
3. When touring homes, use your imagination. Sometimes the clutter and personal effects of homeowners can leave prospective buyers feeling overwhelmed. Try to look past the clutter, and imagine your own tastes, and belongings in the space. Could the catch-all clutter room of the current homeowner easily be transformed into the home office you’ve always wanted?
4. Know the difference between minor upgrades and major ones. While things like paint and cabinet hardware can be changed at minimal costs, other things like flooring, plumbing, and electrical work can be quite costly, and usually require the services of a professional. Decide how much of your time and money you’re willing to put into repairs
5. Spend some time on the outside of the home. Sometimes prospective buyers completely focus their attention on the inside of a property. While this is important, don’t overlook the outside. Take a few minutes to stand in the yard. How loud is traffic from the property? Is their a noisy factory nearby? This is also a good time to walk around the home to check out landscaping and the exterior walls. Will you need to paint soon? Is the landscaping in need of attention?
6. Avoid falling in love with the property. Setting eyes on your dream home can be emotionally overwhelming. Letting emotions get in the way can cloud judgment and keep one from thinking objectively in the negotiating process.
7. Carefully evaluate the layout of a property. Imagine yourself living in the space. Can you live with a bedroom immediately off the dining room? Will a poorly laid out kitchen aggravate you from day to day?
8. Be realistic. Sometimes prospective homeowners are a bit overly optimistic on the amount of work they are willing to do to improve a home to their liking. Try to objectively determine how much time and money you will have for home repairs. If you can barely find the time in your schedule to walk the dog, or clean the house, it is unlikely that you will have extra time for extensive home improvements. If you underestimate the amount of work it will take to improve a property, you might find yourself making mortgage payments on a property you aren’t happy with. However, someone with extra time and resources may benefit from purchasing a property for a bargain price, and then improving it.
Finding the Right Lender
After you’ve found the right home, you’re most likely going to need a lender. The lender can make a huge difference in the overall outcome of your home-buying adventure. Consider the following five tips when looking for the funds to buy your dream home.
1. Know the difference between a direct lender and a mortgage broker. A direct lender uses their own funds to make loans. A mortgage broker gets paid to find customers for direct lenders. Direct lenders can sometimes offer better interest rates and fewer fees simply because they do not have to compensate a broker for their services. However, mortgage brokers are often the only option for those with less than perfect credit, as brokers often have access to lenders and investors that others would most likely not come into contact with otherwise.
2. Use common sense with internet applications. Always look for the secure (padlock symbol) displayed at the bottom of your internet browser when entering personal information into an online application. Keep in mind that some websites shop loans to many different companies. This can result in multiple pulls of your credit report, which can lower your credit scores. Apply to one or two companies, and wait to hear something before you proceed.
3. Beware of sales tactics. Some lenders will place a lot of pressure on you to pay the application fee and “lock-in” an interest rate. It is true, that you do need to lock in a rate—eventually, but if you need a day or two to think things over, the rate isn’t likely to change by much.
4. Look for hidden fees. When viewing loan offers, don’t be afraid to ask questions about fees. If you see something that looks out of place or seems confusing, ask about it.
5. Look for great service. Great service during the application process is a good indicator of good service during the 30 years you will be making mortgage payments. If your lender won’t return your calls, or doesn’t take the time to make sure you understand the application, you probably won’t be happy with their service in the future.
If Bad Credit is an Issue
Sometimes lenders will make you aware of issues in your credit report that are harboring you from getting the best interest rate possible on your loan. Here are 5 tips for improving your credit score in preparation for obtaining a mortgage.
1. Avoid having too many lines of credit. If you have several low-limit credit cards, consider consolidating them into two or three lines of credit.
2. Keep balances low. The lower your balance to credit limit ratio, the better your credit score will be. Never exceed the credit limit on your credit cards.
3. Pay off any collection debt. Sometimes the smallest balances can create big problems with your credit score. Even a $15 long-forgotten bill can ruin your credit score. Keep documentation of paying off debts. Your lender may ask for proof of recently paid items.
4. Avoid multiple applications. Multiple pulls of your credit report by various lenders, can lower your credit score.
5. Avoid other major purchases in the months before applying for a home loan. Lenders want to see that you are well established and have a history of paying your bills on time. New debt makes you appear to be more risky, because there is no history of paying on time.
Finding a Good Agent
When choosing a real estate agent, it is important to find someone working in your best interest. Consider the following three tips when looking for a real estate agent.
1. Remember that an agent works on commission. Agents profit from home sales. Watch out for agents who pressure you into quick decisions. A good agent will want you to find the home you love.
2. Look for a good listener. A good agent will want to know what you want in a home, and will search for a home based on your preferences and your personality.
3. Good agents will know when to make an offer and should make suggestions for successful negotiating for price and buying conditions.
Finding a Good Home Inspector
No one wants to buy a money pit. Home inspectors examine and certify that homes are wise or unwise investments. Here’s how to spot a good one.
1. Know the difference between an appraiser and an inspector. Appraisers evaluate the value of a home by determining the home size, features, neighborhood, and comparing the data to recent sales in the area. An inspector does not determine the value of a home; instead they look for flaws in the property.
2. A good home inspector will be willing to get dirty. Home inspectors need to see every square inch of a home, including dirty spaces such as the basement, crawl spaces, attic, and roof. You want your home inspection to be as thorough as possible, so that you can rest assured that you are making a good investment in the property.
3. A good home inspector will be certified and insured. Don’t be afraid to ask for proof of both.
4. Beware of home inspectors in a hurry. A good home inspector will take the time needed to pay attention to detail. If an inspector seems to be in a hurry, or is unresponsive to your questions, you may want to take your business elsewhere.
5. Paperwork is important. A good home inspector will compile the results of his/her inspection into a professional documented format for you and your lender. A certified and professional report is one sign of a professional inspection.
Conclusion
Buying a home is one of the biggest financial decisions you will ever make. Taking the time to make informed decisions can save you both dollars and heartache in the long run. With careful consideration, and artful negotiating, you will be on the way to finding the home of your dreams.