Things have changed over the past couple of years. Now more than ever, it is important to build an understanding of the current housing market, determine what you can afford, secure a loan and choose a home that fits your lifestyle. That is where I can be of service.
This transaction will likely become your largest asset ever, so there is no room for error. It can be a daunting task. You can ease your concerns if you take the process step-by-step, watching your footing as you move along the path toward the “American Dream”.
This list below is to help you turn that stress into the self confidence you’ll need to move closer to your home purchase.
What you should do.
DO examine your credit standing. You may need to request corrections if there are errors. You may need to adjust your habits if your credit behavior is less than sterling. And you need to take those steps before seeking a loan. Your credit report is free from AnnualCreditReport.com, the federally regulated place to go. You can stagger retrieval of your credit report from each of the big three credit bureaus, getting one from a different agency every four months. Another good place to go to check your credit status is www.myfico.com. Though not free, it is a very good service.
DO explore a mortgage pre-approval or commitment. An early green light on a loan will put you in a good negotiation position when you find your dream home. It will also help you shop within your budget.
DO line up a dream team of professionals. You will benefit greatly from a good real estate agent, mortgage broker, home inspector and others to be your professional eyes during your home search.
DO buy for your lifestyle. Your first home may not be your last, so try to anticipate how long you’ll live in your home and buy based on your needs. Raising kids, starting a business, taking on a new job, housing Grandma could all impact the size or type of home you need.
DO heed housing priorities. Separate your “wants” from your “needs” so you know where you can compromise to stay on budget.
What you should NOT do.
DON’T get taken by the first house or neighborhood you see. Keep an open mind and spend sufficient time finding the home and neighborhood you feel comfortable in.
DON’T buy more than you can afford. Lenders will often loan you as much as your financial condition warrants, but that may not be what you can comfortably afford. It’s better to live with a comfortable mortgage on a smaller home than to struggle every month paying a mortgage on a house with more room than you really need. The downpayment, closing costs, monthly expenses and taxes must be within your income and savings range.
DON’T treat your home like a stock portfolio. Homes appreciate and depreciate in cycles which aren’t predictable. Don’t expect the value of your home to skyrocket. Buy a home because you need a roof over your head, not for a quick profit.
DON’T try to time the market. Pinpointing the bottom of the market almost always happens after the market has started to turn up. Otherwise, how can you see the bottom? Focus on personal lifestyle needs and not on market trends in terms of timing your home purchase.
DON’T sign for a confusing mortgage. Get answers from your mortgage counselor. Read every detail of your loan contract and get some help understanding terms and provisions that confuse you. Avoid exotic, “creative financing,” multi-option loans you don’t understand. Again, lifestyle is key. Get a loan that fits.