Smooth Home Purchase
Buying a home can be an emotional, time-consuming, and confusing process. Here are some things that you can do to help make the process go as smoothly as possible:
- Check your credit
Before you even apply for a home loan, regardless of your credit, it's always a good idea to obtain a copy of your credit report from the three major credit bureaus and review the information. If there are errors or things that need to be addressed, it's much easier to address them before you find a house, than after you have found a house and are trying to get a loan. As they say, forewarned is forearmed!
If you know there are issues with your credit in advance, you can often take steps to correct them before you attempt to get a loan. Often times blemishes on credit turn out to be errors, sometimes not even applying to you. If there are issues that DO pertain to you, however, be up front with your your lender letting them know what they are, why they are there, and why you are a still good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances - like a temporary loss of a job or medical bills - let them know so that they understand that it is not likely to happen again in the future.
- Get a good pre-approved before you buy
A quality pre-approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. Many lenders offer what they call pre-approvals that include none of those things. To give yourself the best possible chance of a smoother transaction, INSIST on a bonafide pre-approval. Those would be more accurately termed pre-qualifications, however. If you have a good pre-approval, all that should be required once you have found your home are things having to do with the house itself...things like the appraisal and title search.
Getting approved also gives you an advantage over other buyers. A firm pre-approval makes it easier for you to negotiate on the price of a home, than a person who is not.
While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. Its having a person plug in a few numbers that you give them - your monthly income and your monthly debt - and getting an approximate payment calculated. From the payment, the calculator can approximate the house price range that you can afford. No information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.
- Find a great buyer's agent
Prior to the 1990s, real estate agents all represented the sellers in a transaction. Thankfully, that is no longer the case. A buyer's agent's job and fiduciary responsibility (meaning legal duty) is to you, the buyer. Before working with an agent, establish exactly what your working relationship with them is. After spending a lot of time with a Realtor, it's natural to feel like they're on your team. But if they are not negotiating on your behalf, they are not really on your team at all. Please take a look at the information we have here on Buyer Agency and how it is conducted in Illinois. It should give you a much clearer idea of what to look for in an agent.
- Learn about the neighborhood
Often times the house you find may be in a neighborhood that you're not familiar with, which is ok. It just means that you'll have to do a little more research. If you find a house that you like, ask for details about other properties in the area as well as those that have sold in the past year or so. How does your home compare? Is it at the top of the price range? If so, it might be hard to resell. Is it average or on the low end? If so, great - as the other home prices in the area go up in value, they will likely pull your home's value up as well.
Check out the schools - are they sought after? A good school district means your neighborhood will always be valued favorably by families looking to purchase, which is a great reassurance, not to mention the benefit if you already have school age children yourself.
Next, contact the police station and obtain crime statistics? Are they acceptable to you?
Talk to the neighbors. The more people you talk to, the better sense you will get of who makes up the neighborhood and how they will effect your time spent in it. And take a look at THEIR properties. Are they well cared for or neglected. This is truly a case of being "judged by the company you keep". If the majority of the homes in the neighborhood are well cared for, that fact alone will have a positive impact on your home's value; conversely, if the homes around you show neglect, that would have a negative impact on your home's value as well.
Check out the location of the shopping, police and fire stations, schools, flood areas, landfills, trains, and air traffic overhead. These are all things that might affect your property value or quality of your life.
- Protect Yourself
Ask your Realtor for a copy of the documents you will be asked to sign if you decide to buy the house. Read them ahead of time so that you'll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.
- Have reasonable expectations
There is a lot of money at stake. No house is perfect. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage.
Emotions are high for both buyers and sellers. The seller may have loving memories and years of sweat equity in the house. Maybe they are being relocated and don't want to go. Understanding their motivations for selling will help you appreciate their situation and predicament during these emotional times.
There is a lot of money at stake for all the parties involved (and that includes the realtors). Just remember that market value (the value of a home) is the price that a willing buyer and a willing seller can agree to. If you can not agree on a price, ask yourself: Is there something you missed? Are there comparables that support the price the seller wants? Are there motivations that might factor into the price they are demanding? In the end, does it matter? What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you plan to spend in it? Think about the answers to those questions before you make your move.
No house is perfect - Always get a home inspection. It might be a few hundred dollars, but it's worth it. It's the inspector's job to find any problems with the house that could cost you thousands to repair down the road. Some inspectors have a tendency to over play the importance of their role and the items that they find. Get objective opinions that you trust before making a decision on an inspection report. Likewise, if an inspector says a foundation is cracked but its nothing to worry about, get more specific. SOME foundation cracks do indicate serious problems while others do not. Ask your inspector WHY he believes this one is NOT a serious concern. If there are items on your home inspection report that you know you will need to or want to address, ask a handyman for an idea of how much repairs will cost and how complicated they are.