How to Buy Your 1st House Like a Boss
So you’re a millennial, the baby boomer or in between. You have the job, you’re settled in a city and you’re saving money but have no clue how to start this agonizing yet exciting process of “home buying,” -this post this for you. I have to applaud you for wanting to buy when I’m sure at least one or two people in your circle have tried to talk you out of it.
“You too young, you don’t have enough money saved.”
“Homes need too many repairs. It’s too expensive.”
“It’s cheaper to rent than to buy.”
There are too many reasons to name why one should not buy. However, you are different. You want to prove to the world home-buying can be done no matter how young or how old you are.
So to my rebels, here are 8 strategies I’ve learned in home buying and I share with my clients.
1. Keep your credit clean and high. The lower your credit score themore you are paying for a house. Missing one credit card payment within one year of you buying a home can even keep you from getting approved for a loan.
Your credit cards should be below 30% of yourcredit limit orthe balance paid off each month. Thisincreases your score. If you can, ask your credit card companies to increase your credit limit.
In the book, “I’ll Teach You How to Be Rich” by Ramit Sethi, he explains how to get more credit to improve your credit utilization rate. This increases your score as long as you keep the balance low or pay off the balance each month.
2. Speak to lenders at least 2-3 months before you start your home search.
They do not have to pull your credit if you do not want them to but you need notice how well they explain terminology to you communicate. You need to find a lender you are comfortable with; they are working for you to get a home.
Once you have found a lender, let them pull your credit. Pre-approval letters are good for at least 90 days. If there is an issue the lenders can catch it immediately and you have a 2-3-month window to get it resolved.
3. MEET WITH A REALTOR FOR A CONSULTATION BEFORE YOU DECIDE TO WORK WITH THEM.
Make sure you are and the REALTOR are a great fit. I like to describe the “agent-client” as you and the agent are going together. If it doesn’t work out -break-up and find another agent.
How well does the Realtor explain the process? What type of person do you get along with? It’s typically the opposite of you. Also remember, no two agents are the same. Just make sure they know their stuff, understands your needs and is an advocate for your homeownership.(Read: 6 Simple Ways to Choose a REALTOR)
4. DECIDE ON A REALISTIC BUDGET.
During the home buying process, you must be true to yourself...and your wallet the entire time. Keep it 100! Can you really afford this home and still be able to travel, go to concerts, hang out with friends or will you be only working to pay a mortgage.This isn’t living.
If you are not sure where your current money goes look at your bank statements. Calculate how much you are spending. Also keep in mind when you are a homeowner you are adding more expenses: utilities, trash, homeowners association fees, and alarm.
5.DETERMINE A LOCATION. There is a rule of thumb that applies to most cities. The closer you live to major cities, interstates, parks, and entertainment venues the more yourpay. The further you live away from the cityand majorinterstates your money can go farther with a larger home for a lower price. Consider the traffic, your commute to work, close to shops and restaurants.
6. CREATE A PLAN.
This by far is the most important key to achieving anything you want in life. You need to have a plan.
With the help of your agent, your lender, and other key people that are supporting you in this venture, they can help you create a timeline with actions for homeownership.
Include in your timeline key events such as when your current lease expires, your closing date, pre-approval expiration, financial goals reached such as saving for down-payment.
7. SAVE, SAVE, SAVE!
If you talk to five different lenders and five different agents, they will give you 5 different amounts you need saved to purchase a home. One thing they will all have in common is- you need money to buy a home.
Yes, there are loan products such as 100% financing, (no money down) but you still need to verify at least 3 months of your mortgage in some type of asset such as your checking or savings account.
It depends on the price of the home you are purchasing. I recommend to my clients to have at least 7%-10% of the home price. This is enough to get in the game instead of being on the sidelines.
8.KNOWLEDGE IS POWER. The more you research home buying, reading books on home buying, and talking to friends, family, and co-workers that have purchased homes in the 2 years.
Ask questions to your agent and lender. The more you will learn about this process and gain confidence. Hopefully by reading this post you are already empowered.
Buying your 1st home is your foundation to wealth. You are purchasing as a liability, but if you buy right it can easily turn into an asset.
When you start with these steps you will get the best deal. You’ll know when you have found the right home. Everything will be aligned.
Now that you have these strategies, get started!