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How to Buy a Home: 7 Tips and Tricks from Real Estate Insiders


How to Buy a Home: 7 Tips and Tricks from Real Estate Insiders

No matter if you’re in a buyer’s or seller’s market, there are a few critical steps you can take to make a smarter purchase. Since buying a home is likely the biggest single investment you will ever make, being prepared will help you make a better purchase. Here are our best tips to buying a home.

Know your buying power

What is your buying power? It is the combination of your credit-worthiness and how much you can realistically pay for a home.

First, you need to understand the hidden costs of buying a home. You will need to save not only for the down payment of your home — which is typically between 10% – 20% of the offer price — but also for any additional transaction fees, such as transfer tax, PMI, title insurance, and legal fees.

Then you need to know what you can realistically afford each month to understand how much house you can buy. Your mortgage rate will depend on your creditworthiness — if you have a high credit score, your lender will likely approve you for a lower mortgage rate, which can save you thousands of dollars per year in interest.

How much of your budget should go to your monthly home costs? According to SmartAssets, you can use the 36% rule as a rough guideline. This means that your monthly obligation shouldn’t be more than 36% of your monthly gross income.

A loan professional can help you figure out how much house you can afford.

Fix your credit with the help of a loan professional

According to CreditKarma, a good credit score is usually 720 or above. You want to clean up your credit as soon as you can, and definitely before you go to a lender for a loan preapproval.

When you apply for your loan pre-approval, you don’t want to have anything to hide on your application. So don’t lower your credit score by doing anything that will originate more inquiries into your credit. For example, don’t open any new credit cards. Also, don’t omit any debts or loans when you apply. If the loan officer discovers them in the application process, they may deny you a pre-approval.

Get a loan professional to check your credit score for you. A professional can give you a clearer idea if your score is in the ‘good’ range, or if you need to do some credit cleanup before getting a mortgage preapproval.

Work with a knowledgeable buyer’s agent

Do you understand what kind of market you are buying into? Even within a city’s limits, there can be micro markets that are increasing or decreasing in value.

That’s why it’s important to hire a highly competent real estate agent who knows the specific market. You want to make sure that the professional who you’re working with really understands what the market is like and will help you find the home that you desire.

How can you tell if your agent knows the market? See if they can provide you with a buyer’s market analysis.

A buyer’s market analysis report outlines which neighborhoods are still up and coming — with potential for increased property value — versus those that have peaked with inflated home prices. Having this analysis at your fingertips will help you know if a home’s list price is above comparable properties so you don’t overpay for a home.

Don’t try to time the market…

Even in a hot market, there’s never a perfect time to buy a home. It can take a while to know exactly what you like, and you may have to look at 10 or more homes before you can recognize what suits your lifestyle best. While you’re shopping, take photos of your favorite properties and the details that you liked the best so that you can remember what you liked.

Another good reason to slow down the buying process: you might find a better deal if you do. Investigate expired listings. Expired listings may have gone off the market because they didn’t get any offers at the listed price, so you may be able to underbid the original listing price. It’s not likely worth your time to look at FSBO (for sale by owner) listings, though. Since they are not represented by a professional, they are often overpriced.

When you start shopping, have a one-hour initial consultation with your realtor. Give them every single detail that you know about your lifestyle, buying power, needs, wants and desires for your home. The more detail you can provide, the easier it will be for them to help you find your future home. Your agent may also know of exclusive listings not available to the general public.

… But make the offer as soon as you find the right home

If you love it, make the offer. Otherwise, that dream home may disappear faster than you think, especially if you’re buying in a hot market.

Your buying agent should contact the listing agent before you submit an offer so that they can decide what’s important to include in the offer. If you’re serious about it, you want to increase the chances that your offer is accepted.

Show that you’re serious about the purchase by creating a buyer’s offer packet. It should include your lender’s preapproval letter, a screenshot of your down payment money in your bank account, and comps that support the rationalization of the offer you are presenting.

Get a home inspection

Once you’re in the negotiation process, it’s essential that you get a third-party inspector to run a thorough home inspection. The inspector will be looking for major structural issues, including problems with the foundation, plumbing, and electrical systems. Your inspector should be extra picky, pointing out the most minor faults.

Make sure to have the inspection conducted before it is too late to back out of a deal. If there are any major structural issues, you may be able to make the seller repair them as a contingency to solidifying your offer. Minor issues that you can repair on your own may be points for negotiating a lower offer.

Protect your credit before you close

Don’t raise any red flags with your creditworthiness in the weeks before closing. Any one of these moves could mean that you’re denied the loan and the deal falls through — even if you’ve already been preapproved!

