Top 9 Tips for Buying a Home
It’s no secret that the U.S. real estate market is hot. But unfortunately, prices are rising, making it difficult for first-time buyers to climb the housing ladder. According to the National Association of Realtors (NAR), first-time buyers make up 26% of real estate purchases. At FastExpert, we want to simplify life for you in 2023 with a range of smart home buying tips.
Buying a home can be an exciting time, but it can also be stressful and confusing, especially if it’s your first time. We’ve compiled a list of the top 9 home buying tips to consider as you start the process. These tips will help lower stress and prepare you for what’s ahead. So take a few deep breaths, read on, and get excited!
Your Home Buying Guide
Owning your own home is the symbol of the American Dream, but buyers often struggle to find the home that’s right for them. As a result, today’s homeownership rate stands at 65.5%, down from the peak of 69.2% in 2004.
Whether you’re a first-time buyer or looking for a second home, the cooling market in 2022 presents an ideal opportunity to buy real estate. Our home buyer tips will support you in finding your forever home.
Here are 9 Tips to Help You Get Ready to Buy a House
Buying a home is challenging. Aside from all the paperwork needed to finalize your purchase, you need to find a reliable real estate agent, sift through current listings in your target area, and qualify for a mortgage.
This guide to buying a home will provide intelligent strategies for house shopping in today’s challenging market.
1. Build and Maintain Your Credit Score
Your credit score is one of the main things lenders look at when deciding if they should lend to you. So try to get any debt you have paid down and make sure you make all of your payments on time.
Higher credit scores offer lower rates on your home loan. According to Experian, lenders require buyers to hold a credit score of at least 620 to qualify for a mortgage. However, most experts agree that to get competitive rates on your loan, your credit score should be at least 740.
If you have a lower credit score, one of the best tips for buying a home is to hold off on purchasing until you can build up your score.
Avoid Large Purchases Prior
Hold off on big credit splurges while going through the home buying process. The two big reasons are your credit score and debt-to-income ratio.
Opening a new credit account or getting approved for a new loan will drop your credit score. Even hard inquiries can cause a temporary dip in your credit rating.
However, the biggest issue is your debt-to-income ratio. Your debt-to-income ratio is one of the most significant factors in determining whether you qualify for a loan. Currently, the U.S. government advises buyers to have a debt-to-income ratio of 45% or lower to qualify.Different mortgage products vary, though. For example, Fannie Mae mortgages mandate a debt-to-income ratio of no higher than 36% to qualify.
2. Save for a Down Payment
To keep your monthly mortgage payment low, you’ll need a down payment for the house you purchase. Having money to put down upfront also shows sellers that you’re serious and prepared to buy a home, lowering the likelihood of the deal falling through. If you’re able to, 20% will prevent you from needing Private Mortgage Insurance, but you’re able to put down whatever amount you feel comfortable with.
Review Your Spending
Saving for a down payment is usually the biggest hurdle you’ll need to overcome. The higher your down payment, the better your rates.
Go over your household expenses to figure out how much you can save. Then, if you’re struggling to save, think about where you can make cuts. Saving faster will ultimately help you achieve your dream of homeownership faster.
3. Get Pre-Approved for a Home Loan
Getting pre-approved not only looks good to home sellers it also lets you know how much home you can afford. This means you can focus on looking at homes that are realistic for your budget and lets the seller know you are ready and able to buy.
How Much Can You Afford?
Real estate experts advise potential homeowners needing help getting pre-approved: never buy a house you can’t afford.
Use the 28/36 rule to determine how much financing you can qualify for. According to the rule, your potential mortgage payment shouldn’t exceed more than 28% of your pre-tax income or 36% of your total debt.
Check Out Your Mortgage Options
Shopping around is critical to getting the best deals. The same principle applies to getting pre-approved before starting your home-hunting adventure.
