How do you buy a home?

Whether you’re a first-time homebuyer or looking for your next home, every market presents a different environment. It all comes down to what is right for you and your budget and lifestyle.

Be Boring for the Sake of your Credit Score

The mega computers that calculate everyone’s credit score like to see a track record of stable, predictable behavior, and when they get nervous, your credit score can take a hit. The months leading up to – and during – your home loan application are a terrible time to take on new debt or generate unnecessary credit inquiries. This is one of the few times when being boring can be a good thing!

Your credit score is a powerful asset when buying a home, and free apps like Credit Karma make it easier than ever to monitor and improve your score over time. An excellent credit score may allow your lender to reward you for your great track record.

Don’t Try to Perfectly Time the Housing Market

We’ve all heard of someone who managed to sell their home at peak value – just before the market took a dive. Lucky them! There are at least as many stories of people who held out longer for even better rates, only to see the market reverse direction.

If you could figure out a way to reliably “buy low and sell high,” you’d never have to worry about money again. In truth, you’re probably better off controlling the things you can (such as your credit score and choice of lender) and embracing "good enough" timing. When the timing is right enough and you’ve found the home you want, that’s truly the best time to buy, so go for it!

Separate fact from fiction

Americans continue to overestimate home loan requirements, according to a survey released in June of 2019 by Fannie Mae. For instance, consumers often think they need higher credit scores and larger down payments than many lenders and programs actually require. Other misconceptions are that lower down payments make it harder to get a loan and all lenders are the same (trust us on this one – there’s a BIG difference). In short, making your homeownership dream a reality may not be as hard as you think. So don’t be daunted! An you may view the full survey findings here.

Find a Great Lender

Connecting with a lender early to get pre-qualified for a home loan is a great first step. This can jump-start your buying process in several ways. First, it can be a useful first step in figuring out how much home you’ll be able to afford. Depending on how in-depth the qualification process is, it can also serve as a bargaining tool for your purchase. The more information you provide your lender, the stronger, more accurate, and more useful your pre-qualification will be. While quick and easy pre-qualifications are possible (and useful to an extent), if you take the time to verify your income for the lender, many real estate agents will feel comfortable using this “pre-qualification” as the basis for making an offer.

Finally, connecting early with your lender can help give you early insights into the current rate environment, the state of your credit score, and even provide connections with strong service providers or programs that can help you on your mission to purchase a home.

Take a Close Look at Your Budget

Have you ever heard the term “house poor?” It can be easy to put yourself in a position where paying your monthly housing payment leaves room for little else. Utility payments, home repairs, home furnishings, window coverings, HOA (homeownership association) dues – even trivial items like garden hoses and holiday decorations can add up. Keep some of these less obvious costs in mind when you decide how large a monthly payment you’re willing to take on, regardless of what you might be approved for.

Scout Your Surroundings

You’ve probably heard people say that the three most important factors in real estate are location, location, and location, but how do you apply that idea? One good way is to invest some time scouting the area you’re considering. Are there busy roads? Where do they lead, and are they likely to get busier? Are you under a commercial or military flight path? Are there development plans for the surrounding areas that will affect your views or otherwise impact the property? Talking to future neighbors, real estate agents and other local resources can provide some great insights. Use online resources like Zillow to see how property values and home sales have trended over time in the area.

Consider how your home fits in the area. Will it be the most expensive in the neighborhood? The least? As a general rule, your home may well appreciate in value more if the homes around you are more expensive than yours. On the other hand, you also don’t want the house you buy to be the worst in the neighborhood unless you plan to put some money into refurbishing it before you resell.

While you’re at it, do some research about the quality of the local schools (even if you don’t have kids, as it affects resale value), how quiet or noisy the area is (it pays to drop by on a Friday or Saturday night for that purpose), how convenient the local amenities are, and so on.

Invest in a First-Rate Home Inspection

A great home inspector is worth his or her weight in copper plumbing. There’s a lot involved with homeownership that isn’t apparent to the casual observer. It’s the job of a home inspector to examine those things and make sure they’re in good shape. Does the foundation have cracks in it? How long before you have to replace the roof? Inspectors come in all varieties, and choosing a great one is crucial. Often an inspector won’t find all that much to warn you about, but if he or she does find something major, the cost of hiring a quality inspector can be repaid many times over.