  • Keep your spending to a minimum and don’t make any major purchases before closing — that includes buying furniture, or a car, truck, or van, or any excessive charges on your credit card.
  • Keep your bank accounts stable. Don’t change banks, spend any of the money you have set aside for closing, or make any large deposits to your accounts without checking with your loan officer first.
  • Keep your employment situation stable — do not change jobs, quit your job, or become self-employed. Any sudden change in your income can have that preapproval offer rescinded.
  • Do not cosign a loan for anyone. It will open an inquiry into your credit and add to your debt, which could raise your mortgage rate and cost you thousands of dollars over the life of the loan.

Looking for a home in our area? Let us help you find the home of your dreams. We’re well versed in the our local real estate market, and we can provide you with a buyer’s market analysis to help you find the right neighborhood for you. Contact one of our trusted agents today.

About Terry Smith

Passionate about real estate, positive problem solver, specialty boutique real estate brokerage that does things your way! A full-time Broker & REALTOR®, helping people buy and sell homes in the Dallas - Plano area. Whether you're a buyer just starting out or someone with luxury properties to sell. I have extensive knowledge and experience to help you with your real estate transaction. I am a native Dallasite. Have questions? Ask me. You can find me on Google+ and Pinterest.

Comments

  1. The best part of your article for me is when you talked about the importance of hiring a highly competent real estate agent who will be glad to give you the different options of markets where you can buy the house that you’re looking for. My sister is looking to buy a bigger house for her family, and it’s important for her to find a real estate agent who will listen to her needs and deliver results of the houses that my sister can choose from. This is a big investment for my sister, so it makes sense to only hire the best. I will make sure to share your blog with my sister so she can get some tips.

  2. Your statement about how essential it is to hire a third-party inspector to run a thorough home inspection caught my attention. My husband and I are looking into buying a new house by the first quarter of 2018. It’s important for us to make sure that we’ll buy the best home that won’t require too many repairs because we can end up paying for more. I will make sure to consider all your tips once we choose the house to buy.

  3. My husband and I are looking for some real estate to buy, and we want to make sure that we make a good deal. Thanks for the tip on having a thorough home inspection to check for any major structural issues, plumbing, and electrical systems. We’ll be sure to consider having it done during the negotiation process so that we can negotiate a lower offer should there be any minor issues. Thanks!

  4. Thank you for the 7 tips and tricks on how to buy a home. I like the idea to make sure your credit is in good standing first off. That will ensure you can get a good loan, but then also to make sure you have a little saved away for a down payment. Having a good downpayment and good credit will ensure you can get a sizeable loan at a good rate.

  5. Thanks for your tip to find a home inspector who’ll be able to find out if there’s anything wrong with the electrical system, the plumbing, or the foundation. My husband and I have decided that it’s time we buy our own house and start building equity on it. We’ll have to make sure we get an inspection once we find and narrow down the houses for sale we’d like.

  6. I like that you talked about how you must consider hiring a third-party inspector that can run a thorough home inspection to look for major and minor structural issues that can affect the price of the house. My husband and I are looking to buy a house. It’s important for us to be aware if there are any issues with the house that we will buy so we can offer a solid offer. It will make sense for us to hire a home inspector that can greatly help us to ensure that we’ll pay for the right deal of the house. I will make sure to consider all your tips.

  7. I like that you talked about how it can be helpful for you to provide all the details to your realtor about your wants, needs, and desires for your home so it can be easier to help you find the house of your dreams. My savings is enough now for me to be able to buy the house of my dreams. It’s important for me to buy the house that will satisfy my requirements to ensure that my money is going to worth it. It can be beneficial for me to hire a real estate agent that can help me to find the house of my dreams based on the complete details that I can provide. I will make sure to consider all your tips.

  8. Now that you mention it, it’s probably true that there’s never a perfect time to buy a home. I’ve been on the fence about whether it’s a good time to invest in a home. I think I’m going to take the plunge and talk with an agent to find out where to start.

  9. I like that you talked about how you can consider hiring a real estate agent who may have an access to exclusive listings of the houses for sale that is not available to general public. My aunt is looking to buy for her family. It’s essential for her to have the copy of the list of the house that’s available on the market so she can make a decision. She understands that there are lists of properties that only real estate agents can access. To make sure that she’ll find the house of her dreams, I will make sure to share your blog with her.

  10. I appreciate you sharing some tips on how to buy a home such as fixing your credit with the help of a loan professional. It is important that you request a copy of your credit report to check if all the information is accurate. Maintaining a good credit rating would definitely help in getting your mortgage application approved. Plus, you would have an idea of how much you can actually afford to buy a new house with your budget. If I were to buy a new townhome, I would make sure to keep this in mind. Thanks.

  11. My mother was a real estate agent for quite some time and I can tell you that trust is really the best first step when looking for an agent just as this article suggests. There are times when a real estate lawyer needs to get involved, and knowing that you have a seasoned and professional agent can be very helpful. Be sure to always keep important and informative documents related to the house on hand.

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