While it can be exciting to buy a home, it can also be stressful. For most people, this is the single biggest purchase they will ever make. The only way to completely eliminate stress is not to buy, but if you are committed, here are some tips to make the process go more smoothly.
Prepare Your Finances
Most of us cannot buy a home without a loan, so step one on the home-buying journey is to make sure your credit is in good shape. To see where you stand, you can check your credit score at creditkarma.com. The information on Credit Karma is not exactly what a lender will see, but it’s close. Credit Karma also gives sound advice on how to improve your score with tips like paying off any credit card balances you can, assuring all bill payments are on time, and removing any inaccurate derogatory remarks on your credit report.
Just because you can qualify for a loan, doesn’t mean you should borrow the maximum available. Qualifying for a loan isn’t the same as being able to afford it. It’s wise to consider all the costs associated with home ownership. In addition to monthly mortgage payments, you’ll need to pay property taxes, homeowner’s insurance, and any maintenance or repairs that pop up (and they will). You will also be on the hook for utilities, water bills, internet, and other expenses a landlord may have been paying when you were a renter. Make sure you are comfortable with all of this.
Once you decide on the price range you can manage, you’ll need to save enough cash for the down payment and closing costs. If you’re buying a house that needs immediate repairs or remodeling, you’ll need cash for that as well.
Gather Documentation
To get a loan, you’ll need to assure lenders that you’ll pay it back, and that means providing plenty of documentation. To minimize stress, don’t wait before gathering all the documents that demonstrate how much you have and how much you owe. Lenders will ask for copies of your tax returns, paystubs, car payments, credit card bills, alimony/child support, and more. Note: only verifiable income will help you get a loan. Making money on the side by helping your brother-in-law on the weekends may allow you to save some cash, but it won’t help you qualify for a loan (unless your brother-in-law provides you with 1099 tax form).
Communicate Openly with Your Realtor
To find a house in your price range that meets your needs, your Realtor will need to understand the features you want versus the features you must have. If you’re not clear, spend some time making a list. Once you have that list, don’t keep it a secret. For example, if you have four kids, you may stand firm on the number of bedrooms. On the other hand, you may have a first choice for a school, but be okay with your second choice, too. This type of information may open up a whole new neighborhood for your Realtor to consider.
Delegate
Buying a home should include several detailed inspections. I highly recommend hiring experts, so you know what you’re getting into. Do not assume you can walk around a property with a flashlight and identify problems, even if you are pretty handy when it comes to home repair.
Hire people who can identify issues and recommend necessary remedial work before you close escrow, including pest and fungus, septic, well, roof, and home inspections. Not only will a professional do it in less time, but they are more likely to catch things you’ll overlook, such as the polarity of a plug or sponginess around the toilet concealing dry rot.
Keep the Big Picture in Mind
Because so many factors influence the decision to buy a house, do not be surprised when you are forced to choose between two desired features. You may need to give up a short commute for a bigger property. Do you want 10 acres in Potter Valley and a 20-minute drive to work or 3 acres at the south end of Redwood Valley and a 5-minute commute? Consider what matters most and go with that.
If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.