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Dos and Don’ts when buying a new home

September 27, 2022blog0

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You are eager to purchase your first home. You want things to go perfectly since it is one of the biggest decisions you will ever have to make. Although you’re anxious, you can immediately picture yourself relaxing on your veranda with a refreshing drink and showing off your new home to friends and family. The road to homeownership is long and rocky, with numerous stops along the way. There are numerous parties involved, numerous components that must come together, and crucial deadlines that must be met throughout the process.

We’re going to discuss the top dos and don’ts when buying a home; some may be strange, others may be more obvious, and many you may not have thought about. We asked our top agents for their best recommendations for first-time buyers.

Dos when buying a home

We’re going to focus on eleven of the key actions you should do when buying a house out of the many things you should take:

1. Be aware of your legal and credit status

To maintain track of your credit position, it’s critical to frequently check all three of your credit ratings from TransUnion, Experian, and Equifax. The majority of lenders use your FICO score, so you should check it as well. If your banking institution offers this service, you can frequently obtain your FICO score without paying anything, but if not, you might be required to do so. Before buying a property, it would be wise to strategically pay off some debt or dispute any mistakes on your credit report.

If you can, take care of any legal matters you may be facing as well. Your lender can insist that you pay child support on time, have no unpaid tax debts, and are not currently embroiled in any legal disputes. If you are a party to a lawsuit right now, you must tell your lender about it, and if so, they will demand an explanation.

2. Arrange funding

You want to purchase a home, but how will you pay for it? It’s crucial to arrange financing well before you want to begin making offers. You can better determine what you can afford by getting pre-approved for a mortgage, which will also hasten the process if you discover a property. Find a reliable lender who can assist you in financing your first house by doing your research and finding one.

3. Send your paperwork in a timely manner

Your lender will ask for evidence of all of your obligations (liabilities), income, and assets once you’ve decided on one and begun the pre-approval process in order to receive a complete picture of your financial situation. After obtaining your permission, your lender will pull your credit record throughout this phase as well. Be prompt in responding to their demands for documents to make the procedure proceed as easily (and swiftly) as feasible.

Typically, the lender will need at least these things:

  • Identification documents include a social security card and a driver’s license or State ID.
  • Banking records
  • Paystubs
  • Two years worth of tax returns, W-2s, or 1099s
  • Earnest money deposit
  • Details of the transaction: a copy of your earnest money deposit and the purchase agreement

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4. Consult with a broker

Real estate agents are experts who are familiar with the local housing market, its circumstances, and the entire home-buying process. It’s important to choose the proper agent, so look for one who works with both buyers and sellers in the area you plan to buy a house in. For first-time buyers, negotiations can be challenging, but real estate brokers, who are among the best negotiators you will ever encounter, should take the lead in standing up for you and your requirements during this process.

5. Examine various neighborhoods

Be open-minded and explore a variety of neighborhoods because you might be surprised by how much you enjoy the “feel” of one that you would have otherwise passed over. If you care about a location’s walkability, this is a fantastic approach to evaluate it. Look into neighborhood cafes, eateries, bookshops, and grocery stores. If you can imagine yourself living there, talk to locals and ask them how they appreciate the location.

6. Keep the home’s potential in mind

The majority of homebuyers have a list of qualities they hope to find in a possible home, which is entirely OK, but adhering to a strict list of requirements may make it more challenging to purchase a home. Instead, make an effort to place more emphasis on the home’s potential than on its current features. For instance, even if a property has an antiquated kitchen and paint colors you don’t like, it can be worth considering if it has a large garden and excellent “bones.” Instead of focusing on how the house is currently, consider what it could be with a little renovation. Having said that, some factors, such as the design and quantity of restrooms, are difficult to change.

7. Maintain your financial situation and take the long view

It could mean the difference between closing on your ideal house and losing the contract if you keep your financial situation stable during the closing process. To maintain your closing on schedule, you should refrain from shutting your accounts, starting new accounts, and changing employment during this time. When purchasing a home, you should also take the future into account. Consider the potential for value over time as well as your budget for maintaining (or eventually replacing) pricey items like the roof, appliances, and HVAC systems.

8. Have a home inspection done

It’s always advised to have your home inspected. A certified property inspector carries out this task. After carefully inspecting the home, the inspector compiles a report outlining any major faults that should be resolved right away, long-term difficulties, and systems that are operating as intended. A property inspector will check the roof, plumbing, HVAC, and other systems. It’s always a good idea to get an inspection so you know exactly what is wrong with the house before you assume ownership, even in a competitive housing market when purchasers are waiving inspection contingencies.

9. Compare homeowners insurance quotes

If you’re buying a home with a mortgage, homeowners insurance is always necessary; but, even if you pay cash, it is always highly advised. You can save money by shopping about and contrasting providers and premiums, both now and in the event of a calamity. When evaluating regulations, consider potential local dangers like flooding, wildfires, earthquakes, or tornadoes. If you bundle your policies, have an alarm system, or are purchasing a property with a new roof, ask about savings. Before you purchase an insurance policy, some lenders may need wind mitigation and four point inspections, but your real estate agent or mortgage lender will be able to recommend what is best.

10. Examine the Loan Estimate and Closing Disclosure carefully

Always read everything you sign, but this is crucial when purchasing a home because it can cost hundreds of thousands of dollars or more. After submitting a loan application, you will get a Loan Estimate in three business days. A Closing Disclosure, which is delivered three working days prior to closing and includes a more thorough analysis of your closing costs, will eventually come after this. The details of the loan and your anticipated monthly mortgage payments should also be included.

