Are you ready to find the perfect home, the home of your dreams? If you’re a new homebuyer, the process can be daunting. You’re not alone with this feeling.
According to Homes.com, 40% of Americans claimed that buying a new home is the most stressful event of their life. What’s more, 38% thought the process took longer than expected, and 20% didn’t feel confident in the process.
These stats aren’t meant to discourage you. By knowing what to expect and how to navigate the world of first-time homeownership, you’ll be cutting down your stress, increasing your confidence, and maybe even finding some enjoyment in discovering the perfect home.
Read on as we break down all the top tips for finding your dream home, what to expect during the process, and how to look out for yourself and your family for the longterm!
1. Price Range
First, you need to decide what your budget is and stick with it! On a 15-year fixed-rate mortgage, it’s recommended to have a mortgage payment that’s no more than 25% of your monthly take-home pay.
You’ll also want to remember that owning a house also brings responsibility for any repairs or upgrades that need to be made, so setting some money aside in savings is a smart way to safeguard for the future.
To determine your budget, add up every income source that hits your bank account every month. From that number, subtract all your monthly expenses, such as:
- Credit cards
- Health insurance
No one really enjoys budgeting, but the peace of mind you’ll attain afterward is priceless.
2. Mortgage Pre-Approval
Lenders will typically look at your assets, income, and credit history in order to create an accurate assessment. This usually only takes about three business days after you’ve applied for the loan. However, you’ll want to start preparing for this process much further ahead of time. Here are some important landmarks to guide you through the process.
Minimum of 6 Months Beforehand
During this time you’ll want to start saving for the expected down payment. You’ll also want to look into your credit history and score and determine if there are any discrepancies you need to correct.
If your score is low, you’ll want to take steps now to raise it so you can get a better rate. Lenders typically expect a FICO score of 620 or higher. Understand that the higher your credit score, the better your monthly mortgage rate will be.
Three to Five Months Beforehand
At this point, you’ll want to avoid taking on new loans or opening new lines of credit. You’ll also want to make sure that your income remains stable, and your expenses remain consistent, all the way to the closing. You will not want to make any unusual, or large purchases until after your closing. This way, your loan approval won’t be met with any delays or changes in rate and Closing Costs.
One to Two Months Beforehand
This is a good time to look into what documents you’ll need to gather for the lender. These are usually recent paystubs and bank statements, as well as two years of federal tax returns. You’ll also want to look into your options for down payment assistance or homebuyer programs.
3. Fixer-Upper or Turnkey?
Next, you’ll want to decide whether you’re willing to pay less for a house that needs renovations or pay more for a home that’s already been fully upgraded by an investor. There’s really no right or wrong answer here; it all depends on how much more work you’re willing to do.
It’s not recommended to make the decision based on price. For the most part, a fixer-upper home with renovations comes out to about the average price of a turnkey home. What’s more, homeowners often go over budget with fixer-upper homes and have been found to spend an average of $25,000 more than turnkey buyers.
Are you willing to purchase an older home with only a few upgrades? In this case, as an example, it’s smart to choose properties with upgraded HVAC systems and appliances.
Once you’ve decided whether you’re willing to do some major renovations for your perfect home, consider the number of bedrooms, bathrooms, and square footage you’ll need. Depending on the town or city you want to live in, your expectations need to shift.
LendingTree recently published a report comparing the average size of single-family homes throughout the United States.
According to the report, in Richmond, Virginia, the median size of a $224,000 home is 1,716 sq. ft. Compare this to San Diego, California, where you’ll need to pay $400,000 more for a home of a similar size.
The ideal house will feel comfortable to you while also allowing you to utilize the space to its utmost potential. Ideally, you’ll want enough bedrooms for each person to sleep in their own room, along with one extra room for guests or an office. On average, you can expect two bathrooms for every three bedrooms.
Size matters more in these scenarios:
- You’re planning on starting a large family
- You need something more spacious than your starter home
- It’s time to downsize
- You travel frequently and don’t need a large space
5. Location Matters
While you’re house hunting, you’ll probably come across this question sooner rather than later: Does the size matter more than the location? It’s good to have an idea of what will benefit you or your family most for the long-term.
Here are a few scenarios where the location would matter more than the size of the house:
- You’re planning on renting the house
- You have school-age children
- You’re planning on selling the home
- You want a more convenient work commute
You’ll also want to consider walkability if this is important to you. Whether you can put up with traffic noise, and if you need a garage. The more specific you get about what you need, the better.
