Whether you are a first time home-buyer or an experienced homeowner, buying a new home is always stressful. Here’s a handy checklist of six things you can do up front to make the process a lot easier. Before you start packing, here’s what you need to do.
- Prepare a budget. You need a clear picture of your family’s finances before you even think about calling a Realtor or applying for a mortgage. List all your monthly fixed expenses, such as car payments, current rent or mortgage, utilities, school tuition, and loan payments. Add categories for other expenses such as food and entertainment.
- List your debts. If you have existing credit card debts, student loans or other debts that require regular monthly payments, get them down in black and white, so you know exactly how much you owe. Figure out your debt ratio. There are plenty of online calculators that will do this for you. You need to know two ratios. Your housing debt expenses (including taxes and insurance) as a percentage of your gross monthly income should be 25-28%. Your installment debt ratio (credit cards and other consumer debt) should be around 10-15%. Your total debt to income ratio should not be more than 40%.
- Get pre-approved. #1 and 2 above are important because you want to get pre-approved for a loan before you start shopping. This is an important safeguard, to keep you from falling in love with something you can’t afford or can’t get a mortgage for. Be sure you understand the importance of pre-approval. Getting pre-qualified means that you give a lender your overall financial picture, including your debt, income and assets. The lender evaluates this information and gives you a ballpark figure of the mortgage amount for which you could qualify. Pre-qualification can be done over the phone or on the Internet, usually at no cost. Pre-approved, on the other hand, means that a lender evaluates your debt ratios, your credit report, and your overall ability to repay a loan and says, “Yes, I would loan this buyer X number of dollars to buy a home.”
- Make a list. Before you begin working with a Realtor, you need to make a two-column list of needs vs. wants. Be sure you know the difference! You need three bedrooms. You want a swimming pool. You need to be very upfront with your Realtor about exactly what constitutes a deal-breaker in your purchasing process. If more than one person is involved in making the final decision, be sure that you are more or less in agreement about needs and wants. If one spouse wants a short commute and the other has visions of a country estate, you could have a problem. Resolve these issues ahead of time.
- Find a Realtor. Once you’ve done your homework, it’s time to start looking. You want to find a Realtor who represents you and puts your interests first. When it comes to working with someone,it’s important that you find someone with the 3 C’s:
Competence. Character. Chemistry.
Competence is the ability of your agent to perform their job at a high level.
Character is the faithfulness of your agent to perform their job with high integrity.
Chemistry is the ability to work and communicate with you.
ALL 3 are needed for successful real estate transaction.
Competence + Character – Chemistry = You will be frustrated working together.
Competence + Chemistry – Character = You will be put in unethical situations.
Character + Chemistry – Competence = You will be let down by poor work.
Character + Chemistry + Competence = You will have a smooth move into your new home.
I’m a big believer in these 3 C’s and I would like to say I’m a 3 C kind of Realtor. So if these 3 C’s are something you want when buying a home, you have it with me, and I would be honored to work with you!
Buying a home could well be the single most important decision you will ever make, both financially and emotionally. However, if you do your homework and prepare thoughtfully for the process, it can also be a fun and rewarding experience. Happy hunting!