25 Ways Home Buyers Can Get Ready For Home Buying Season
Spring is fast approaching, which means there will be “For Sale” signs popping up as fast as spring tulips. If you are looking to buy a home this year, be prepared for another competitive market. Here is a list of 25 things to help you get ready for the Spring home buying season.
1. Make a wish list
One of the first things you need to do is create a list of your wants and needs in your new home. How many bedrooms and bathrooms do you need. What type of home are you looking for, Single family or Condominium? What neighborhood, amenities, and square footage is required. Do you need parking or outdoor space? Most of all, determine your price range.
2. Consult your spouse or co-buyer
IF you’re purchasing your new home with your spouse, partner, sibling, friend or significant other, make sure you are on the same page before you begin your search. Make a list of each of your must-haves and compare be prepared to compromise to find a middle ground.
3. Compute your debt-to-income ratio
To calculate your debt-to-income ratio, you need to add up all your monthly debt payments and divide them by your gross monthly income. Anything higher than a 43 percent debt-to-income ratio can limit your ability to get a Qualified Mortgage.
4. Check your credit score
It’s a good idea to check your credit at the beginning stage of the process of purchasing a new home to give you ample time to dispute any errors or pay down any debts to increase your score. There are free sites to check your credit score, and most credit cards offer it when you log into your account. Remember anyone who is going to be on the loan needs to check their credit score.
5. Pull your credit reports
Pulling all three of your credit reports from, Transunion, Equifax, and Experian is a good idea, as lenders will be looking at all three reports. As mention already, checking your report for any errors that may be affecting your credit score will give you time to dispute them. Your report will also aid in determining your debt-to-income ratio as your monthly obligations are listed on the report.
6. Pay down credit card and loan debt
Paying down or paying off credit card debt and loans can give a big boost to your credit scores. This will help reduce your debt-to-income ratio and lift your credit score as it is calculated in part on how much you utilize your credit lines. Anything over 10% of your available credit and your credit score is affected.
7. Decide on a down payment
You can go as low as 3.5% with an FHA loan to an ideal 20% down payment to lower your monthly cost. Putting down 20% will eliminate having to pay for private mortgage insurance (PMI). Anything less than 20% is required to pay PMI, and this is calculated in your monthly payment and reduced your buying power. Don’t worry; there are many loan options available for down payments less than 20%.
8. Research interest rates
Check with a few local banks to see what interest rates are being offered; often you can find this on their websites. And remember, your interest rate is the main factor in determining your monthly payment and how
9. Account for closing costs
Many things will affect your closing cost including, type of property, location, size and what lender you will be using. Typically, the run between 3% and 5% of the purchase price.
10. Figure out how
much home you can afford
Many factors will impact how
11. Pick neighborhood
Location, location, location is the only thing you can’t change and is one the most important factors when searching for a new home. Deciding on what areas you want to live in early on will aid in your pre-home search planning. Having a good understanding of what the neighborhood has to offer you regarding schools, restaurants, shopping, and amenities will give you comfort in your choice.
12. Study the market
Once you have selected a neighborhood, it’s a good idea to study that particular market. What’s the median home price in the area? Are prices going up? What’s the average market time? Are homes selling for more than asking price? All of these things will prepare you for what you will be up against. How fast you will need to move, once you find the perfect home.
13. Learn the process
There are a lot of steps in the home buying process, from your pre-home search to closing, having a solid grasp will help reduce stress and put you on track for a smooth transaction. Get yourself familiar with the steps involved: pre-approval, purchase contracts, negotiations, inspections and appraisals, title search, and the closing.
14. Search for schools
If you currently have children or are planning to in the future, carefully examine what school choices are available to you in your desired neighborhood. Double check before submitting an offer if your home of choice is within the school’s boundaries. There are plenty of online sites to research schools and their ratings.
15. Find a Realtor
It’s not required to use a Realtor, but enlisting the services of a professional Realtor has its benefits. A Realtor has access to market data in real time. They can show you any home listed for sale in the MLS, and walk you through the home buying process from start to finish. They have the experience to negotiate the best deal possible. The best part is, in most cases they are free, the seller pays the commission.
16. Vet mortgage lenders
If you have a good relationship with your local bank, that’s great, but you want to research reputable mortgage lenders and their loan officers. Making sure your loan officer has the experience to get the loan to closing is a plus for a smooth transaction.
17. Get pre-approved
Before you even look at your first home, it’s best to speak with a lender and get pre-approved for a mortgage. Once you are pre-approved, you will know exactly how much house you can afford. Being pre-approved will in most cases be required when you submit an offer to the seller and will show your agent you are a serious buyer.
18. Ready your bank statement
When applying for a loan, you will be required to submit the last 2 – 3 month’s worth of bank statements, brokerage, and retirement statements. It’s best to have them ready to go, so you don’t hold up the process of getting a loan.
19. Request your pay stubs
Today, most employers have a direct deposit. If you can download your pay stubs, great, otherwise it’s best to find out where you can get copies of your pay stubs to submit to the lender. You will need at least the last two pay stubs and may be required to resubmit additional pay stubs right before final loan approval.
20. Think about what other paperwork you’ll need
It’s a good idea to ask your lender during the pre-approval process of what documents will be required for underwriting and final loan approval. Additional documents could be financial statements, gift letters if a parent is helping you with the down payment. Proof of employment letters if you started a new job. Tax returns if you are self-employed. Having these documents ready will keep you on track to closing on your new home.
21. Learn what to look for
Even though you have the option of hiring a home inspector, they usually cost between $400-$600. Learning what to look for when previewing a home can save you time and money associated with a home inspection if they are well beyond what you are willing to accept or repair. You’ll want to check certain things such as the furnace, hot water tank, electrical panel, roof, plumbing (water pressure), windows, and basement.
22. Brush up on your offer letter writing skills
Best used when in a multiple offer situation, you’ll want to write a personal letter to the seller and submit it with your initial offer. Price is still the most important aspect, but when you are a few dollars apart from the competition, a letter can be the difference between winning or losing out on your dream home. The best letters are positive, personal, and specific.
23. Keep those credit cards in the drawer
While purchasing a new home, its best to not use your credit cards, especially for large purchases that add to your balances. Any increase in debt, including buying a new car, will change your credit score and debt-to-income ratio. It is not uncommon for this to compromise your ability to qualify for a loan. It’s hard because most buyers want to start purchasing furnishings for their new home. Don’t do it, unless you can pay cash.
24. Get ready to compromise
Unless you hire an architect, builder and you have an endless budget; the perfect home does not exist. Be prepared to compromise in some way. Whether that be size, location, age, condition, finishes, and amenities.
25. Purchase at your comfort level
No matter how much your lender says you can afford, you should only purchase a home you are comfortable with the monthly payments. Taxes and insurance go up, at some point you will need or want to buy a new car. Take your lifestyle into consideration, do you like to travel, eat out or go to shows. What type of contingency plan do you have if the roof leaks or furnace goes out?
Buying a home is a substantial financial commitment, making sure you are comfortable with the level of financial allocation to your home, can help prevent you from becoming what is called “house poor.”