Figure out which mortgage options you can qualify for based on your circumstances. For example, if you’re a veteran, active service member, or widowed spouse, you can qualify for ultra-cheap VA loans.
Once you’ve determined which mortgage products you can get pre-approved for, it’s time to compare lenders. Hundreds of lenders are available, making comparison websites essential in creating a shortlist.
By entering some basic details, you can find out which lenders offer the best deals for you.
4. Decide on Your Wants, Needs, and Deal Breakers
Knowing what each person involved wants is important whether you are purchasing a home alone or with others. Having a list of deal breakers and things you will bend a little on is also good. This will save you from wasting time on homes that just won’t work for you.
What Features in Your Home Do You Want?
Everyone has different needs, but many must-have features often need clarification with wants. Refusing to budge could mean spending longer than you expected narrowing down homes.
Remember, you can always change your home later. So one of the best home buyer tips is to be flexible wherever possible.
Attend Open Houses
Online real estate listings can only tell you so much about a home. Nothing beats attending an open house to see a property for yourself. It’s also a chance to ask questions and learn more about a potential home.
Research the Home Buying Market in Your Area
Most real estate news focuses on the big picture. The national viewpoint offers just a fraction of the whole story. Even looking at state real estate news won’t tell you everything.
To find out the truth about a local real estate market, you need to focus on that area. While some areas of the country have experienced unprecedented growth, others have seen price drops even with a hot market.
Looking into the home-buying market at the local level also offers targeted information on home buyer grants and other forms of financial assistance. For example, you could qualify for cheaper loans if you purchase a home within a designated rural or suburban area (according to the U.S. Department of Agriculture).
5. Find a Good Real Estate Agent Who Aligns with Your Values
To make the process the best it can be, it’s essential you have an agent who can meet your needs. You may want an agent that is always available for questions, constantly on the lookout for the right home, or great at getting you to see the big picture. Whatever it is, make sure the agent you choose has it. Not sure how to see if an agent has the qualities your looking for? Check out the FastExpert filter by trait to narrow it down without an interview. Find the most successful realtors in your area!
Be Sure the Real Estate Agent You Choose is Skilled at Negotiating
If you’re in a situation where you are competing against ten other bids, you want an agent who can make you stand out among the rest and get you the house. These agents know the market and how to use it to their client’s advantage. So that’s who you want on your side.
Who is the Seller’s Real Estate Agent?
Here’s one of the home buying tips everyone needs to know about. Find out who is selling the home. Ideally, your real estate agent shouldn’t also be the seller’s agent because then there’s a conflict of interest.
A real estate agent working for a seller wants to sell real estate at the highest possible price. A buyer’s real estate agent wants to complete the transaction at the lowest possible price. If there are any tips to buy a house you need to follow, this is the one.
6. First-Time Home Buyer Tips
First-time home buyers are those who haven’t owned a property in the past. Despite this definition appearing rigid, there are exceptions. For example, many first-time home-buying programs within states classify you as a first-time homebuyer if you haven’t owned real estate within the state for at least three years.
Moreover, if you’re a first-time buyer, it pays to work with an agent who can guide you through the process. It’s not uncommon for people to underestimate the time and effort of purchasing a first home.
Check for First-Time Buyer Assistance Programs
First-time buyers can take advantage of various programs to fund their real estate purchases. But what is the best buyer assistance program for you?
Most first-time buyers opt for loans backed through the Federal Housing Administration. These loans are considered more secure than conventional mortgages. Furthermore, they’re one of the most straightforward mortgages to get approved for as a first-time homebuyer.
FHA loans are the way to go if you’ve got a low credit score and a smaller down payment. But they’re not the only first-time homebuyer program.
Analyze your circumstances and examine other first-time homebuyer programs, such as VA and USDA loans. Many states also have assistance programs for residents, including education programs, closing cost assistance, and down payment support.
Research, Research, and More Research
Home buying tips focus on the real estate purchasing process at a superficial level. However, even with professional support, one of the best tips for buying a house is to take a step back and research.
