While surfing Realtor.org for a client I ran across the customer hand out 10 Steps To Prepare for Homeownership. I think its a great summary on getting started looking for your new home. The steps are slightly different if you already own a home and are looking to upgrade or downsize in this market but still a great summary for any buyer.
10 Steps To Prepare for Homeownership from Realtor.org
1. Decide how much home you can afford. Generally, you can afford a home equal in value to between two and three times your gross income. To decide how much you can afford the place visit is the mortgage calculators website at a your finical institution or I have some great ones at www.DeRoseRealEstate.com. The mortgage calculator is a great source to get the ball park figure or guesstimate to help you determine how much you can afford.
2. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list. I think this step should be changed to “What do you really need in your home?” I wish to live on Lake Michigan with 400 ft of lakeshore, I wish to live have a stainless steel appliances, etc. The realty of the fact people should be saying something like “I wish to have a 3 bedroom, 2 bath, newly remodeled bath, finished basement, in Mona Shores School system. I need a ranch home with little or no stairs and I need first floor laundry room because my back and knees hurt.”
3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety. Remember the three golden rules of a real estate purchase Location, Location, and Location!!!! You might find the perfect home you like but if it is next to the rail road tracks, on a busy highway, or not the school system you like, odds are you won’t be happy long term and it maybe hard to sell in the future. Remember that locations is the critical factor in determining value of real estate.
4. Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price. The days of the zero down with 100% loan are pretty much done. I know some people will argue that point but for the most people who are looking for a home to live in you need money down even if you are doing a land contact. When doing a land contract the down payment will cover the selling closing costs and I am not finding many sellers that want to bring money to close let alone have money to bring money to closing. Also, no matter what type of home you are buying odds are you will want some extra money to do updating, repairs, painting, etc. not to mention the new things you might need as a first time home buyer with a new home.
5. Get your credit in order. Obtain a copy of your credit report. You should be doing this once a year regardless if you are buying a new home. Your credit score is your financial report card to the world, manage it or it will manage you with only expensive alternative options left.
6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you. 7. Organize all the documentation a lender will need to preapprove you for a loan. 8. Do research to determine if you qualify for any special mortgage or downpayment- assistance programs. 9. Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable. Steps 6-9 pretty much go together, get pre-approved before you talk to a your realtor or call your realtor to find out who he recommends. 99.9% of the Realtors today will ask on the initial conversation “Are you Pre-Approved?” This is not because we want to lick our lips on how much you are worth but how to help you. If we start showing you $165K-175K homes before you are pre-approved and you find out $150K is you max loan amount, I guarantee the you will not be happy with any of the $150K homes we show you. Second reason we ask this is because we are in a buyers market for real estate you need to me a prepared when we see the home of your choice. Sellers today are chasing the market trying to find the price that their home will sell. So when that $175K home lowers it price to $165K or $150K you will not have time to get pre-approved because other pre-approved buyers will have offers in while you are just sitting down at the bank. Br prepared!!!
10. Find an experienced REALTOR who can help you through the process. Find a REALTOR you are comfortable with, high sales volume doesn’t always equal great customer service and experienced doesn’t always equal good experience. So ask around, get comfortable with someone who will work with you.
If you need any help or have any real estate questions please let me know I how I can help you.