Get Preapproved, Not Just Prequalified
You probably have a figure in mind for what you’re willing to spend, but lenders may have a different idea of what your budget can withstand. Before you even step foot into your first open house, it’s a good idea to find a reputable lender and start the preapproval process. Despite similar sounding names, the difference between being prequalified and preapproved is huge: Prequalification takes only self-reported information on incomes, debts, and assets into consideration to give you a ballpark figure of what you might qualify for, whereas preapproval involves submitting tax returns, bank statements, and credit scores and results in a formal letter with an actual mortgage amount for which you are approved, along with the estimated interest rate you’ll pay. (Rates fluctuate with the markets so these are rarely locked in.) It’s especially important to have this squared away when you’re looking in a competitive market, as many sellers will only consider offers from preapproved buyers, who can close faster and are less likely to have their financing fall through. The last thing you want is to find your dream home and not be in a position to put in a competitive offer quickly. Arming yourself with preapproval paperwork means you can strike while the iron’s hot.
Start Window Shopping
Once you have your financing in order, the fun part begins: Start browsing real estate websites like Trulia, Redfin, and Zillow. This is a good way to become familiar with the market in a broader region before zeroing in on one or two areas. And don’t just look at what’s currently for sale--look up the “recently sold” homes in your ideal neighborhood for a realistic look at what homes are actually selling for (in some markets the list prices could be as much as 30 percent lower than the sale prices) and how long they’re staying on the market. Then start dropping into open houses in the areas that pique your interest. Take notes on features you love, things you consider “dealbreakers,” and agents you meet that you may want to interview later.
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Make a (Realistic) Priority List
Unless your budget is limitless, compromises will almost always have to be made, so it’s a good idea to ask yourself the tough questions before you get too far into the process. What are your absolute must-haves? As in, which things would you rather not go without vs. owning a home? Those belong at the top of your list. Amenities that you’d really like but could live without--like marble countertops--likely belong toward the bottom of the list. Be realistic with what you can afford, and keep in mind that many things, like stainless steel appliances and hardwood floors, can be upgrades for later. Others, like location and architectural style, will never change.
Interview Agents
The next thing you’ll need to do is find a knowledgeable agent that you trust to help you in your search. Getting recommendations from friends or family is a great plan A, but you’ll want to make sure their agent is familiar with the market in your top-choice neighborhoods and has experience as a buyer’s agent at your budget level. If not, check out sites like HomeLight.com, which can help match you to realtors who meet your needs. From there, you’ll want to ask important questions like how many homes do they typically show their clients before they find “the one,” how many homes have they bought or sold in the area you’re looking for, whether they’re willing to do showings on nights and weekends, and how they plan to communicate new listings with you. And don’t be afraid to change agents mid-stream if the person you’ve picked is not working out.
Really Run the Numbers
By this point, you should have your preapproval letter in hand, stating exactly how much house you are approved to buy. But only you know how much you’re comfortable laying out each month. Before you put in an offer, tally up all the monthly expenses associated with living in the home you’re considering. Include the obvious items such as HOA fees, property taxes, and homeowners insurance, of course, but don’t forget maintenance and renovation costs--especially for an older home. Is the school district good or will you be sending your kids to private schools? What will your new commute cost you? What will the utility bill look like? Is there a chance your dual-income household will become a single-income household in the future? Many first-time homeowners fail to ask themselves these questions, max out the budget for which they were approved, and then struggle to make ends meet. A thorough and honest accounting before the offer is submitted will help spare you the dreaded buyer’s remorse.
Check Out the Neighbors
When touring a house the first time, it’s common to hone in on the property itself: its curb appeal, the closet space, those gorgeous oak floors. But there’s one major factor beyond the property line that can drastically impact your happiness in a new home: the neighbors. When you go back for your second viewing of the home, pay closer attention to what’s happening around your would-be neighbors’ homes. Are there cars overflowing from the driveway? Is the lawn overgrown? Are there barking dogs? Do people in the community seem friendly? It’s also smart to look up the address in your state’s sex offender registry to make sure there aren’t any questionable characters living nearby.
Write the Earnest Letter
In a hot real estate market, agents advise that you do whatever you can to make your offer stand out. The best way to do that is with a high, all-cash bid. But if you don’t have cold hard cash on your side, try a few other tactics: Offer the sellers a couple of weeks of free rent-back, so they can take their time planning a move, or write a flattering cover letter for your offer that pulls at their heartstrings--or their vanity. Compliment their decor and any impressive DIY projects, or simply speak from the heart and share your vision of your family making memories in the home. This doesn’t always do the trick, but it can certainly set you apart to more sentimental sellers.
Find Your Own Inspector
Once you have an accepted offer, things start to move pretty quickly and it’s easy to become overwhelmed with all you need to do before closing. A good agent will guide you through these tasks, including recommending inspections for the home, roof, pests, etc. They probably have a list of inspectors they’ve worked with many times before, but it’s wise to do your own research on this one. Even the best agents can’t deny that they have an incentive in getting you to close the deal, so a rigorous inspection isn’t usually in their favor. You’re better off getting a referral from a friend or family member, or finding someone yourself who can provide references. Once you’ve hired someone, ask them to pay extra attention to the priciest problem areas--the foundation and roof. The extra effort now will give you priceless peace of mind once you’ve moved in.
