After the Super Bowl, real estate professionals know the next big event on the calendar is the Spring Home Buying Season. A time when more homes are for sale, and house hunters scour the internet so they can devote their weekends to the open (house) trail.
But a tight real estate market and stiff competition mean buyers need to bring their A game. You don’t want to fall in love with a home and then scramble around in an emotional tizzy to get your financial house in order.
Good news! There’s a right way to prepare yourself, and it won’t take that long.
Find your Financial Sweet Spot
First things first – find a lender and go through the Pre-Approval process for a mortgage. Whether you’re buying your first home or trading up, it’s important to learn your financial sweet spot — the price range that’s affordable for you — by getting pre-approved for a mortgage.
During a pre-approval, the lender will look at your income, debts, savings and credit history. The Pre-Approval will tell you the maximum you can borrow, a target purchase price, and your credit score. When complete, you’ll receive a pre-approval letter that you’ll include with any offer you make on a home. This is proof you can purchase the house, and it tells sellers you’re a serious, credible buyer.
As you go through the pre-approval process, you’ll absorb information from talking with family and friends. And while it can seem like two new questions pop up for each one you have answered, this is the time and place to learn information like, “Should you use cash savings to pay off debt or hold onto it?”
You can also expect to:
- Nail down your home-buying budget, so you know your target price range.
- Learn about different loan programs and choose the best one for your situation. One size does not fit all.
- Uncover possible landmines on your credit report, including incorrect or derogatory information. If this comes up, realize that it takes time to correct or minimize the impact.
- Identify income issues that may affect loan approval, like a recent change from salaried employee to self-employed.
- Figure out how much money you need and when you need it. Learn what lenders call your “cash to close,” which adds closing costs to the down payment.
Learn All You Can
You’ll gain a lot of knowledge as you go through the pre-approval process, and your homework should also include reading about the process in general. My #1 best-selling book, My First Home: A step-by-step guide to achieving the ultimate American Dream (available on Amazon) will fill in the gaps and help you prepare.
Build Your Team
And you’re going to need a strong team to help you purchase your home — a loan officer and real estate agent. You’ll spend a lot of time together and rely on their guidance as you go through the home buying process. Best practice for finding both includes asking family and friends for recommendations and doing a little sleuthing online.
Look for a depth of knowledge and someone you feel comfortable talking to about your personal and private information. It’s not critical to pick either your Loan Officer or your Real Estate Agent first, but your team members need to work well together, and all three of you should form a cohesive team.
Explore Your Future Neighborhood
When you’ve done your homework and picked your team, it’s time to hit the open (house) trail! Your real estate agent will help you investigate neighborhoods you’ve had your eye on and add valuable insight on list price versus market price. After learning the size and condition of homes in your price range, you’ll know where you are willing to compromise and where you draw a hard line in the sand.
Keep in mind, only 46% of buyers get the first home they make an offer to buy, according to a 2016 study done by Zillow. But if you take the time to get pre-approved and do your homework, you may be ahead of the competition.
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