The 3 Keys to Buying a Home
5/7/2015 | By Team United
Before you start the search for your dream home, get to know these three keys to buying a home for your financial situation and lifestyle. Follow these tips for a more satisfying and successful home buying experience:
The First Key: The Finances
Not only is buying a home one of the most exciting purchases you’ll ever make, it’s also likely to be your most expensive purchase. By understanding the financial side of home buying, you’ll save time, energy, and maybe even some money.
Manage your credit score. Before you apply for a mortgage, take steps to make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Fix any problems you discover and double check that all facts are correct. The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.
Know your limits. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. A mortgage calculator can help you get a better idea of what you can afford. UFCU Mortgage Advisors can also help you determine a price range for your new home.
Save for a down payment. Your goal should be to save 20 percent of the list price of your dream home. If you can’t put down the full 20 percent, there are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment. However, many of these lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration, the Federal Housing Administration or a private mortgage insurer (required by lenders to protect against a mortgage default).
Get pre-approved. Getting pre-approved will save yourself the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on an initial review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. Since your documentation will already be in place, a mortgage pre-approval will likely speed up the process once you make an offer to buy.
Learn how to bid and negotiate. Before you make an offer on a home, it helps to know how to bid like a pro. CNNMoney.com suggests your opening bid should be based on the sales trend of similar homes in the neighborhood by considering sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that’s about eight to 10 percent lower than what the seller is asking. Additionally, HUD.gov provides tips on how to negotiate a good deal on a mortgage, and offers information on your rights as a borrower.
The Second Key: The Property
Doing your homework on the property and the surrounding neighborhood before making an offer on a home may seem obvious, but many people overlook this step. Information is free; being stuck with a home you’re not happy with can be expensive. Make sure you gather as many details about a prospective property as you can.
Property lines and taxes. Consider getting a survey done on your property. This way you know exactly where your property ends and where your neighbor’s begins. Also, your property taxes could be based on the amount of property you own, so make sure you get accurate information ahead of time.
Know the neighborhood. Location, location, location. It’s the first rule of real estate, and it applies to home buying as well. Make sure the neighborhood of your prospective property also meets your requirements. Find out how far it is to the nearest grocery store, hospital and entertainment venues. Even if you don’t have kids, research the schools because it affects the value of your home in a big way. According to HGTV.com, If you buy a house in a good school district versus bad school district even in the same town, the value can be affected as much as 20 percent.
The Third Key: The People
Several people are involved in helping you find the home of your dreams. The better you know them, the better your home buying experience will be.
Lender. The first contact you should make before buying a home is with a trusted lender. A home is a major purchase and the financing process is full of complexities. Choose a lender, like United Federal Credit Union, that has experienced Mortgage Advisors who are available to help you with the entire process and answer all of your questions clearly and accurately. Ask questions about the financial institution’s loan programs, how long it will take to get financing, and how buying a home fits into your overall financial goals.
Real Estate Agent. You don’t have to be selling a home to utilize a real estate agent. As a buyer, having the right real estate agent can help you define your ‘must haves’ and narrow down the list of prospective properties. Work with a real estate agent who specializes in working within the community you wish to live. An agent who knows the area well can tell you about local market conditions—both the good and the bad.
Home Inspector. A trustworthy home inspector can be the difference in enjoying your new home or feeling like you purchased a money pit. Before you hire the first home inspector you find on Google or whoever your Realtor or lender suggests, do your homework. It’s acceptable to interview a home inspector before you decide to drop $300 or more on the inspection fee. USNews.com lists seven important questions you should ask before hiring a home inspector.
Neighbors. Have you ever heard horror stories about really bad neighbors, or have some of your own to tell? One way to make sure you don’t feel miserable in your new home is to scout out the neighborhood and get a sense of what your new neighbors might be like. HGTV.com recommends driving by the house at all hours of the day to see what’s happening in the neighborhood. Start your regular commute from the house to make sure the overall environment is something you can deal with on a daily basis and fits your lifestyle.
Sellers. You don’t have to be best friends with the home’s previous owner; in fact, you might not ever meet them. However, they are an important piece to the home buying puzzle. You should feel comfortable with the accuracy of the information they have listed about the home, as well as their negotiating style.
Buyer (That’s you!). While many people play a role in your home buying experience, don’t forget to check in with the most important person—you! Ultimately, deciding to buy or pass on a new home is all up to you. Assess how you feel about the process before you make a commitment to sign on the dotted line—Are you prepared for the purchase? Do you feel pressured to make a fast decision? Is this where you plan to live for the next few years?
If mortgage questions have you seeing double, remember there is one clear answer—United Federal Credit Union. By choosing UFCU, you will be partnering with a trusted, local mortgage lender with expert Mortgage Advisors who will guide you through the entire home financing experience. Visit mortgage.unitedfcu.com where you can utilize helpful mortgage calculators, request a personalized consultation, review our competitive rates, and begin the mortgage loan application process.