By ALEXANDRA MATZKO
To paraphrase Winston Churchill, those who fail to plan, plan to fail.
A house is the biggest purchase you will ever make, and it requires a hefty amount of foresight to get it right. And, it requires a hefty amount of help from others. The real estate journey has been a scary one for me and my husband, and we couldn’t have done it without the advice and guidance of our parents and friends.
Maybe that should be my first tip: keep someone whose financial advice you trust in contact throughout the process from beginning to end.
So, you’re going to buy a house? Congrats! That is so super exciting. I know that I’m thrilled to ditch the apartment life and have a patch of dirt to call my own. But, before you plunge into the terrifying and vast world of real estate, check off the following items to be a step ahead in the game of house hunting. Turn off HGTV and get cracking on these tips.
1. Know Your Monthly Budget. This is the most obvious and most important. Bottom line — you don’t want to default on a mortgage. Building up a down payment is crucial when it comes to considering a leap into the housing market. Yes, there are incentives for first-time buyers and married couples even if the down payment loan is less than 20 percent, but then you get entangled in things like mortgage insurance and that kind of thing. Avoid it if you can, even if it means sticking around in that apartment for another year.
Look at your income and calculate what you can afford a month. Most financial experts recommend that your monthly payment not exceed 35% of your total income, and that’s a great rule of thumb. Zillow has a basic tool that allows you to plug in a projected down payment and receive an estimated monthly payment that sometimes includes property taxes in the total. It’s a good, quick resource to use while perusing houses online.
2. Location, location, location. Though you’re dreaming of becoming a homeowner, you’ve got to think of one day selling your place. Arguably the most important aspect of your home is where it’s located. The Middle Tennessee area is pricey, and I had a very specific area in mind. I wanted a neighborhood that was safe, not too big, and in a certain part of town. And, I would sacrifice aesthetic aspects in order to meet those needs. You can add a fresh coat of paint and do some renovations, but you can’t pick your house up and plop it down somewhere else. Plus, it’s not a bad thing to be the smallest house in the neighborhood — the house’s value will go up by association. In addition to safety, look to buy in an area with good schools and proximity to grocery stores, restaurants, entertainment, highways, etc.
3. Get Pre-Approved. So, you know your budget and your desired location, now it’s time to get your financial info in order. If buying your dream home comes down to a bidding war, being pre-approved will give you the advantage. And, most Realtors prefer that you are. You’re going to need a slew of documents to provide to lenders and brokers. Get these things on hand: two years of W2s, two years of tax returns, two latest pay stubs, two latest statements from all bank accounts, and a copy of driver’s license.
That should get you started. Then, you got to shop around. Work with brokers and lenders. Get quotes from three or more. Already, we’ve had two greatly different estimates with almost a .5 difference in interest and a $100 difference in monthly payments. This disparity will make an incredibly big difference over time.
4. Know When to Buy. With all that information, you can begin your search. But, when is the best time? Housing prices vary drastically depending on time of year. Most people buy starting in the early spring, so they can move during the summer in between the school year. Because of this, prices can skyrocket come February or March. Avoid those and ensuing months. The market can be a lot better for buyers in the late fall and winter. Aim to shop from October-January.
5. Word of Mouth Recommendation. You want a real estate agent who will work hard for you. And, if you’re a first time buyer like me, there’s no downside to getting an agent. You won’t have to pay him or her any money. I really wanted a shark-like agent, a person who would be scouring the Internet and other sources for the perfect place just like I do. I reached out to all my family and friends to learn from them and their experiences in that area. You should definitely do the same.
Now you’re ready to house hunt. Take all those accumulated years of HGTV knowledge and don’t settle until you’re happy and have your own inspection done. Good luck and happy hunting!