My husband and I are very excited to buy a home … eventually. When will we be ready? We don’t really know. The whole process feels so incredibly vague and intimidating. The mere conversation about it tends to make us anxious and eager to postpone.
Anxiety around buying a house is common among those of us who have always rented. An August 2017 survey by loanDepot, found that though 52 percent of renting millennials are driven to buy a home, half are anxious about the costs associated with such an endeavor, and only 18 percent think it’s something they can financially pull off.
Using the 28/36 rule, which we covered here, is a great way to figure out how much you can actually afford, but money matters are only one aspect (albeit a big one) of the confusion surrounding buying your first home.
We consulted real estate and mortgage experts to compile a list of what you can expect of this complicated process, and how to manage it.
MAKE A LIST OF 10 THINGS YOU WANT
“The best thing to do, in the very beginning, is make a list of the 10 main things you’re looking for in a home and make sure to rank them or at least notate which ones are flexible,” advises Joshua D. Arcus, a broker and president of The Siderow Organization’s Residential & Commercial Divisions.
“The list could include price, location, size, renovation, views, etc.,” Arcus adds. “Knowing ahead of time that you are really looking to check as many of those boxes as possible but that some will need to be adjusted is important. And along the way you may very well come up with new things to add (and hopefully some to take off).”
If you’re moving with others, make sure they have a say in the list.
“All parties involved in the decision making process needs to be on board and on the same page when starting the process,” says Justin Moundas, a real estate agent with Douglas Elliman Real Estate. “Outline your likes/dislikes about home and/or home styles, determine your short and long term needs in terms of space, number of bedrooms, bathrooms and the potential for expansion in the future.”
GET COZY WITH YOUR CREDIT SCORE
“Know your credit score and make sure that there are no surprises/errors,” says Wendy N. Arriz, an agent with Warburg Realty. “Many people now subscribe to Experian [or another consumer credit reporting agency] and are given monthly updates on the status of their credit score. That is a great way to keep an eye on things.”
Credit Sesame’s members with a conventional mortgage have an average credit score of 682.
Brennan’s pro tip: “Try to limit your [home] shopping to a 45-day window, as multiple hard-inquiries from mortgage lenders within this timeframe may be treated as just a single inquiry.”
TALK WITH A MORTGAGE BROKER OR LOAN OFFICER
Next, learn whether you pre-qualify for a mortgage by consulting a mortgage broker or loan officer.
The difference between the two: a loan officer works for the lending institution; a mortgage broker works as an independent agent for both you and the bank. The latter facilitates the loan process to choose the right lender and guide you through the whole process — and you give commission if the loan closes. A loan officer typically works on commission or salary provided by their institution.
“[They] will ask you about your savings, your income and other relevant questions, and run a credit report. If there is a second borrower, the loan officer will need to run that person’s credit, too,” says Kevin Buckthorpe, EVP, Freedom Mortgage. “Once the loan officer has all this information they’ll tell you how much you can afford and the type of loan or loans you qualify for.”
HAVE PERSONAL FINANCIAL PAPERWORK READY
Once pre-approved for a mortgage, you’ll need to have a lot of information ready to proceed with buying.
“A loan officer will ask you for as pay stubs, bank statements, tax returns, and other information that documents your financial status to complete your loan application,” says Buckthorpe. “If you want to save some time, plan ahead and prepare a file in advance with your most recent bank statements, last 3 months pay stubs, and most recent W2 or tax returns that can easily be provided to the loan officer. They’ll need all this information to underwrite your mortgage — basically, to make sure you’ll be able to pay back your loan.”
GET A REALTOR — AND BE AGGRESSIVE WITH YOUR EXPECTATIONS OF THEM
The next step, Buckthorpe notes, is to “find a real estate agent who knows the local market. Based on your pre-qualified purchase price, the agent will work with you to help you find homes that fit your budget and your needs.”
Let this realtor do the hard work for you, including negotiating.
“A good buyer’s agent will work hard to find out all details about the homes you are interested in and negotiate not only the best purchase price for you, but possibly negotiate other throw-ins like closing costs and repairs that would normally fall on their buyer,” says Brenda Di Bari, licensed associate real estate broker at Halstead in NYC. “This agent will also have the team of professionals to recommend such as a home inspector, attorney, contractor or builder, mortgage brokers of various banks who can give you quotes (maybe you can beat another bank’s interest rate offer). A great agent will also save you loads of time in searching through properties for you after having a good understanding of what you’re looking for, setting up your appointments and organizing all of the steps along the way.”
LOVE AT FIRST SIGHT CAN LEAD TO BUYER’S REMORSE
Once your realtor starts showing you homes, try to keep your competitive emotions in check. You may want to beat out other buyers immediately, but hold your horses and visit the property a second time before making an offer.
“Don’t fall in love with a home immediately,” Moundas says. “I always recommend to my clients to see a property twice before making an offer. It’s important to envision yourself in the home, in the neighborhood, etc. This helps minimize the chance for buyer’s remorse.”
A ROCK BOTTOM OFFER COULD TURN OFF SELLERS
Asking for a lower price than the house is listed at is normal in real estate, but going to low risks offending the seller past the point of compromise.
“Providing a lowball offer on a property can be insulting to the sellers,” Moundas says. “If you’re a serious buyer, work with your real estate agent to establish comparable pricing to establish a reasonable offer price. If your offer is less than asking price, have your agent provide the sellers with the rationale behind a lower offer including recently sold homes in the area, condition of the property, trends in the area, etc.”
HAVE AN INSPECTOR READY
Once you’re in final negotiations, retain a licensed inspector (again, your realtor should be able to recommend a few) to perform a home inspection. They will assess the property to size up its condition and see if it needs any repairs.
“A second or even a third inspection may be needed to determine whether the house has termites or other issues, such as mold, lead-based paint or asbestos,” says Buckthorpe. “The appraiser will view the home and determine how close the selling price is to the home’s value. Your lender will pay particularly close attention to this information.
IF THE HOME IS LESS THAN PERFECT BUT THE RIGHT PRICE, LOOK FOR THE POTENTIAL
“All buyers have the ambition of finding their dream home but unfortunately, that’s not always possible,” says Moundas. “It’s important sometimes to look at a home not for what it is today but what it can be.”
OTHER HELPFUL TIPS
“Typically, this whole process takes between two to six months for most homebuyers,” says Buckthorne.
With that in mind, Lindsey Harn, realtor at Richardson Properties, suggests these additional tips for getting through this process.
- Don’t be afraid to ask questions.
- Check with multiple lenders before accepting an interest rate.
- Avoid making major purchased on credit and avoid moving cash around during the process.
- Drive by the house during multiple times of the day to get a true feel for the neighborhood, morning, noon and night.
- Ask if the seller has any inspections or disclosures you should be aware of up front. If there are serious issues with the property, knowing that beforehand can save you a lot of time and potential emotions.
And finally, a tip from most everyone consulted: have fun, this is a beautiful milestone and you’ll want to remember it in a positive light.