a low-down-payment program, but should factor in the cost of private mortgage insurance (PMI). Compare interest rates using APR (Annual Percentage Rate). (More about PMI and APR in Chapter 4 MONEY.) Be sure to calculate how much each option will cost you monthly and during the entire period you’re likely to own the home. Simply put: You’ll need a professional mortgage lender to help you compare different loan products to find which one best fits your financial situation. We’ll show you how to find that lender.
6. List what you must have in a home first, then prioritize your wants. Think ahead. Consider changes that might affect your housing requirements in the next several years. Remember, though, if you’re buying your first home, it doesn’t have to meet your needs or dreams for a lifetime; after building some equity, you should someday be in a position to sell your home and buy another. (More in Chapter 5 SHOP.)
7. Select a top-notch buyer’s real estate professional. Ask friends, neighbors, family members and co-workers for recommendations. Read reviews online. Visit the online presence of the real estate pros you’re considering and check for Facebook and LinkedIn pages. Observe their responsiveness and interactions. Although it’s valuable to talk with several agents first, you’ll be best served working with one top agent you have a good rapport with, one who knows the local market and listens closely to your needs. Hiring a buyer’s agent who will be legally bound to represent your interests in the transaction — not the seller’s — is essential.
8. Don’t buy on impulse. First-time buyers sometimes rush into the first home they find that, at first glance, appears to meet their needs and budget. It’s a costly mistake to choose the wrong home — one that’s too big or too small for future needs; that’s a fixer-upper if you’re not handy; that’s too far from work or too close to traffic; that’s likely to need extensive rehab; or that’s in the wrong price range.
Spend time looking around until you have at least three or four good candidates, then take a closer, deeper look. Drill into what utilities will cost. Consider resale value of the location carefully. (Location is the one thing you can’t fix.) Ask yourself whether your furniture will fit in the home. Research zoning restrictions, homeowners association rules and plans for development/redevelopment in the area. Hiring a professional home inspector is always a good idea to put a fine point on how much fixing-up you’re comfortable with and avoid purchasing a money pit with hidden problems that can cost you major bucks down the road.
9. Be flexible during negotiations. Sellers may have some requirements — e.g., a particular closing date, taking the dining room chandelier, etc. — that won’t cost you much to comply with. Remember, buying a home is not a contest between you and the seller; it’s an agreement that must meet both parties’ needs.
10. Avoid making major purchases or applying for more credit. Your lender will underwrite your loan based on a snapshot of your finances just before settlement or closing. That picture will change for the worse if it appears you’re looking for additional credit or you deplete your cash stash. (We’ll help you avoid some never-do’s that can sabotage your closing at the last minute.)
11. Stay in close contact with your loan officer and real estate agent. Once you sign a contract to purchase, you’ll supply a blizzard of paperwork, purchase homeowners insurance, make appointments for inspections and deal with a dozen other details. Not to mention packing to move! Be sure to ask questions if you don’t understand what’s going on or what you need to do next. That’s why you hired the pros!
12. Buy owner’s title insurance. Most lenders require you to purchase a lender’s title policy to cover their interests in the event that someone else comes forward with a claim to the property after closing or settlement. To protect your interests, you’ll need to buy a separate owner’s title policy.
TOP TIPS TO HOME SHOP SMARTER, FASTER, CHEAPER
Most home buyers today are looking for a great price, energy efficiency, functionality and comfort in the home they purchase. Yet finding all the right features in the perfect location can be harder than expected … despite a wide selection.
When you’re in the market to buy a home, shopping for a home in your price range is a straightforward procedure. Finding the right-size home in the right condition and the right area is worth the search. One reason home shopping can be a challenge is the “downsizing” trend in recent years in new-home construction. To keep costs down and meet marketplace demands, builders have been trading size for lower sales prices, nicer amenities and better locations. On the other hand, that may work perfectly for you.
Need storage? Want cozy? Prefer energy efficiency? No matter what’s top on your list, here are eight tips to help you make the best decisions. Use these proven pointers and you can move into your next home faster, cheaper and more simply than you might imagine.
1. Do your homework. Take time to do online research about neighborhoods that interest you. Then test drive and walk them in person. For amenities that are important to you and your family — work, schools, shopping, parks, playgrounds, etc. — figure out how far they are from the area you’re considering. Drive routes during rush hour to get a realistic sense of commute times.
2. Be prepared. Before you start viewing homes, secure your down payment. This is worth repeating: Know exactly how much you can afford by getting pre-approved for a home mortgage. This tip alone will make your purchase offer more inviting to sellers, as they will know you have your financing elements already in place.
3. Stay flexible. Don’t box in your needs for a home. If you’re looking for a home office, consider extra bedrooms, dens, unfinished spaces in basements or attics, or even dividing a large room to carve out office space. Ditto for play areas for young children or space to host guests. Even if a listing doesn’t specify the perfect configuration, if everything else seems like a good fit, take a look at what the home holds that could fulfill your needs completely.
4. Go green to save. Not everyone is an eco-warrior, but who doesn’t want to save a little cash? Look for energy-efficient systems and features in the homes you view — or determine if they can be retrofitted with energy-saving elements later on. ENERGY STAR appliances and other energy-saving labels will alert you to money-saving features. Ask the home sellers for previous utility bills to see the true costs of operating the home.
5. Prioritize rooms. Consider and rank the importance of rooms and features in the home you are looking for. Is the four-bedrooms requirement a must or a would-like? Is an eat-in kitchen necessary, or would a counter area that seats four be sufficient? Is a first-floor master bedroom totally a deal breaker? Understand the “wants versus needs” on your house hunting list before you set out. That way, when you find that gem of a home, you’ll be ready to make an immediate offer.
6. Look ahead. If the homes you view are hard to see past the clutter, needed repairs or personal belongings, take a moment to step back and imagine what your furniture and belongings will look like in the space. Don’t be overwhelmed when not seeing a perfectly staged home. By looking beyond the existing contents of a home, you may find the perfect home — and get it for a great price — because no one else can see through the owners’ stuff.
7. Don’t forget the formalities. No matter what your concerns, consider your home-inspection money well spent. Be sure to attend the inspection, if possible, because you’ll learn a lot about the property. Then read the entire report. Be sure your purchase contract accommodates your decision for a home inspection so your new home doesn’t come with costly repair surprises. To find bargains, home buyers should look beyond
