Are you thinking of buying this year? Even if you’ve bought a home before, we recommend brushing up on your house-hunting skills to handle the current market (especially if you're an introvert or an HSP). Here are our best tips to set yourself up for success on the search for your dream home.
Expect sticker-shock
In almost every housing market across the country, competition is high and inventory is low, causing home prices to rise quickly. So when you start browsing properties online, look for homes listed well below your actual home-buying budget—and prepare for a very different bidding price if you decide to go ahead.
Lock in your home loan
Getting an early start on your mortgage prep is essential for a few reasons. It sets your real estate agent up for success so they can hit the ground running, helps you understand how much house you can afford, and keeps you from wasting time checking out houses that aren’t right for you.
Crunch the numbers
Buying a home may be an emotional decision, but there’s also a lot of cold, hard math. Take the time to work out what you can afford in advance to avoid setting yourself up for disappointment. Educate yourself about some common financial terms and how you and your mortgage lender will use them to make financing your new home much more manageable. Lastly, consider make a closing on a house checklist to make sure you don't miss any crucial steps.
Make sure you understand all of the following:
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Credit score: While some lenders offer low-credit loans, most conventional loans require a score of at least 620. Is your credit score a little lower? Don’t worry—there are ways to raise it.
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Debt-to-income ratio: You can figure out your debt-to-income ratio with a quick calculation. Most lenders follow the 28/36 rule when deciding whether to approve your mortgage, meaning your total housing costs shouldn't exceed 28% of your monthly income. This includes your future mortgage, and monthly debt payments shouldn't total more than 36% of your monthly income.
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Down payment: A 20% down payment is standard for a conventional loan, but some lenders allow as low as 3%.
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Closing costs: First-time homebuyers can be shocked at the cost to close escrow on their new home, which is typically 2-5% of the home's cost. These costs are usually paid out of pocket, so it’s a good idea to budget for it ahead of shopping for your future home.
Choose the right agent
The process of shopping for a home, submitting a winning offer letter and shepherding the deal through to the close of escrow can be grueling and stressful. That’s why a highly motivated, ethical and experienced real estate professional can make all of the difference in your dream home search.
Start with a list
With so many options available, it’s important to stay focused. Make a list of what you need to have, want to have, and can’t tolerate in a new home. Share this list with your real estate agent, and keep it handy as you browse online, tour houses and make your final decision.
Size up the competition
Due to the competition in the market, there’s a good chance that you won’t be the only one bidding on that cute bungalow with the big backyard. Prepare yourself to deal with bidding wars, make concessions (but not too many!) and have negotiations on top of negotiations. Don’t let yourself get swept up in the “winner take all” mentality; instead, work with your real estate agent to weigh all of your options.
Always negotiate
The extremely competitive market may make some people feel like they aren’t allowed to negotiate with the seller, but that’s not the case at all. Get an inspection to determine what will need addressing once the home changes hands and what the seller will need to do to compensate for any issues you find during the inspection.
There is no better feeling than creating and living in a space that is truly your own. From the day you move, there will always be projects to tackle and improvements to make. Start off on the right foot by choosing a home within your budget that meets your needs, and you can enjoy your home for years to come.
Protecting that dream home-- that's where Hippo comes in. Give us a call, we are here 24/7.