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The don’ts of buying a new home

When buying a property, there are several unquestionable must-dos and don’ts.

1. Wait till you have received pre approval before looking at homes

Some people may get inspiration in looking at expensive homes, but most people constantly contrast these homes with what they can actually afford, which might result in exaggerated expectations and disappointments in the future. To prevent falling in love with that amazing totally restored colonial home that is listed for a stunning $2 million dollars — when you’re actually pre-approved to buy a property for $700,000 — make sure you get pre-approved for a mortgage before you start looking.

2. Avoid buying everything in your pre approval range

Just because you get pre-approval to buy a $500,000 home doesn’t imply you have to or even want to spend that much money. Keep in mind that your pre-approval often only includes the most expensive type of property you can afford; it does not take into consideration the cost of any renovations you might decide to make once you move in. When looking for a property within your price range, it’s a good idea to exercise a little more caution and think about looking at properties on the lower end, if possible. This could prevent you from becoming “home poor” and enable you to preserve money for any unexpected expenses.

3. Do not wait till you have 20% saved up

Contrary to popular opinion, you don’t always have to hold off on looking for a home until you have 20% saved for a down payment. A 3.5% down payment is required for some loan programs, including those insured by the FHA, and some first-time buyers may be eligible to get down payment assistance for all or part of their down payment. If you fall into one of those categories and wish to finance your entire house purchase, a VA loan may be a wonderful choice for you. VA loans for veterans, service members, and select surviving spouses give 0% down to qualified buyers.

4. Avoid becoming very emotionally involved

When making a significant purchase, it’s simple to become emotionally involved, especially if you know that your new home will be where you and your family will spend each night. The majority of individuals find the home-buying process to be fairly difficult, and you won’t always be able to find the house of your dreams. You may prevent buyer’s remorse and maintain a positive attitude by being adaptable throughout the process and taking your time to carefully weigh all of your options. Make sure not to rush into anything or become so consumed with the process that you forget to appreciate it.

5. Remember to conduct research

Listing descriptions frequently contain errors. A “fully refurbished waterfront property” can actually be a house that was renovated decades ago and is located across from a creek. Always conduct internet research, see images and videos, and take a physical tour of the home. To ascertain whether a home would fulfill your needs, your real estate agent can also be of assistance. The same is true of mortgage calculators; don’t totally rely on them to determine your ability to purchase a home. Although some mortgage calculators may not include all of the costs that go up your monthly housing payment, such as principal, interest, property taxes, HOA dues, and homeowners insurance, they can still be a useful tool.

6. Pay attention to the property’s potential for appreciation

Even while it’s impossible to predict an asset’s appreciation rate precisely (without a crystal ball), you can always look at how its value has evolved over the past few years for hints. Look at the comparable sales in your region to get an idea of how much other houses are selling for. Future changes in employment patterns and the kind of businesses that will be opening, closing, or changing location could also affect property values. The cheaper property on the best block is frequently a better investment than the most expensive home in a neighborhood since you may have more opportunity to boost the value of your home with well-planned improvements and remodeling initiatives.

7. Avoid making any financial adjustments prior to settlement

In Enterprise, Alabama, Kimberly Hoobler, who sells more townhouses than the typical agent, advises potential purchasers not to make any financial adjustments before the closing. If you are not careful, a new trading line could change your debt-to-income ratio and ruin the whole thing. Any major purchases, such as those for automobiles, jewels, boats, furniture, and appliances, should be postponed until after closing. Additionally, avoid making significant deposits into your bank accounts unless you have a strong letter of justification that explains and documents where they originated from. Unless your lender instructs you otherwise, try to keep everything the same as it was when you were pre approved.

8. Do not be afraid to bargain with the vendor after the inspections

If the house inspector found anything troubling, it could sometimes be advantageous to haggle with the seller after you receive the report. Prioritize any serious issues over aesthetic ones, such as those involving safety and health. You can sit down and decide how to move forward and how much negotiating you want to do if you’re working with a real estate agent. It’s typical to request a lower sale price or to have competent professionals make repairs before closing. Additionally, you might be able to bargain for the seller to pay a portion of the closing costs in return for maintaining the current sale price.

9. Keep closing fees in mind

The average homebuyer should plan on spending 2% to 5% of the purchase price on closing fees. You may be able to reduce these costs by comparing mortgage lenders and title companies, but you should always have more money set aside than you anticipate needing. Although it’s a pleasant surprise when you spend less than you anticipated, planning ahead can spare you the pain of finding out right before closing that you are short on finances.

10. Avoid changing careers

Even though you may have always wanted to travel, work fewer hours, or go on your own, this is not the right time to do it. Avoid changing your career during the closing process since you can lose your eligibility for a loan if you abruptly quit your work or start making less money. Working with a trustworthy mortgage lender and real estate agent can help you stay informed at every stage of the process and prevent you from making mistakes that could prevent you from settling into your new home.

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If you’re a first-time home buyer and need professional guidance before making a choice. Schedule a meeting with the knowledgeable lender at Dream Home Mortgage for a free consultation. Dream Home Mortgage, An Equal Housing Lender, a Division of Brazos National Bank, is committed to providing affordable mortgages with superior customer service. Contact a member of our team immediately at (972) 245-5626 to initiate the first-time homebuyer financing process with our trained staff. Please send your inquiry to Info@dreamhomemortgage.com

Get approved to see what you can afford.

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