6. Make a Deadline
Create a realistic deadline for when you expect to start preparing to move in. There’s no guaranteed time, as a variety of factors will alter it, but having a general timeline is beneficial to keep you moving forward and motivated.
Most homebuyers look at six homes before they make their final decision, but it’s also known for them to look at more than 20.
7. Find a Real Estate Agent
Once you’ve spoken with a lender and have an idea of the kind of house you’re looking for, the next best step is to look for a real estate agent. A good real estate agent will make the process of finding a home and getting a contract in place far less stressful.
Here are a few guidelines that will get you started:
- Get referrals from family, friends, or coworkers
- Ensure that the referrals are part of the National Association of Realtors (NAR)
- Research the websites and social media of your candidates
- Interview at least two or three candidates
- Ask for references
- Go with your gut
As you go through all of these steps, you’ll be able to see how professional the realtors are and whether they’re good at keeping in communication. It’s also important that their websites and social media show an active presence and good marketing of their past listings with professional photos or video.
Lastly, remember to take a good look at the contract before you sign it!
8. Negotiating and Closing
Once you’ve found the perfect home, your real estate agent will be there to guide you through the negotiating and closing process. After you put an offer in, the seller is required by law to get back to you within 48 to 72 hours.
After your offer is approved and you sign the Purchase Agreement, you’ll typically need to complete a home inspection within 10 days or less, depending on the current state of the market. Understand that your accepted offer is not final until a purchase and sale contract is completed by both parties. Acting quickly at this time is of utmost importance in order to secure the house because the seller and their agent will continue to show and market the home until the contract is fully executed. Depending on what else the house needs, this can potentially delay the closing by a few weeks or even a month.
After the home inspection, you will receive your contract. Review it carefully with your attorney and your agent to make sure that the contract reflects the terms that are acceptable to you. Once the contract is signed by both parties, your lender will receive a copy of the contract and then your loan will be moved into underwriting. At this point, your lender is assessing the property to see if it can be financed and if it’s worth the risk. It can take up to 30 to 60 days to close a loan.
If all of this sounds tedious and rather excruciating, remember that this is where your real estate agent shines. They should be in communication with you about what to expect next.
How to Know You’ve Found the Perfect Home
Now that you know what to expect, when you’re looking at homes it’s all too common to feel divided between one home or another – or more than a few. Narrowing it down to one home can be one of the hardest choices you’ll have to make.
Here are a few things to look out for that indicate you’ve found the right one.
Meets Basic Requirements
All of the homes you see should meet your basic requirements, meaning they meet your needs and have the right amount of space. However, this doesn’t mean you can’t be flexible. If you find yourself opening up to more possibilities, such as a smaller yard than you initially envisioned, this could be a good sign.
Keep Note of Your First Impressions
First impressions are important when it comes to homes. If you’ve narrowed it down between a home that had a good first impression and one that had a poor one, chances are you’re trying to justify purchasing the house that made a poor impression because of the price or a feature that you believe you “should” prioritize.
You’ll know a home has made a good impression on you when you walk in and feel invited to explore. You’ll feel comfortable enough to walk into each room and bathroom. If you find yourself hanging onto doorways and peering inside instead, something about the home has put you on edge.
As you walk through the home, there’s a strong indication it’s a good fit if you’re already envisioning how your own furniture will look inside it. This could mean your brain has already accepted the fact that this home is yours.
However, remember that not all homes are going to be shown in their best light. Some home sellers aren’t willing to pay the extra amount to stage the home, or, even worse, they haven’t cleared out all their personal possessions. You’ll need to try your best to exercise your imagination during these showings.
You’re Ready to Stop Looking
This is one of the strongest indicators you’ve found the perfect home. You’ll start comparing all your other choices to it to see if they match or exceed the expectations this property has set. Maybe you had great feelings about a few previous properties, but this one completely drew you in.
Finding the Perfect Home: One Step at a Time
By now you should have a thorough understanding of what to expect when it comes to finding and attaining the perfect home. Knowing exactly what kind of structure you need, the location you desire, your budget, and the state of your finances will all go a long way to mitigating your stress and smoothing out the process.
Last but not least, take it one step at a time. Purchasing a home is a long and involved process, and knowing the ins and outs of the negotiating and closing stage are what separate good realtors from great ones.
Ready to have a positive, memorable experience while buying your first home? Find your perfect home with Dean Miller Real Estate today!