Whether you are a first-time homebuyer or a seasoned real estate investor, buying a home is an exciting process. However, there’s also a lot to consider when you decide to buy. So before you begin your search for the perfect property, here are four questions you should ask yourself …
What do I want?
This might seem like an obvious question, but many people go into the home buying process having no clue what they are looking for and that will only add frustration to your search. Take the time to figure out what type of property you want to buy. From single-family and multi-family homes to condos and co-ops, there are many different options on the market and it’s important to choose the type that best fits your needs. Figuring out the town or neighborhood you want to live in is also very important. While a property might have “everything” you are looking for, other factors like proximity to highways or public transportation can impact your overall happiness with your home. A great idea is to list out and prioritize your needs (large backyard, walkability, school system etc.) before you begin your search. This way you won’t be wasting your time looking at properties that will never work for you.
What can I afford?
The rule of thumb is that you should never spend more than 30% of your monthly income on a mortgage payment. An alternate rule states you can afford to buy a property that runs about two-and-a-half times your annual salary. For a more tailored look at what you can afford, you can use an online mortgage calculator to see what your monthly mortgage payments would be if you bought a home today. Keep in mind that this is only an estimate and you should meet with a mortgage professional and work out the financials before you start looking for a home.
Am I financially prepared?
A few months before you start searching for a home, review your credit history and make sure it is in good standing. Get copies of your credit report, ensure that it’s accurate, and fix any issues you discover. You will also want to get pre-approved for a home loan. This will put you in a better position to make a serious offer once you find the right property. A pre-approval from a lender is based on your credit history, debt and income.
How do I make the best bid possible?
This is why it is so important to be working with a real estate agent! Your opening bid should be based on the sales trends of similar homes in the area. Your agent will review the selling prices of comparable properties and then present the information to you so that, with their guidance, you can make an educated decision on what to offer. If the comps you are looking at sold for less than the current asking price of the home you are looking at, you can feel comfortable making a bid that is slightly lower than what the seller is asking. If the opposite is true, the seller might have priced the home low to gain multiple offers so you may need to offer more than asking. These are all decisions that your agent will guide you through.