So, you’re thinking about buying your first home or upgrading from your current house? It’s easy to head out and look right away, but jumping the gun sets you behind all of the other competitive buyers out there in the market. Do you know the steps to take before looking for a house?
When you start looking on Zillow, Realtor, or other listing aggregation sites, the world of real estate transactions seems so easy. You think to yourself, “I can sell my house Fast in Orlando!”. Post some pictures, make sure that it looks like the breakfast nook you’ve always wanted, and all of those HGTV upgrades that your friends copied and sunk their life savings into.
I sunk $30,000 into shiplap, chalkboards in my kitchen, and rustic wood. Worth it.
It’s very competitive out there right now in these post-recession times. Home purchases are back on the rise, with 5.5 million existing homes bought and sold in 2017. It’s important to be ahead of the curve. Before you step into the ring, follow these four steps to take before looking for a house!
1. Ask yourself if you’re ready to become a homeowner
Becoming a homeowner is a huge life step. Having to care about a lawn, saving for home repairs, learning to find Millwaukee tools in Canada and shoveling driveways is not for everyone. A huge reason that people continue renting is that they don’t want to deal with the responsibility of homeownership and would rather have a dedicated handyman in the apartment complexes fix the water heater.
However, there are massive benefits to owning a home that renting an apartment can’t compete with. Obviously, you get so much more square footage and space for the price when you own your own home. Apartments are typically 700-1100 square feet, whereas comparably priced homes are more like 1,500-3,000 square feet.
Additionally, the age-old question applies here: why would you want to pay for someone else’s mortgage when you can pay for your own? Don’t pay the bills for a landlord when you can gain equity for yourself. Hanging on to a home for 5, 10, 20 years is typically a solid financial decision in the long run and, if you have the funds for a 5%-20% down payment, then there is no sense wasting money on something you’ll never own. If you can afford it, it’s better to buy, especially before interest rates go up. Owning a home is not as hard as lifelong apartment dwellers might think it is. If you think you’re ready to handle it, there’s a very obvious next step…
2. Hire a Realtor®
Yes, this one may seem obvious. Obviously hiring an agent is one of the first steps before looking for a house. But, you’d be surprised how long it takes some people to take this step. Usually, future homeowners look for a house they like first, and then they call a real estate agent. Unfortunately, in hot real estate markets, any delay will lose you the house you loved so much on Zillow.
Find an agent before you fall in love with a house. This cannot be overstated. You’re setting yourself up for disappointment when you become attached to a house or houses before you have the #1 resource at your disposal to submit an offer. Most importantly, buyers typically do not pay anything to a real estate agent.
The seller picks up the tab for both their agent and yours. A Realtor is a free (for the buyer) resource who knows the market, knows the entire process, and will pour through pages and pages of real estate legal-eze documents on your behalf. Why turn down free, expert help? P.S. If you’re interested in a new build, the builder pays for your real estate agent. So, yet again, a free service that can help save you money!
3. Get some insight into your local real estate market
Your Realtor is a huge help with this step. What’s the average sales price in your local market? How many days does a house usually stay on the market? Those questions will dictate what you offer, what you pay in closing costs, and ultimately, your bottom line overall. If houses are typically on the market for a week and the house you love has been on the market for 17 days, it’s probably overpriced.
Thanks to being vigilant with an agent, you could offer $5,000 less and nab the house of your dreams with no competition. If you’re looking for a new build, this is a great time to start looking into all of the different builders in town, where they’re building currently, and what kind of floor plans they offer. Again, your agent is a huge help in this area. Being knowledgeable is a huge boon to your home search and will help you save money and/or get the home you want with less headache.
4. Talk to a mortgage lender
Last, but possibly the most important, is to find a qualified mortgage lender. Out of all the steps to take before looking for a house, this might be the biggest. Your real estate agent likely has a few recommendations for you. Experienced agents have worked with several lenders, so they know who does great work and, more importantly, who is terrible at their job.
A lender will let you know exactly how much house you can qualify for and what your monthly payment will be. That will give you an exact idea of whether or not you can afford that $350,000 house, or whether you should downgrade your expectations to a $275,000 house and pay less monthly. A mortgage lender will get information from you and get you a pre-qualification letter.
That is an absolute necessity in hot real estate markets when you submit an offer on a house. Even better, a lender gets you a pre-approval letter, which looks much better than the pre-qualification letter. You’ll get pre-qualified for a $1,000,000 home as a Burger King fry cook with two Everyday Loans, if you find the right person to talk to.
With lenders, we usually recommend going local over a national chain. They typically have issues with closing delays, losing documents, etc. Having a mortgage lender is the most important part of the process outside of hiring a real estate agent. The entire deal rests upon your financing. If that falls through, the deal is off. So hire a good one!
There you have it. The 4 steps to take before looking for a house! It’s so easy to look for homes nowadays. It’s even fun, a lot of the time. But, the fun will run out when you find a home you’re serious about, but you’re not armed and ready to throw your hat into the ring and get your forever home. Don’t fall in love and lose the house before you’ve even had a chance to get your offer rejected.
Are there any steps you think we missed? Also, if you recently bought a home, share your experiences! Did you follow these steps or did you not and wish you did? Let us know!