December 16th, 2016 6:57 AM by Jackie A. Graves, President
A buyer’s market is on the way; here’s how you
can get your first home
For many people, the dream of owning a home might become a
reality next year, especially with signs pointing to a homebuyer’s market in
Existing-home sales next
year are expected to
grow about 2% to 5.46 million homes, helped by millennial first-time home
buyers or those born in the 1980s and 1990s.
Though there’s always the debate between buying versus renting,
buying is becoming attractive, much more so than it has been in years. In fact,
it’s nearly 38% cheaper to buy than rent now in the top 100
cities in America, according to real-estate firm Trulia.
If you’re shopping around for a
home, and expect 2017 to be when you buy your first place, here are 5 tasks to
add to your to do list.
Figure out what you can afford
is an expensive purchase, no matter what type it is, and affordability usually deters potential
buyers, said Jeremy Wacksman, chief marketing officer of real estate site
Zillow. If you’re interested in buying a home, figure out first what you can
afford — both for monthly payments and the down payment (the typical down payment
is 20% of the home price). The general rule of thumb is to spend no more than
28% of your gross income on a mortgage, known as the “housing ratio,” according to
Bankrate.com. When doing calculations, include other recurring bills
and responsibilities you have, as well as any debt you’re paying off.
Condominiums and co-ops usually have homeowners’ association or
maintenance fees every month on top of the mortgage -- don’t assume if you
don’t see that fee on the home listing that it isn’t there. Also consider what
the tax and insurance costs for your home will be. Other fees can apply, such
as closing costs or extra insurance if you put down less than 20%. Spending
most of your take-home pay on your home and debts could put you in a dangerous situation,
depleting your savings account and/or meaning you may not have enough for an
emergency. Condominiums, co-ops and townhomes will also have their own rules
and restrictions and breaking any, such as having a pet or undergoing home
renovations without approval, could give the homeowner’s association the power
to place liens on your home. It could even result in numerous fines.
Get your credit in order
credit score could negatively impact your chances of a mortgage loan, but there
are plenty of actions you can take to stay on top of it, such as checking your
credit report for mistakes and properly managing your credit use,
Monica Ma, director of consumer public relations at real estate site Trulia,
said in an email. Payments should be made in full and on time and credit cards
shouldn’t be maxed out, she added. Good credit is ranked between 661 and 780,
and excellent credit is between 781 and 850, though lenders may have
their own criteria for
what defines bad, fair, good or excellent credit. Consumers can check a credit
score from three of the main credit bureaus (Experian, Equifax and TransUnion).
Interested home buyers shouldn’t wait until they’ve found a home to buy to work
on their credit — that’s something they can fix well in advance, Wacksman said.
Interview as many realtors as you need to find the right one for
Finding a Realtor who is
experienced and will make you feel comfortable is important, said John Smaby,
who will be first vice president of the Chicago-based National Association of
Realtors next year. He suggests you look for referrals or someone who
understands the area and price point you want. “Interview a couple of people to
see that the person understands your needs and is meeting your needs,” he said.
“If they don’t, interview someone else.” It helps when these professionals can
break down terms and the process so that you can do your homework and browse
listings by yourself at home. Especially for first-time buyers, an agent makes
for a better experience, since they can keep clients informed, according to a
recent J.D. Power Home Buyer/Seller Satisfaction survey. Realtors will usually
have a network of lenders their clients can work with to get preapproved.
Do your homework and know what you want
Though many home buyers eventually rely on the pros, they’re
starting their searches online, according to a Chase homebuying survey of more
than 1,000 adults from earlier this year: 68% started searching on their own,
and 45% used a computer or laptop to do so while 13% used a mobile device.
Another 11% checked local listings in newspapers or magazines. Websites such as Zillow, Trulia and Realtor.com have
listings for buying, renting or selling homes as well as information on agents
and mortgage lenders, though all options should be vetted by the home buyer first. (Realtor.com
and MarketWatch are owned by the same parent company, Dow Jones.) Listings will
also include a disclosure that information may not be accurate. There are plenty of tools home buyers can use to determine what
they can afford and to get a step-by-step breakdown of the buying process,
including calculators on insurance and mortgage refinancing and websites like
Freddie Mac’s My Home to
understand basic mortgage concepts.
There’s more to homebuying than the color of the house or if there’s a fireplace. Buyers
should also take into consideration school districts, crime statistics, noise
from local transportation or a nearby bar scene and parking, among many other
factors. Also take into consideration how long you plan to stay in the home —
for some, that determines if they should rent or buy. Three in four home buyers
get homes they don’t plan to stay in long-term, the Chase survey found.
Organize all your documents and get preapproved
Buying a home is a lot easier when those interested in
purchasing a house are preapproved for a mortgage, experts says, and it’s
becoming more commonplace, according to a Zillow survey of more than 13,000 consumers: 82% of
buyers get preapproved and 77% do so before they find a home they want. In
order to get preapproved, home buyers must provide details on their financial
history, including credit reports, proof of income, bank statements and assets
and liabilities, as well as personal information including Social Security
numbers and driver’s licenses. Home buyers should shop around for lenders, who
will offer different interest rates; buyers can find them online, through
referrals and advertisements or by working with their financial institutions.
The majority (90%) of buyers will stick with the lender they used for a
preapproval for their mortgage loan, Zillow’s survey found, though parties will
usually talk to an average of two lenders about financing before making a decision. The process
can take a week to a month, depending on individual factors, Smaby said.
“Ultimately, when it is your time and you have preapproved, if you see
something you like you should be prepared to write an offer,” he said.
By Alessandra Malito -
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