Things to Consider when Buying a Home
Most financial experts are saying it’s a good time to buy, provided you are going to live in the house for five years or more. So if you are making a commitment to home ownership – here are some things to consider.
Before you even start shopping, get prequalified with a lender. Even if you have a long-standing relationship with a certain bank, this can be a good time to shop around. While your own bank may be your best bet, if you don’t get the results you want when you talk to their mortgage department, you still may have options. (Your Realtor may be able to recommend lenders, also.)
You will probably need:
- A full month of paycheck stubs
- Two years’ federal tax returns (be prepared to explain any deductions)
- Two months’ bank statements (be prepared to explain large deposits – it is a good idea to have documentation if you sold a vehicle or received a gift, etc.)
- At least 10% to put down, sometimes 20%
Do not do anything that would require someone to run a credit report on you, such as:
- Increasing limits on existing credit cards
- Shopping for a car
- Looking into life insurance
- Applying for a new credit card/cancelling an existing card
Speaking of lenders, seriously consider working with someone local. Local lenders are familiar with the local real estate market and communicate much better with your real estate agent because they are tied to the community.
You need to be aware of market values (an advantage of working with a Realtor), but be aware that there could be appraisal pitfalls. Let’s say you have made an offer on a home, and the seller has accepted your offer. Now it’s time to have an appraisal – and there are a couple potential snags. The appraiser may not be familiar with the local market and/or the appraisal may come in below the accepted offer. These are not necessarily deal-breakers, but you should be aware of all potential setbacks.
If the property you want needs third party approval (IE: a short sale), be prepared to have your patience worn thin. It’s often a long process fraught with frustration, but if you have a good Realtor and keep your goal in mind, it is often well worth the effort.
Home inspections: This is an expense best to incur in most situations. It will come out of the buyer’s pocket, but it is worth it to have a licensed inspector checking the roof, wiring, plumbing, heating and cooling systems, insulation, well and septic, looking for mold, etc. The average home-buyer is unqualified to identify associated problems. Building in a clause contingent upon inspection is a wise idea, and your Realtor should recommend it.
Having said that – an inspection is not a win/lose proposition. A buyer may elect to still purchase the home and may negotiate with the seller to make repairs or reduce the cost of the home. Or you may take advantage of the contingency clause, retain the earnest money deposit, and resume shopping.