Are you a first time home buyer that is feeling overwhelmed by the process?
Here are 8 steps to simplify the home buying process and make your life easier.
Do you have any idea how much paperwork is required to secure a mortgage? Prepare to hit the filing cabinet hard to track down old tax returns, pay stubs, bank statements, and more!
Hopefully, your personal debt is under control. The bank is about to launch a full-throated investigation into every credit card, student loan, and car payment that you possess.
Did you know that if your monthly debt payments exceed a specific threshold set by the bank – typically around 32% in the United States and 40% in Canada – that your mortgage application may be denied?
Simplify the Home Buying Process and Master Your Mortgage Destiny
The pressure is on. While this all may seem a bit overwhelming, especially for a first time home buyer, you can simplify your experience through upfront research and preparation.
Find a Great Real Estate Agent
It is never too soon to contact a real estate agent. Selecting your realtor seems like an easy step, but is amongst the most important in your search for a new home.
A real estate agent will guide you through the home buying process, from advising you to obtain a mortgage pre-qualification to navigating through the contract requirements.
Obtaining a trustworthy and reliable real estate agent is a proven way to simplify the home buying process.
Get Your Financial House in Order
What do we mean by this? It is time for you to save a down payment and eliminate any debt, if possible.
The FHA, a common guarantor of mortgages, requires a minimum down payment of 3.5%. However, be forewarned that if you cannot put 20% down on the house, you will have to pay Private Mortgage Insurance (PMI). PMI may add several hundred dollars to your monthly payment, depending on the total value of the loan.
As mentioned earlier, banks have a debt to income threshold that you cannot exceed. This ratio may vary depending on the bank and the type of loan, however, it would be prudent to pay down credit cards, student loans, and auto loans.
Avoid at All Costs Taking on New Debt
One surefire way to simplify the home buying process; do not open any new lines of credit. Not only will it be detrimental to your debt to income ratio, it may add more paperwork and could even delay or jeopardize your mortgage application.
This rule of thumb applies from the market research phase all the way until your closing date.
Know the Difference between a Mortgage Pre-Qualification and a Pre-Approval
Want to simplify the home buying process? Consider skipping the informal mortgage pre-qualification and using online tools and resources to see what you can afford instead.
A pre-qualification carries little weight in the real estate community. If you want to show a seller that you are a serious buyer, come with a mortgage pre-approval.
The difference between the two is that a pre-approval is a more thorough analysis and includes pulling credit reports, reviewing pay stubs, and even submitting a draft loan package through an automated underwriting system.
The odds of an 11th-hour disappointment in terms of mortgage affordability are much less if you rely on a pre-approval instead of a pre-qualification.
Use Mobile Technology to Enhance Your Market Research
The real estate market has changed dramatically over the past few decades. Potential buyers used to search the classifieds for prospective homes as late as the early 2000s.
Currently, 92% of home buyers use mobile apps and the internet to search for a home. These online sources provide powerful information at the tip of your fingers.
Comparable sales, listing history, property tax information and technical characteristics are just a few of the valuable subjects that can be researched on a mobile app.
This information allows you to be armed with knowledge to drop a quick offer or walk away from an overpriced home.
Understand the Follow-On Costs
This is a subject that many real estate and financing experts ignore. The goal is to find a house, get your mortgage approved, and close.
Little time and energy will be dedicated to the day after your closing date.
When you evaluate a prospective home, look deeper than cosmetics.
- Does the home have a functioning sprinkler system and a well?
- What is the condition of the fence? Does it need to be replaced?
- What major renovations are required, if any, and how much will it cost?
Lastly, do not take smaller items for granted. Window dressings and light fixtures can add up if they need to be replaced.
First-time home buyers are more susceptible to fall in love with a home, without taking the time to consider these additional costs.
Envision the Long-Term Real Estate Market for Your Home
Purchasing a home is likely to be one of the biggest investments of your life. Think big picture.
What is the school system like? Does it consistently earn good ratings?
What is the condition of local parks and facilities?
Is the area at large desirable? Is the area growing in population or declining?
How is the local economy? Is the economy growing or are new jobs scarce and low-paying?
These factors all directly affect the resale value of your home.
This is another area that first-time home buyers may fall victim to. The good news is that your real estate agent will have a pulse on all these factors and should be able to provide a report on the local market.
In addition, use online resources and mobile apps like Zillow to supplement your knowledge about the community at large.
Pull the Trigger!
Follow these guidelines and it will certainly simplify your home buying process. The key is preparation.
If you do the homework on the local real estate market, community, personal finances, and mortgage approval process, you will surely find success and make a better long-term investment.
If you have any additional questions, drop a comment or send an e-mail to get in touch with a real estate professional. It would be our pleasure to simplify your home buying process and help you find a dream home!
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