Gina Lorenzo, an agent with RE/MAX Executive in Charlotte, North Carolina, says she’s been working since November with clients who aren’t looking to purchase until the spring or summer. She calls these clients her A-players.“These are my planners,” Lorenzo says. “They fare best when it comes to purchasing a home in the upcoming year because they’re doing their homework now and getting the basics out of the way.”According to Lorenzo, many factors go into a buyer finding the right home, including researching neighborhoods and looking at the market to understand what is available within a budget.“There can be a learning curve of what your budget can actually get you,” she says. “Sometimes people need to adjust their expectations – or their budget.”According to Lorenzo, a mortgage payment is only part of the monthly cost of homeownership. There’s also the potential HOA fee, private mortgage insurance (typically required with a down payment of less than 20%), homeowners insurance and property taxes to consider.“When you add everything to your loan cost and come up with a final number, it narrows down your options,” Lorenzo says.
Resolution 2: Create a (realistic) monthly budget, including a potential mortgage payment
Once homebuyers have a feel for how much they are able to afford each month, they should work with a mortgage advisor to get pre-qualified for a loan that meets their needs and works with what they can afford monthly.“Getting pre-qualified allows you to know what your budget is before you go window shopping,” says Crystal Jenkins, a Sales Associate with RE/MAX Downtown in Orlando, Florida. “It’s always good to know how much money you have in your pocket to spend.”A lot of other variables can determine how big of a loan makes sense for each individual homebuyer, including type of loan (FHA, VA or Conventional, for example) or the current interest rates.“A lot of times, people qualify for more than they can afford,” Lorenzo says. “You need to look at your finances and determine, ‘What do I feel comfortable with?’”A rule of thumb is that housing costs shouldn’t exceed more than one-third of a homebuyer’s monthly income.
Resolution 3: Build a real estate dream team
Buying a first home is exciting and maybe a little intimidating. Working with the right real estate agent and mortgage broker can make life a lot easier – and more fun. An agent can help a homebuyer zero in on the right property during the search process and also advocate for homebuyers at the closing table.“Looking for the house is just one step,” Jenkins says. “Once you find a house you like, who’s helping you after that? A real estate agent is there to help you negotiate the best terms in purchasing a home that benefits you.”Jenkins says buying a home is not a simple DIY project – it’s important for homebuyers to work with a trusted advisor. In addition to helping buyers in the real estate process, an agent can recommend home inspectors, repair services, home warranties and other important services.“This is the biggest financial transaction of your life, why would you want to do it on your own?” says Jenkins “You need to find somebody you trust.”
Resolution 4: Get out more! Start browsing homes and neighborhoods
Once homebuyers have an idea of their ideal price range and have found an agent to work with, it’s time to start looking at different properties online and in person, potentially even attending an open house.“It’s really hard for people to make a decision about a house if they don’t have a point of reference,” Lorenzo says. “Say your budget is $500,000. What does $500,000 look like in your area? What you don’t want to do is have the first time you’re looking at houses be when you’re ready to pull the trigger.”When it comes to choosing the right neighborhood, Jenkins says to keep in mind three important things: “You have to think about it in terms of live, work, play. How close is it to grocery stores? The gym? Your work?” she says.If a buyer has a specific neighborhood in mind, Lorenzo stresses the importance of working with a professional who specializes in that community.“An agent can tell you about everything from traffic patterns to community events,” she says. “They may even know about some things buyers don’t think about, such as noise from overhead plane traffic.”
Resolution 5: Clean up your credit if possible
Having the opportunity to correct your credit is one way having time on your side is important in the home-buying process. It’s another reason Jenkins says it’s critical to start early. “Three to six months is a good timeline. If you start saving and taking steps to correct your credit now, by April you could be ready to close on a house in as little as 30 days,” she says. Credit bureaus submit a new report each month, according to Jenkins. That means homebuyers can see a boost in their credit every 30 days as long as they continue to exercise good credit habits. Prospective homebuyers can take a number of steps to improve or maintain their credit score. Jenkins advises homebuyers to keep or pay down their credit balance to under at least 25% of available credit. “Avoid charging a lot on your credit card during the holidays,” Jenkins says. “Credit card debt can affect your debt-to-income ratio, which is an important consideration during the pre-approval process.”
Resolution 6: Plan for more than the down payment
In addition to the down payment, homebuyers will also need to pay thousands of dollars in closings costs before the deal is final. They also may have one final month of rent due at their current apartment, need to hire movers, or have to pay for temporary housing while waiting to move into the new home. The more money buyers have in their pocket when making an offer, the better shape they’ll be in. A buyer’s mortgage advisor or real estate agent can help buyers plan how much their savings goal should be. The start of a new year is always an exciting time. Staying focused on the goals above will help make the homebuying process exciting, too!
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