With homeownership rates near all-time lows and really low interest rates, now is the perfect time to buy a home. In fact, renting a home costs more and more, taking up a huge portion of the monthly budget for many Americans. But to take advantage of the perfect opportunity to buy a home and not only save money monthly but build a great long-term investment, it takes a little bit of planning. Here are five things you can do to start your path to home ownership:
1. Sit down with a mortgage professional
The biggest mistake I see wet-behind-the-ears buyers make is that they go out and look at houses first, before they even know the details of their loan. Remember that you are not just buying the house – you’re buying the money to buy the house in the form of a mortgage. Talking to a good mortgage loan officer will help you answer all of the important questions – how much house can we afford, what will our payments be, how much money do we need to put down, and can we even qualify for a loan?
2. Take a hard look at your credit score
The loan officer you talk to will most likely pull your credit report and give you a copy. Talk to a credit professional about where your credit is at and what can be done to increase your score in advance of a home purchase. It’s been documented that even a 20-point bump in credit score can save you tens of thousands of dollars over the course of your new loan. Too many people try to increase their score by fiddling with their credit themselves (paying down debt, closing accounts, paying off old collections, etc.) and end up doing much more damage than good. Blue Water Credit offers a complimentary consultation and would love to help by working with you and your loan officer.
3. Know what you want
Now the fun part – you get to actually talk about houses. I recommend making a list with your needs and wants. Most likely you’ll want a mansion in the best neighborhood for the lowest price, but, unfortunately, it doesn’t work that way. So decide on criteria that are negotiable, or can be changed later (paint colors, hardwood floors, etc.) versus the important stuff that you’ll be stuck with (location, location, location, square footage.) Take a few weekends to drive through those neighborhoods, go to open houses, look through listings, and generally get familiar with what is out there – and realistic.
4. Find a great realtor
As you are looking at homes online, asking around, and going to open houses, inevitably you’ll meet a bunch of great realtors who are willing to help. You’ll want to work toward a decision about who you are going to work with. Realtors are paid only on commission – not out of your pocket – so it’s only fair to commit to one person and not waste their time. Find someone who you like, who really cares, knows the neighborhood you want to buy in, and knows the market, etc. It doesn’t have to be someone who’s been in the business forever, just someone who is good at their job and cares and is willing to hustle on your behalf.
5. Get your money right
Based on the recommendation of your loan officer, and what you find on your credit report, it’s wise to get your financial house in order before your literal house. Save money for the down payment, show a solid savings account, pay off debt if needed, and allocate money toward the cost of home inspections, appraisals, repairs once you move in.
One last thing – ask a TON of questions! Don’t be afraid, because the better educated you are, the more enjoyable the process will be – and you’ll make the best decision choosing your first home.
Information Provided by Blue Water Credit, 2016