I read a hilarious article (list, really) in Men’s Health this evening, titled “25 Simple Steps to a More Perfect World.” While not about real estate in any way, it did make the suggestion that all base runners should score on a ground-rule double. As one of the 15-20% of Americans who still loves baseball, that alone made the article worthy of my praise. As an homage to this clever list, here below are 25 simple steps to follow for a more perfect home buying experience. I cannot promise it will be as witty, but it will be useful and poignant, and that’s really what you came here for, right? A list, by design, is going to raise many points, without going into very much detail. So, if you have a question about one or more of the steps below (or about ground-rule doubles), just ask!
1. Get pre-approved for a mortgage FIRST. There are few things worse than finding the home of your dreams, and then finding out it’s priced $60,000 above your threshold. Also, if you think you’re going to want more than one quote, you’re right. Try applying with your preferred bank, who may offer you a discount for your continued business, and a local mortgage broker, who has access to a network of lenders and possibly lower interest rates. Ask for a Good Faith Estimate (GFE) from each, and compare the two.
2. Start saving for your down payment plus closing costs now. Get an estimated amount to save from your mortgage loan officer, then save 10-20% more for incidentals.
3. Research the crime statistics of the areas in which you are looking. Research the school districts serving the areas in which you are looking, even if you do not have and do not plan to have children. You may not care how the local elementary, middle, and high schools rank, but the future buyer of your home might!
4. Don’t change anything relating to your financial or credit record. Changing jobs, closing credit card accounts, making large purchases, opening new credit accounts, transferring large amounts of money from one account to another, and closing bank accounts can all affect your loan approval. If you are considering doing anything related to your finances or credit, consult with your mortgage loan officer first.
5. Drive through the areas and neighborhoods in which you are looking. Sure the photos of the home on REALTOR.com look great, but what’s next to it? What’s around the corner from it? How close is the nearest grocery store, gas station, dry cleaners, etc.?
6. Ask your mortgage loan officer if there are any programs that can help you with your down payment or your closing costs. There are many programs that can, but some take 60-90 days to navigate your way through. If you start the program now, you may be half-way (or further) through it by the time you find and negotiate a contract on your next home.
7. Ask your mortgage loan officer and your REALTOR if there are any tax credits that would be available to you after you purchase your next home. Are you going to be a first-time homebuyer?
8. Find and choose an experienced REALTOR whom you trust. A REALTOR can give you real-time access to your local Multiple Listing Service (MLS). Most of the other websites out there are days, weeks, or months behind the current supply of inventory. In this transitioning market, you can’t afford to be hours behind, let alone days!
9. Consult with everyone who is going to have a vested interest in your next home early in the process. Are your parents going to help you with your down payment? They’re probably going to want to see any home you make an offer on, too. Is your husband going to live in this home too? He should probably be receiving the same emails of listings, too.
10. Meet with a Certified Public Accountant (CPA) or similar advisor to discuss what impacts buying a home will have on your income taxes next year, and subsequent years.
11. Start researching homeowner’s insurance companies now. You won’t have to choose one until after you’ve negotiated a contract on a home and have begun the loan processing period. However, it’s an important decision to make, and should be given its due consideration.
12. Start researching home warranty companies now. The seller of the home you buy may pay for the first year of a home warranty plan, or not. Either way, not all home warranty plans are created equal.
13. Visit the website of your state’s Association of REALTORS. The website will likely provide lots of helpful information, specific to buying a home in your state. Get familiar now with how a real estate transaction works there. What happens in Maryland does not necessarily happen in Arizona, or in the same order.
14. Take a drive from the area(s) in which you are looking to buy to your place of work/school during the same time of day you would be taking this drive on a typical day. Is the area a 20-minute drive from work on a Sunday at 4pm? If so, it may be a 45-minute drive from work on a Monday at 8am.
15. Review a blank copy of the Purchase Contract most commonly used in your state. Start familiarizing yourself with the terms used in it, and what agreements you will be expected to make. Also, keep in mind that most builders and banks do not use standard Purchase Contracts. If you end up buying from them, ask your REALTOR to review the contract, and discuss with you any clauses that are out of the ordinary. The moral of this is not to sign anything until after you thoroughly understand it.
16. Start gathering your closing funds into one bank account now. You will be expected to open escrow with an earnest deposit as soon as your offer is accepted by the seller. This deposit usually must be made with guaranteed funds like a Cashier’s Check or wire transfer. The amount of your earnest deposit will depend on a variety of factors including: local customs, the purchase price of your home (the higher the price, the higher the earnest deposit is expected to be), the seller’s requirements (builders and banks tend to require a higher earnest deposit from their buyers), etc. Ask your REALTOR for further guidance on this matter.
17. Start researching home inspection companies now. Even if you intend to purchase a new construction home, an inspection by an independent third party may reveal oversights the builder thought were taken care of. Your REALTOR can probably offer you a referral to one or more companies, but make sure you are confident in the inspector you hire, too. Do you want the inspector to take photos of recommended repairs? Not all inspection companies offer this service.
18. Decide whether or not you are willing to live in a subdivision managed by a homeowner’s association. Most homeowner’s associations have a specific list of rules, by which all members are bound. Some prohibit certain types of pets, while others prohibit boats and RVs from being visible in your back yard. Most also impose regular (monthly, quarterly, semi-annual, or annual) fees, which are then used to pay for ongoing maintenance and improvements to the neighborhood’s common areas.
19. Compare the annual property taxes of each property you look at, especially if you are looking at more than one type of dwelling (Single Family Dwelling, Condo, etc.) or in more than one municipality/city/county. Your annual property taxes will affect your monthly mortgage payment.
20. Ask your mortgage loan officer for a list of the documents he/she is going to need from you before sending your file to be underwritten. Even if you have outstanding credit, expect to provide a few of your most recent pay stubs, and a few of your most recent tax returns. The days of “no-doc” loans are long gone.
21. Assess how much work you are willing to put into your new home after purchasing it, and then tell your REALTOR what you decide. If you decide you don’t want to install any new appliances, your REALTOR can help you avoid homes without appliances (e.g., most bank-owned homes).
22. Start researching moving companies now; most book their appointments weeks and months in advance, and therefore require advance notice. There are many moving companies out there, big and small, national and local. They offer different levels of service, at different prices. Once you’ve chosen a company, wait to book your appointment until after you’ve negotiated the contract on your new home. Then, schedule your move to take place several days after or even a week after your scheduled Close of Escrow date. If you close escrow late, you may be stuck with a re-scheduling fee from the moving company or, worse, with a truck and two disgruntled men at a house you can’t move into yet.
23. Prepare a “Must-Have” list and a “Must-Not-Have” list for your next home. Give these lists to your REALTOR, so neither of you waste time looking at a home that you would never buy.
24. Decide whether you want to focus your search on new construction homes or re-sale (previously owned) homes. Comparing the two is like comparing apples with oranges.
25. Decide how you are going to take title on your new home, especially if you are married and/or are buying a home in a state you have never lived in before. There are different ways to take title in different states. You should meet with an attorney or other qualified professional who can advise you on the ramifications of each option.