Today’s real estate market has never been more complicated, with various financing options and agents to choose from.
Reading guides, talking to recent buyers, and engaging industry professionals offer information to empower you to weigh the pros and cons of each pathway to homeownership.
7. Buyer Caution: Some Things Can Be Changed, and Some Things Can’t
There are really only a few things that can’t be changed in a house. However, most things can all be changed when your budget allows, and you should keep this in mind as finding a place that is exactly what you want as-is is going to be near impossible.
Factor in All Your Costs
The cost of purchasing the home itself is just the beginning. You also need to consider origination costs, the potential for interest rate increases in the future, and any renovations you intend to carry out to create your perfect home.
Go over the numbers to determine whether you have the funds to carry out your plans. One of the biggest things first-time buyers need to correct is basing their calculations on future salary increases or interest rate decreases.
Base your affordability calculations on the here and now because your finances can change instantly.
Think Long-Term Solutions
Transforming an existing property takes longer than you think. Consider how much time and effort it could take to make the changes you want.
Generally, most experts agree you’re better off renting if you plan on living in a home for less than five years. High mortgage and renovation costs make this investment a losing bet if you’re not planning to stay somewhere longer.
Factoring in the long-term means considering any changes you want to make and aspects such as career and family.
8. Don’t Avoid the Home Inspection
Unless you are experienced in home maintenance and repair, many issues can evade your notice. However, if the issue is big enough, it may make you change your offer. So whether you do a pre-inspection, inspection contingency, or inspection after purchase, it is important to know what you’re getting into.
Caveat Emptor vs. Caveat Venditor
Caveat emptor means, “Let the buyer beware.” In other words, the onus is on the buyer to perform a home inspection, and if any defects are discovered after completing the purchase, the buyer is out of luck.
Today, most states no longer apply caveat emptor, which protects buyers engaging in real estate transactions. State courts that continue to apply caveat emptor include:
- North Dakota
The legal situation has changed in most states. Today, most states operate under the caveat venditor principle, meaning “let the seller beware.” Since sellers are more likely to know the condition of a property better than the buyer, caveat venditor principles protect buyers if they discover major post-sale problems.
Does this remove the need to employ a home inspector? No, experts still state that one of the most critical home buying tips is to employ an inspector.
Exercising a caveat venditor can still lead to stress, legal costs, and no guarantee of a court ruling in your favor. Enlisting a trustworthy home inspector from the beginning enables your transaction to proceed smoothly.
9. Put Some Thought into Your Bid Offer
In simple terms, an offer should consider what the home is worth and what you can afford. But also remember those home sellers are real people. So think about doing some research to find out what is important to the seller and work that into the offer.
Should You Bid Below the Asking Price?
Deciding how much to bid relies on you (and your agent) knowing the local market. There’s no point in bidding below the asking price within hot real estate markets because there’s so much competition.
To win the bidding war, you may even need to bid a few percentage points above the asking price within the hottest markets.
In calmer local markets, putting a bid in at the asking price of 10-15% lower is perfectly acceptable. Starting low gives you more room for maneuvering, but it could also mean losing out to a competitor. In the U.S., a true lowball offer is considered 20% or lower.
Lowball offers are only recommended if the seller has overpriced their home or there are serious issues you’ll need to rectify post-sale.
Determining a bid is the most contentious aspect of any home buying guide. The best way to resolve the issue is to speak to a local real estate expert.
Find Your Perfect Local Real Estate Agent Today
These home buying tips offer a launch pad to go into your real estate buying journey confidently. Nothing is more valuable than retaining a local expert on the ground.
Since 2014, FastExpert has supported more than 500,000 Americans in finding a local expert to facilitate their real estate transactions.
Use our platform to find the expert who can get you the most value for money on your dream home. Ready to get started? Find the most successful realtors in your area by entering your city or zip code with FastExpert today.