Steps a buyer needs to take to prepare for a home purchase
Like any other large purchase that requires far more than the initial down payment to ultimately secure the asset, buying a home is most often comprised of a large initial monetary outlay in addition to a substantial, ongoing investment of money and time. In other words, the largest purchase of most people’s lives requires far more planning than simply having the necessary down payment in the bank at the outset of the transaction.
The following contains a short list of suggested preparations to make prior to purchasing a home.
Check the budget carefully.
The old adage rings true, “no one wants to be house poor” from buying a home that stretches the budget to the maximum, allowing for little to no breathing room if a financial emergency arises. Even if no catastrophic reality emerges, being house poor is still not a good idea. Who wants to own a home and then cannot afford to go anywhere because the required mortgage, taxes and any required association fees take up the majority of a buyer’s disposable income? This is especially true of an adjustable mortgage – no doubt the monthly due amount will rise. The usual rule of thumb is to not have the total monthly mortgage expense amount be higher than just less than 30 percent of your net income.
Get pre-approved
First, collect all of the required documents by asking your preferred lending institution for a list of necessary paperwork to qualify for a home loan. Second, fill out everything out completely. Third, wait for a pre-approval amount. And last, make sure to let your chosen agent know the maximum amount of financing you are qualified to take on. Remember, since real estate agents are paid a commission on the amount of the home purchase, they will most often point you toward the high end of – or over – your budget. Do not go over your “comfort” level – referring back to the suggested course of action above – check your budget carefully and stick to it.
Prescreen your preferred home location
What has always been said about location continues to be one of the most important considerations in the purchase of a home. Location is critical in many factors including: school districts, access to freeways, nearby gas stations, grocery stores and restaurants, and other important amenities, such as recreational offerings. Another consideration that warrants pre thought is availability. Just because you would like to live in a certain neighborhood or on a certain street, it does mean that homes are for sale in great supply or at a reasonable price. Perhaps, the neighborhood you once knew has changed – for the better or worse. Do your homework even before consulting with your agent of choice. Make a short list of areas to concentrate on when looking for a home.
Remember the rules of “the game”
No matter what, sellers will try to ask for top dollar deals for their homes and you, as a buyer, will want to save as much money as possible. Again do your homework. Check comps for reasonable and recently completed home sales in the areas you select as most desirable. Count on the fact that negotiation will most likely take place, especially in highly desirable neighborhoods. Be prepared to have enough financial room to be able to make a counteroffer. Ultimately, take into account not only what your maximum “comfort” amount for a house purchase will be, but also remember the need to have some “wiggle room” to negotiate a counteroffer, make needed repairs and/or upgrades, and buy interior fixtures such as furniture, window coverings and flooring.