This is part of our ongoing series on everything to know about homebuying.
Wondering when and where to start when buying a home? If you plan to take the plunge in the next year, now is a good time to prepare.
Here are five key ways to get started:
1. Get educated
We live in the age of immediate information, so why not use it to your advantage? Whether you’re a first-time buyer or seasoned in the market, educating yourself is a crucial first step.
We know it may seem wise to just listen to the experts you’ll be working with (check out our post “Broker? Realtor? Agent? Choosing the Right Partner”), but the decisions in your homebuying process will ultimately be yours. Which property should you put an offer on? What is your absolute maximum budget? Which mortgage option is best for you? The more prepared you are to make these choices, the more empowered you’ll feel when it comes time to do so.
2. Determine your budget
Unless you’re paying the full sales price in cash, your budget will be based on the amount you’re approved for from a lender and the monthly payments you can afford. An online mortgage calculator can give you an idea of what your mortgage might be, but a preapproval from a lender will give you a better estimate. Note that in addition to your down payment, you’ll need to stash some funds aside for closing costs, which can be 2-5% of the total loan amount.
Heads up: Numerous programs offer financial assistance. Some are geared specifically toward first-time buyers. Our post “The Lowdown on Downpayment Assistance” offers a handy list of options.
3. Check your credit score
A healthy credit score can help you qualify for a wide range of mortgage options with optimal interest rates (but no need to worry – those with less than stellar scores can qualify for loans too). Check yours and take some time to boost it if you can. While you’re at it, read through your credit reports to make sure all the information is correct.
4. Research real estate agents
Some real estate agents say it’s a waste of time to start looking at houses before you’re preapproved for a mortgage, as it’s difficult to know how much of a loan you qualify for without checking with a lender first. However, once you start calling around for representation, chances are that someone is going to want to meet with you. So how do you find the right agent? One way to start is by asking around for referrals. Know anyone who bought a house in the area recently, or who might otherwise have a connection to local brokers?
Pro tip: Shop around. Chat with a few different people to find the right person before signing a contract, as that typically locks you into working exclusively with an agent for several months.
5. Visit open houses
You’re probably already scrolling through online listings every chance you get, but open houses let you see what the houses look like in person. They’ll show you what’s actually available in your price range. You’ll also see the information sales agents typically provide and learn about the terminology they use. Plus, you can go to them on your own, without bringing a real estate agent with you.
(Can’t go to open houses due to COVID-19? The housing market is going virtual.)
But while you’re popping around at showings, be careful not to let listing agents pressure you into anything, whether it’s signing a document or putting your email address on a sign-in sheet. Sales agents often use open houses not only to c0llect contact information so they can follow up about the house they’re selling, but also to find buyers who still need representation.
That being said, going to see houses tends to be the most entertaining part of the homebuying process, so go have some fun!
Nervous about the mortgage process? Our story “7 Steps to Take Out A Mortgage” will walk you through it.
