Nearly every day, our agents get calls from people who are renting and want to buy their own home, often for the very first time. That is so exciting! I encourage you to follow your dream of home ownership. There is a time for everything under the sun, including renting. But there is also a time to step out into the world of homeownership. So what does it take to get ready for that move into the house of your own?
Well, here are my seven steps to prepare you for home ownership:
Step One: Conquer your credit score! Many of us reach adulthood without ever being taught how to budget, how to set up bill paying, or how to organize our lives so that we can handle the stress of juggling our incomes and our commitments. If you are behind on any financial commitment, get caught up as fast as possible. Get online and order your free credit report. You really need to see what it looks like. Often there will be errors. If anything in it is incorrect, you need to write the agency and have them correct the statement. Once you start the home buying process, you are going to be offered loans to help you with the purchase of your new home and your credit score and credit worthiness will determine the terms of the loan. So here is absolutely where you want to begin.
Step Two: Play with a mortgage calculator. You can find one online. In fact, we have one on our website at century21mvp.com. A mortgage calculator will let you figure out what your monthly payment will be based on the typical factors, such as the price of the home and the current interest rates. As a new homeowner buying in our area, you and your new home may qualify for a 100 percent loan, which means you have no down payment. You also might qualify for a VA loan if you have served in the military. And, almost everyone can get a FHA loan, which requires a 3.5 percent down payment. These loans are usually amortized for 30 years (meaning the monthly principle and interest payment that is required will be fixed for the life of the loan), but you can always pay off these loans quicker. Compare the monthly payment to your rent payment, look at your budget and see what you are comfortable with and see what price house that monthly figure is going to purchase. (Don’t forget that taxes and insurance are often added into a mortgage payment, as the lender wants to make sure they are paid.) Just as a rough estimate, an average house in our area that has 1,200 square feet will probably need about $50 worth of insurance a month added to the payment. The taxes will probably be around the same.
Step Three: Call a lender. In fact, it’s a good idea to call more than one and compare their rates and terms before deciding on one to work with exclusively. Lenders can include mortgage brokers, banks or credit unions. You can visit with them on the phone or make an online application. You will need to allow them to review your credit in order to give you an idea as to what they think you can afford and what kind of loan they can offer you. Ask them all kinds of questions! They are used to us not knowing the specifics of how it all works on their side of the desk, so take your time while you talk with them. Explain your goals and make sure you understand the expectations that you will be required to meet during the process. They will be able to “prequalify” you on the phone, letting you know how much house you should be looking for and what the payment will be approximately.
Step Four: Drive around. Where do you want to live? One of the best ways to find a home is to drive through areas that you love. Get a feel for what homes are selling for in areas that you could enjoy living. Most importantly, make sure you know ahead of time – does that house meet your budget?
Step Five: Dream about life in the future. Sometimes it is hard to imagine life as a homeowner when you have been renting. Perhaps you have been renting for decades! So let’s think about home ownership… you probably are not used to taking care of a yard. I know that when I moved from an apartment, I couldn’t wait to get my hands dirty in the garden! Growing my own tomatoes, my squash the size of baseball bats (because I was new at this!) and pole beans was just thrilling. But you may not want to bite off an acre if you have been used to a concrete pad for a front yard. There are yards that manage themselves much better than others, so take a good look at the size and shape of the lot before you put this property high on your prospective list. Think about how you want to spend your weekends. If you purchase a lot with a steep hill and grass that grows rapidly, you will be doing a lot of mowing. That push mower you saw for sale on Craigslist won’t be enough to get the job done. What about your kids? Maybe you already have children bouncing off the walls of the apartment or maybe raising a family is still something on the horizon. If you have kids already, a fenced in yard is worth its weight in gold. If not, that is something that can be a long-term goal as part of your overall planning. Another consideration will be schools, so be sure to go online and check out the schools in the neighborhood you are eyeing. Talk to friends, church members and girls in your Zumba class – what do they think? Should you have children in your future, or if your vision of children is furry and maybe barks, than we need to consider homes that are pet safe because you have been in an apartment just waiting to get a chance to own Fido! As you imagine yourself in a particular house, try to live all the important “loves” and “desires.” Make a list of those. These are the really, really top priorities. Then make a list of the items a home could have but you really don’t care that much about. These items will help you stay in your budget and get the items you really want!
Step Six: Get a realtor that you can relate to and go out looking! Do not sign a buyer representative agreement with this realtor until you are sure you will enjoy and feel comfortable working together. If the first realtor doesn’t fit you – isn’t it wonderful that you aren’t married to them – find a realtor you can partner with. The good news for you is that the seller of the home pays your realtor. Even though they work for you, the seller pays their commission. However, be as sensitive as you can of their time. They don’t make a dime until you close on the home of your dreams. You want to remember the golden rule. They are going to be a great coach, consultant, and guide. Take care of them and they will be a huge part of getting you through the process without any extra grey hair.
Step Seven: Lastly, Enjoy the process! You are about to be a homeowner. Statistics show that home ownership causes all kinds of stability, prosperity and happiness for the owner. We live in a great country that allows ownership of property. Many families across the globe can never hope to own what Americans take for granted, so enjoy it and go for it!